Online Auction Fraud
Millions of people take part in Internet auctions every day, bidding on items
from around the world. Buyers and sellers alike benefit from the great
opportunities that online auctions provide, but these auctions also give
criminals the opportunity to perpetrate fraud. According to the National
Consumers League, online auction fraud is the number one fraud committed over
the Internet.
HOW ONLINE AUCTIONS WORK
In an online format that resembles a real-life auction, people offer cameras,
computers, artwork, jewelry, and dozens of other products, usually in a set time
frame for bidding to take place. Prospective buyers examine the descriptions and
photos and decide whether (and for how much) to place bids. As in a live
auction, the highest bidder wins. Upon winning, the buyers sends payment for the
auction item, possibly to an online escrow service that holds payment until the
buyer receives the goods.
HOW AUCTION FRAUD OCCURS
Both consumers and merchants can be victims of online auction fraud. Here are
some ways that fraud occurs during or after an online auction.
- Failure to deliver goods. The seller places an item up for bidding
that does not exist of fails to deliver merchandise after the buyer purchases
it.
- Nonpayment for delivered goods. The seller sends the merchandise to
the highest bidder in good faith but fails to receive payment.
- Misrepresentation of merchandise. The seller gives false
information about the item, or attempts to deceive the buyer concerning its
true value.
- Hidden charges. Instead of a flat rate for postage and handling,
the seller adds separate charges for postage, handling, and the shipping
container, causing the buyer to pay more than anticipated.
- Fake bidding. The seller bids on his or her own item, or has
someone else bid, in an attempt to drive up the price.
- Credit card fraud. The seller uses the buyer's name and credit card
number for fraudulent purposes, or the buyer uses a fraudulent credit card
when purchasing an item.
- Black market goods. The seller offers goods that are stolen and/or
copied (e.g., software, music CDs, and videos). Often they arrive with no
warranty, instructions or a box.
- Bogus escrow services. After the auction, the bogus escrow service
receives payment from the buyer and pockets the money and disappears rather
than transmitting it to the seller.
PREVENTING ONLINE AUCTION FRAUD
- Understand how an online auction works before you bid on merchandise. What
are your obligations as a buyer? What are the seller's obligations? Does the
auction site provide insurance that covers buyers up to a certain amount? How
would the auction site handle a dispute between buyer and seller?
- Don't judge by initial appearances. It can be hard to validate a seller's
claims about the value of an item, and descriptions or photographs on websites
can be misleading. Know as much as you can about the item you wish to
purchase.
- Investigate the seller as much as possible. Be wary of sellers who provide
only an email or post office box address. Check the seller's feedback rating
if available on the auction site. Call the seller to see if the phone number
is working, or send an email to see if the email address is active. If the
seller is a business, check it out with the Better Business Bureau.
- Contact the seller before bidding to find out what type of payment is
required, when you can expect delivery, what the return policy is, if the
merchandise is covered by warranty, and if shipping and delivery are included
in the price.
- Try to pay the seller directly with a credit card, so you can dispute the
charges if the merchandise does not arrive or was misrepresented. If possible,
avoid paying by check or money order.
- Consider using an escrow service or alternate payment service if purchases
on your credit card are not disputable or the goods are not covered by
insurance. Make sure the escrow service is licensed and bonded; fraudulent
escrow services might pocket your money and disappear.
- Protect yourself from identity theft by not giving out such personal
information as your social security number, driver's license number, or bank
account numbers, as sellers do not need this information.
- Do not send your credit card numbers electronically unless you know for
sure that the website is secure and encrypted.
REPORTING ONLINE AUCTION FRAUD
- File a complaint with the online auction company.
- Notify your local and state law enforcement officials.
- Notify law enforcement officials in the perpetrator's town and state.
- File a complaint with the Better Business Bureau (www.bbb.org)
- Fill out the online complaint form at
www.fraud.org or call the Fraud Hotline at 800-876-7060, 9 a.m. to 5 p.m.,
Eastern Standard Time, Monday through Friday.
- File a complaint with the Federal Trade Commission (FTC) Bureau of
Consumer Protection,
www.consumer.gov/sentinel/.
- File a complaint with the Internet Fraud Complaint Center (IFCC), a
partnership between the National White Collar Crime Center (NW3C) and the
Federal Bureau of Investigation (FBI),
www.ifccfbi.gov/.
FOR MORE INFORMATION
National Consumers League:
www.nclnet.org
National Fraud Information:
www.fraud.org
Federal Trade Commission:
www.ftc.gov
Consumer Sentinel:
www.consumer.gov/sentinel/
National White Collar Crime Center:
www.nw3c.org
United States Department of Justice:
www.internetfraud.usdoj.gov
This information provided
by the National Crime Prevention Council (www.ncpc.org)
and the Mesa Police Department Crime Prevention
Unit
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