Online Auction Fraud: What You Need to Know About the #2 Most Common Fraud in the U.S., Online Auction Fraud
by www.SixWise.com
Online auction Web sites have become an incredibly popular
tool for Web-savvy Americans looking to buy everything from
model trains to designer handbags. The largest of the sites,
eBay, has now become a household name with 212 million registered
users and 2006 third-quarter profits of nearly $1.5 billion.
Online auction sites can be a safe and exciting way
to buy and sell unique items, but they're also the source
of the second-most-common complaint received by the
FTC.
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While many honest people use online auction sites legitimately,
their popularity has attracted a large number of criminals
-- and online auction fraud is now a major concern to watch
out for.
"Among the thousands of consumer fraud complaints the
FTC receives every year, those dealing with online auction
fraud consistently rank near the top of the list," according
to the Federal Trade Commission (FTC).
In fact, online auction fraud is second only to identity
theft when it comes to consumer complaints, with the FTC
receiving 80,450 such complaints in 2005, according to Time
Almanac 2007.
These frauds also made up the majority (almost two-thirds)
of the 97,000 complaints referred to law enforcement agencies
in 2005 by the federal Internet Crime Complaint Center.
What Exactly is Online Auction Fraud?
Online auction frauds run the gamut from small-time thievery
to sophisticated schemes, but according to the FTC most complaints
about Internet auction fraud involve sellers who:
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Do not send the merchandise purchased.
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Send a product that's of less value than the item
advertised online.
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Don't deliver the product in a timely manner.
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Don't disclose all the relevant information about
a product or terms of the sale.
In a worst-case scenario, an auction buyer may send money
for an item, then never receive it. Or, they may receive an
item that's damaged, not worth the amount they paid or is
different from the item they thought they would be receiving.
Other frauds that auction buyers have experienced include:
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Bid siphoning: A criminal may lure a bidder from
an auction site by offering them the same item at a lower
price. The bidder is then tricked into sending money and
no merchandise is sent. Meanwhile, because the item was
purchased outside of the auction site, the buyer loses
any protection (insurance, feedback forms, guarantees)
the site may have provided.
-
Second-chance offers: Similar to bid siphoning,
except the criminal offers an item to a losing bidder.
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Shill bidding: Fraudulent sellers may bid on their
partners' items to intentionally drive up the price.
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Bid shielding: Fraudulent buyers may bid a very
high price for an item, thereby discouraging other people
from bidding. They then retract their bid so a partner
can purchase the item at a lower price.
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Fake check scams: Fraudulent buyers may send fake
checks or money orders as payment for online auction site
merchandise. Even worse, a con-buyer may overwrite the
amount on the check, then ask the seller to wire the overpaid
money back to them. Meanwhile, after the bank determines
the check is fraudulent, the seller is left responsible
for the entire amount.
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Fraudulent escrow services: This fraud occurs
when a criminal seller insists a buyer use a particular
escrow service, which is also in on the scam. The fraudulent
escrow service then sends the money directly to the seller,
instead of holding onto it, and the merchandise is never
shipped. Because the escrow service is also fraudulent,
the buyer can't get the money back after the merchandise
never arrives.
How to Protect Yourself When Shopping or Selling on eBay
and Other Online Auction Sites
Internet auction sites can be a safe and fun way to find
merchandise that, in the past, you may not have had access
to, or to sell items you no longer want. But to be sure your
experience is a positive one, check out the FTC's tips below
(and remember, both buyers and sellers need to be careful).
To protect yourself when buying something online, consider
using a virtual credit card -- a one-time use card that
protects your identity and funds.
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If you're a buyer:
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Learn the rules of the auction site. Find out
what protections are offered, what guarantees you get
and how the bidding process works.
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Find out the value of the item you're buying.
This will help you gauge whether the price is appropriate.
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Check out the seller. While online feedback ratings
can help, don't rely on them as your only reference for
the seller (the ratings may have been "padded"
by friends or gathered by selling a number of small items
before a fraud occurs). You should get the seller's phone
number and call it to be sure it checks out, and don't
do business with anyone you can't identify. Also, find
out the seller's return policy and shipping charges.
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Don't give out personal information. You should
never share your social security number or driver's license
number, and don't give out your credit card number or
banking information until you have checked out the online
payment system or escrow service.
-
Consider using a virtual
credit card. These have a unique number for one-time
use.
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Protect your money. If the seller only accepts
cash or checks, you'll have to decide if the risk is worth
it. You should never wire money to someone you don't know,
however, and should check out any escrow service for legitimacy
thoroughly before sending your money (if an escrow service
claims to be affiliated with the government, for instance,
it's a scam).
If you're a seller:
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Know the legalities. There are certain laws that
govern how soon an item must be shipped, how an item may
be advertised and more, so become familiar with them to
protect yourself.
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Respond to bidders' questions honestly and in
a timely manner.
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Check out any escrow service the buyer insists
you use before sending out the merchandise.
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Watch out for fraudulent checks. Also, never wire
money back to a buyer who has overwritten the check amount.
Instead, send the check back to the buyer and don't ship
the merchandise.
Finally, if you have a problem, either as a seller or a buyer,
that can't be worked out between yourselves or through the
auction site, you can file a complaint in a number of places:
Recommended Reading
Don't
Get Caught by Phishing Scams on the Internet!
The
World's #1 Internet Threat May Be Robbing Your Identity Right
Now
Sources
The
Federal Trade Commission
EurekAlert
December 5, 2006