A Lexus dealership, sun-soaked Miami Beach, a rogue police officer and nearly a dozen criminal accomplices.

It might sound like the early sketches of a Hollywood action film, but the setting and characters are real.

Last fall, a massive auto lease theft ring was busted wide open, exposing an elaborate fraud arrangement concocted in large part by Tomas Manrique, 51, owner of Wachovia Auto Sales, and Todd Javon Smith Jr., 29, owner of Parelelas Motors, according to law enforcement officials.

All of the accomplices involved in the ring sought out supposed buyers to secure financing from credit unions for cars that had already been bought and moved out of the country or to lease vehicles that were illegally subleased. The buyers would turn the vehicles in to Manrique and Smith who would then lease them to a third party.

One of the accomplices, Marion Mayoli, was allegedly told to submit a false credit application at a Lexus dealership. Miami Beach police officer George Robert Navarro Jr. got involved in the theft ring when he allegedly handed over a vehicle to Smith, one of the leaders of the scheme. While that car was eventually recovered, the lender ended up losing more than $31,000. 

In the end, several area credit unions were allegedly defrauded out of $500,000, including Space Coast Credit Union in Melbourne, Fla., according to the police and local media reports. Nine of the 10 suspects were arrested, including Navarro, who at last check, was still fighting the charges after pleading not guilty to several charges. Because there are several players are involved in the car financing process including, dealerships, car shoppers, credit unions and other lenders, the potential for fraud can often leave lenders left with massive financial losses.

Indeed, fraud targeted at credit unions continues to rise, according to CUMIS Insurance Society Inc., the property and casualty division of CUNA Mutual Group in Madison, Wis. These include online banking fraud, data breaches, and wire and home equity lines of credit scams.

Carlos Molina, risk management consultant in the Credit Union Protection's Risk Management Division at CUMIS, said credit unions, as member-focused service providers, are considered easier prey because they often sacrifice security to provide service.

As was likely the case with the Florida auto lease theft ring, the car buying experience tends to involve funds being wired and documents being faxed, which can open up gaps for scammers to move in to intercept. 

Speaking on emerging fraud issues during a roundtable recently hosted by the New Jersey Credit Union League, Molina said most credit unions' wire policies usually contain step-by-step instructions on how to perform the wire transfer but don't include verification procedures. Fax requests and call backs should be treated with an added layer of caution because it makes it easy for thieves to step in. 

On the member end, loopholes can occur if the entire financing package doesn't get finalized, said Robert O'Hara, president of cuautocoupon, a Hauppauge, N.Y.-based auto loan discount provider that serves 18 credit unions. 

"There are certain instances where the finance manager will inform you the deal fell through only to have a back-up finance option with a higher rate that will raise your monthly payment or the dealer may extend the term to avoid raising the monthly payment," O'Hara said. 

To that end, the Consumer Financial Protection Bureau may be looking into scrutinizing the interest rates that auto dealers tack onto car loans, The American Banker reported in a March 15 article. The CFPB did not confirm this with Credit Union Times by press time. 

The way it typically works is a lender will establish a set interest rate but leaves a bit of percentage point wiggle room for dealers to allow a markup to the car buyer. The danger is because the dealer gets the bulk of the interest rate markup, these increases are similar to the yield-spread premiums that mortgage brokers received during the housing market bubble, according to American Banker, adding that those premiums have since been prohibited. 

Consumers submit a litany of complaints to the Auto Fraud Legal Center, which is run by Rosner, Barry, and Babbitt, LLP, a San Diego-based law firm. They run the gamut from the sale of wrecked vehicles or previously repurchased lemon vehicles, odometer fraud and various financial frauds that occur in the advertising or at the time of sale or lease of the vehicle, the firm said. 

As in most states with lemon laws in place, car shoppers are still easy targets for fraud, said Hallen Rosner, founder of the Auto Fraud Legal Center. 

"The bad news is that a lot of dishonest dealers routinely cheat consumers, despite California lemon law and California auto fraud laws that are designed to protect consumers. The good news is that consumers are protected by strong, clear consumer rights," Rosner wrote in a blog on his firm's website. 

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