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Patriot Act Car Dealer Financing Scam

By | Published January 3, 2013

Do you know what the Patriot Act is? Are you aware that car dealers have the ability to abuse the Patriot Act to scam you when you are buying a new car? Sadly too many consumers can answer yes to my second question; they were victims of this dirty trick. This scam is often pulled on you when you are paying cash or cashier's check in full for your new car, instead of financing through the dealer. The LieNance manager forces you to fill out a credit application, even though you are paying cash, lying to you that it's "required by the Patriot Act." One victim contacted us here at recently and she asked for help to get out of this scam. What did we tell our heroine to do?

Patriot Act image

Brief Background on the Law

The Patriot Act is an act of Congress, signed by President George Bush Jr. in 2001 as a set of tools to aid in combating domestic terrorism. It covers many facets from surveillance procedures, money laundering, border patrol, and other categories. It added tighter bank regulations, and new finance institution accounts must have ID verified. Cash business transactions over $10,000 require businesses to check your name against a list of terrorist suspects. When I bought a condo in Broward County, the bank filled out a short one page Patriot Act ID verification document confirming that I am Jeff Ostroff.

Car Dealers Lose Out When You Pay in Full

Car dealers make money when you finance through them. Brilliant deduction: they don't profit as much if you don't finance though them. If you show up with cash or a check and pay for the car in full, or you have financing from your credit union, they don't like it, and they want you to finance through them instead. They will say anything to get you to finance through their dealership, including lying to you that it's required by law for you to fill out this loan application.

These dirty underhanded tricks are what inspired me to coin the term Lie Nance Manager many years ago to refer to any finance manager who is crooked. Let me point out there are many honest finance managers, but there are also sociopaths similar to Bernie Madoff who don't think twice about lying through their teeth to extract more out of you. We started reporting about this scam years ago after receiving complaints from consumers. We cover this and others in our Top 10 Car Dealer Scams. Educate yourself on current tricks of the trade by reading that list.

The Meat of the Scam

A visitor to our site was hit with this scam last week. They demanded she provide her driver's license (normal) and social security number (not so normal) even though she was paying for the car by check. All they need to do really is confirm her ID, and verify the check with the bank. But they asked her to fill out a credit application, stating they needed the first 5 lines for titling the vehicle. She filled out only her name, address, phone number and knew from our site to cross out everything else and wrote on the form "no credit check." The sales director claimed her Social Security number was required to title the vehicle, which is a lie. That killed the deal, they would not let up, and so she left without a new car.

I knew it was a lie and told her to check her DMV for the real requirements on titling a car, to confront the dealer. Here's what the Texas DMV told her which surprisingly does not match what the car dealer told her:

  1. Social Security number is not required to title a new vehicle
  2. Credit application is not required to title a new vehicle
  3. DMV advised her to find another dealer if SSN or credit application is required for titling
  4. Copy of driver's license is required to register your new vehicle

How do I Prevent this Scam from Happening to Me?

The law does not force dealers as much as they like you to think. It also helps for you to bring printouts off the DMV site of documents required to title a new car. Then your salesperson can't lie saying the DMV requires it. Bring up the PDF file of The USA Patriot Act (H.R. 3162), Section 326 make them show you where it requires you to fill out a credit application. Watch salespeople scatter in all directions.

These Boots Were Made for Walking!

Unless you are financing at the dealer, there is no reason to fill out credit applications, it means you are applying for credit, maybe a car loan, or they may run your credit, possibly lowering your score in the process. Now that you're aware of this scam, if it happens to you just walk out. Sales managers will let you walk too, a deal slipping through their fingers. There are plenty of good dealerships that don't require you to complete applications when you have your own financing. When I bought my Lexus GX470, they did not require it.

Meanwhile Back at the Devilship, Lies Morph into new Lies

The dealership kept trying to sell the deal to our heroine. They changed their story, like many do with this scam, telling her "actually we collect this information to protect the customer and the dealership, to confirm that you are who you say you are." Well, I thought checking the driver's license accomplishes that by itself. Trying to pressure our heroine one last time, the finance manager emailed her the old trite saying: "This offer will not be available tomorrow." Hold on a minute, I can't breathe through all my laughter. Won't be available tomorrow? Newsflash: neither will the buyer!

Author Jeff Ostroff

About The Author: Jeff Ostroff is a consumer advocate, Founding Editor and CEO of overseeing a team of expert authors. For over 17 years, he's been the recognized authority on car buying, leasing, used cars and financing. He developed sophisticated spreadsheet tools to help consumers negotiate on a level playing field. He is a widely sought out guru, cited by the press for his expertise in savvy car buying and preventing consumer scams. Jeff has been quoted in CNN, Bloomberg, MSNBC, Wall street Journal, Consumer Reports, NY Times, Reader's Digest, and many live call in radio shows. He has covered the automotive space since 1997. Jeff also has extensive experience and expertise in selling used cars for clients on eBay and Craigslist. Connect with Jeff via Email, Twitter or on Google+. has affiliate relationships with multiple web sites. We are paid referral fees for leads or sales generated from visitors that click on some links or fill out certain forms on this site. Please view our advertising policy page for more information.