 |  | Fending off auction fraud
Online bidders lost millions of dollars in 2001. Editor Rik Fairlie can help make sure you're not a victim this year. |
By Rik Fairlie
Editor, Computer Shopper
(6/26/02)
Looking for a laptop for a buck? Last week, I spotted one on eBay: a refurbished Dell Latitude offered at an opening bid of $1. When the gavel came down seven days and 17 bids later, it was going, going, gone at $675. Given the notebook's last-century specs--a 466MHz Celeron processor, 64MB of RAM, and a 10GB hard drive--it's a relatively safe bet the deal was legit. Anything less would have been suspect, however.
"You wouldn't go into some burned-out part of the Bronx because you can pick up laptops for $25; you know they're junk, and you just know that's not a legitimate business," says Bob Pocica, a supervisory special agent for the FBI's Internet Fraud Complaint Center (IFCC). "It's the same way in the cyberworld."
Auction frauds on the rise
According to a report by the IFCC, Internet auction scams made up 42.8 percent of the $17.8 million in total online fraud complaints last year. The IFCC says the median dollar loss per typical auction complaint was $395.
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Internet auction scams made up 42.8 percent of the $17.8 million in total online fraud complaints last year.
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But the real losses are probably far greater, Pocica says, because most incidents involve small dollar amounts, and consumers don't know where to turn for help. Inform the local police that you've lost $59 online, and they're not likely to rush out the orange jumpsuits. But by reporting the incident to the FBI, the bureau might uncover a pattern of fraud involving hundreds of people who have been ripped off for $59. And that could lead to an investigation warranting a little face time with a judge.
"If we don't know about an instance of fraud, we can't start building a case and trying to refer the case to local officials to resolve it. Every piece is a building block," Pocica says. Auction fraud victims should click to the Internet Fraud Complaint Center and file a grievance. The agency says it reviews and evaluates each complaint, then refers it to the appropriate law-enforcement or regulatory agencies.
Notifying the authorities
It's also a good idea to report auction fraud to local police (even if they scoff), and, if the U.S. mail was used to receive the merchandise or send a check, the U.S. Postal Service. Of course, you should also contact the auction site, many of which have instituted a broad range of protective measures. In fact, Pocica is quick to point out that auctioneers such as eBay have been very "proactive and aggressive" in the war against scammers.
eBay, which cleared roughly $9.5 billion in sales last year, says that only one-hundredth of 1 percent of all its transactions are fraudulent, according to spokesman Kevin Pursglove. Note, however, that technology products are especially tempting to scammers because of their relatively high price tags. This year, eBay will sell $1.3 billion in computer and technology products alone, Pursglove says, noting that computers and technology equipment are among the fastest growing categories on the auction site.
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Technology products are especially tempting to scammers because of their relatively high price tags.
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To counter fraud, eBay has deployed a system it calls FADE, for Fraud and Abuse Detection Engine, an authentication service that verifies seller information by relying on a review process similar to that which credit card companies employ. Furthermore, the company has been cementing stronger bonds with law-enforcement agencies, the U.S. Postal Service, and authorities abroad. It also employs a fraud-investigation team headed by Rob Chesnut, a former Justice Department official and federal prosecutor.
eBay, like most auction sites, provides plenty of feedback mechanisms for would-be buyers to check on the performance of sellers before they click the bid paddle. It also has implemented a program called SquareTrade, which helps buyers dispute sales.
Tips for avoiding auction scams
All these precautions are commendable and probably go a long way toward fending off fraud, but I wouldn't bet my bid on them. If you go for online auctions, do your due diligence up front. Here are a few tips:
- Carefully examine the online feedback on the seller and avoid those who have earned negative responses.
- Use other methods to learn as much as possible about the seller; if it's a business, check with the local Better Business Bureau.
- Watch out for any seller whose mailing address is a P.O. Box.
- Be especially wary about buying from a seller in another country.
- Look for a seller who accepts credit cards, which tends to indicate legitimacy and provides some buyer protection against fraudulent charges.
- Be sure to ask the seller about delivery dates and information on warranties.
- Consider a seller's return policy. If he or she doesn't list one, e-mail and ask how returns are handled.
- Don't give your Social Security or driver's license number to a seller; he or she has no need for this information.
- Use an escrow service for costly items.
These steps should provide a basic shield for protection against auction fraud. Given the potential for fraud, auction sites and even the FBI can't be expected to nab all scammers. Use your common sense and don't bid out of bounds.
Rik Fairlie is the editor of Computer Shopper magazine. Questions or comments? Let him know!
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