Channel | Industry

How to Prove Every Customer’s Identity

Compliance-minded agents can build a process dealers can use to meet Red Flags and REAL ID standards.
By: Gil Van Over

How to Prove Every Customer’s Identity

Occasionally, even the seemingly simplest tasks become fraught with minutiae that encourage some to make it more difficult or cumbersome than necessary. The latest example of this idiom surfaced in a dealer’s quest to sell and finance a vehicle to an individual who could not provide a government-issued photo identity to prove she was who she said she was.

This customer presented a driver’s license without a photo. Instead of a photo, there was a state seal and the words “Valid without photo.” Her explanation was that she was a Department of Defense employee and this was a valid ID.

The dealer’s Red Flags policy is very straightforward: Each customer must provide a valid, current, government-issued photo ID. Similar requirements to confirm a customer’s identity are resident in finance source agreements, the USA PATRIOT Act and good risk-management practices.

Her ID and the dealer’s identity-confirmation policies are at odds. How is the dealer supposed to sell a vehicle in instances such as this? How about another recurring scenario in which a customer presents a driver’s license with the phrase “Not valid for federal identification.”

Thankfully, there are options.

Behind the ID

There is not a nationwide ID card issued by the United States, and the state driver’s license is the de facto ID. A few reasons complicate the ability to confirm a customer’s identity:

  • Customer does not drive
  • Customer is active-duty military in a state that does not require a current state driver’s license
  • Customer has recently applied for a driver’s license and has a temporary ID without a photo

In these cases, an alternative form of photo ID must be obtained as identity confirmation. A few federal laws also play into the scenario of alternative IDs. One law prohibits anyone from making a photocopy of a military ID except to be used for the customer’s benefit. Applying for a military rebate does not quality as a reason to make a photocopy of the ID.

The REAL ID Act also applies. Passed in 2005 but not fully enforced until 2020, this law requires anyone who wants to board a plane or enter a federal facility to provide an ID which conforms to the standards provided under the act. Forty-five of the 50 states have a vetting process to issue driver’s licenses and state IDs that meet these standards, and if a consumer is unable to provide the full documentation necessary, she or he receives an ID with the phrase “Not valid for federal identification.”

An Agent’s Responsibility

As an agent, if you have any interest in keeping your clients on the right side of these laws, you must encourage them to apply the same standards to confirming an identity as the standards found in other identity-vetting programs. Banks are required to confirm the identity of anyone opening an account. The TSA is responsible to identity anyone flying on a plane. State DMVs must ensure anyone receiving a driver’s license or state ID is who he says he is.

In those small percentage of times when the customer is unable to provide a valid, current, legible photo driver’s license or state ID card, your dealers must obtain an alternative form of photo ID. Some examples include:

  • Military ID (with the aforementioned caveat against making unauthorized photocopies)
  • Department of Defense Common Access Card (to which the photocopying standard also pertains)
  • Passport issued by the United States or foreign nations
  • U.S. passport card
  • Global Entry or NEXUS ID card
  • Gun or concealed weapon license that includes a photo (in states that issue them)

Ultimately, a dealer’s responsibility is to confirm the person purchasing a vehicle is not an identity thief, and this starts with vetting the identity provided. When using a military ID as an alternative form of ID, have the salesperson complete the following statement and sign it:

“I certify I reviewed a military ID or a CAC for [name of customer]. I confirmed the photograph is the same as the person providing the ID. I confirmed the height and eye color are consistent with the person providing the ID. The ID was issued on [date] and expires on [date].”

They should also confirm that the information on the credit application matches the story provided by the customer and use an internet search engine to confirm what the alternative form of ID should look like. Finally, they must verify the driver’s license number or state ID number with the state DMV and retain documentation.

Good luck and good selling.

This article was written by:

- has written 10 posts on Agent Entrepreneur.

Gil is the principal of gvo3 & Associates, a nationally recognized compliance consulting, audit, training and review firm. He and his team work with dealerships around the country in implementing F&I and Sales Compliance Management Solutions to help dealers manage and mitigate compliance issues. He is a frequent speaker to industry groups and also provides litigation support on behalf of automotive retailers and insurers. Prior to forming gvo3 & Associates in 2001, Gil was the Chief Operating Officer for Premier Auto Finance, a management company that managed auto finance portfolios for dealer groups.

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The views expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views of Agent Entrepreneur or any employee thereof.

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