Some of my dealers reporting encounters with sovereign citizens are looking for guidance on how to handle the transactions. The most important thing I can stress is that both the consumer and the dealer can terminate a potential sale. Sovereign citizens are not a protected class under the Equal Credit Opportunity Act, so there cannot be a discrimination claim for refusing to sell a vehicle.

Sovereign Citizen Movement

There are many moving parts to the sovereign citizen movement, so many so that I won’t use up my precious word count to delve into the entire background of the movement. There is an extensive discussion on the topic on Wikipedia that I used as the source for some of the following information.

How Dealers Are Affected

Sovereign citizens may try different tactics to purchase and finance a vehicle with no intention of paying for it. Successful tactics will likely end up as a loss to the dealer. We need to make the dealer community aware of this movement and provide some steps a dealer can take to protect the house.

Clues to Detect a Sovereign Citizen

One of the underpinnings of the sovereign citizen movement is a belief that the government is illegitimate and that a person is immune from any laws and regulations unless they consent to them. Being aware of this belief can help dealers see that they are dealing with a sovereign citizen early in the sales process.

Here are some clues we can train our dealers and their managers on:

Clue - Sovereign citizens sometimes create their own driver’s licenses instead of ones issued by the states they live in. Others will simply not have a driver’s license.

Training – Obtain the consumer’s driver's license early in the sales process. Vet it as you would any other consumer’s driver's license. A dealer can terminate any potential sale if the consumer provides a bogus ID. Failure to require acceptable forms of identification issued by the appropriate state or federal governmental entity is, among other defects, an obvious violation of the Red Flags Rule.

Clue – Some sovereign citizens create their own license plates that were not issued by any state.

Training – Confirm the license plate on the vehicle the consumer may be driving is legitimate, and if possible, that it is current and registered to the buying consumer.

Clue – A common tactic among sovereign citizens is the addition of language to contract documents which they believe will provide a loophole to avoid responsibility for the debt. A common tactic is to write a phrase under the consumer signature which they believe relieves them of the obligation. Others will write a phrase referencing the Uniform Commercial Code. 

Training – A manager’s gut feeling and fraud radar must engage when any consumer wants to alter any of the legal documents that are used in every transaction. We must train managers to ensure that such alterations are not permissible. If the consumer persists, terminate the sale.

Refusal to acknowledge the laws governing a particular transaction could be reasonably seen as failure to provide “express, informed consent” under the CARS Rule’s “affirmative act communicating unambiguous assent to be charged.” 

Further, allowing a contract to be signed in the absence of express, informed consent is a deceptive trade practice and would expose any finance source purchasing that contract to significant legal exposure under the Holder in Due Course Rule.

Word Tracks to Terminate the Sale

We must help our dealers protect the house and understand that sales to sovereign citizens can result in an ultimate loss to the dealer. Word tracks for termination of the transaction, depending on the nature of the variation from accepted practice, might be:

“I’m sorry, but we can’t complete this transaction without an acceptable form of official government identification, and what you have tendered is not acceptable to this dealership or the financial institutions with which we do business.”

“I’m sorry, but we can’t complete this transaction unless your signature matches the name as represented on an acceptable form of official government identification.”

Good Luck, and Good Selling.

Gil Van Over is executive director of Automotive Compliance Education (ACE). He is also founder and president of gvo3 & Associates and author of “Automotive Compliance in a Digital World.”