The Chargeback
Scam
A chargeback is when a buyer
places an order for an item with a credit card, then calls the credit card
issuer to
request their money back. Some credit card companies like VISA will
usually refund a buyer's money within a certain time period, for almost any
reason. They do this for customer satisfaction, and it's generally a good
policy.
Unfortunately, this area is open
to exploitation by fraudsters, and it's the seller who is left holding the bag.
Here's how the scam works: a buyer (usually in a foreign country beyond the
reach of the authorities in the seller's area) will order an item, charge it to
their card, and then do a chargeback. But instead of returning the item as
promised to the card company, they keep the item, and the money, and the seller
gets nothing in return, except a headache trying to track down the scammer.
To avoid a chargeback, on large
ticket item's you might want to insist the buyer use a money order, cashier's
check or bank wire. Of course, if you are a new seller with very little
positive feedback, the buyer may suspect you of trying to pull something, since
these payments cannot be reversed. But, if you are an established seller with a
reasonably high feedback and little or no negatives, you are within your
right to make such a request and most buyers will trust you.
Accepting payments safely with
Paypal
If you are using Paypal for the
sale, ask the buyer to fund payment with a checking account or Paypal
balance and not with a credit card. This will also help avoid a
chargeback, and protect you from unauthorized charges on stolen credit cards. However, if you are going to ask for special payment
demands such as these, clearly state it in your auction terms.
To further protect yourself using
Paypal, ship only to verified addresses, accept payment from only one Paypal
account, and make sure the Buyer's paypal account is in the same country as his
or her mailing address. Also, only ship to countries on the
Paypal Approved Countries List.
For added protection, when sending
goods to buyers, use a shipping company
that has online tracking available. Be especially wary of any buyer who
wants it shipped immediately to a foreign country, where money is no object.
More than likely, they are simply just very excited to receive their treasure,
are giving the auction item as a gift, or have their own buyer lined up.
However, a buyer willing to use Fed-Ex or other overnight carrier is worth a
second look- do some digging into their user ID and feedback at Paypal and the
auction site. This is especially true when selling high value items like
electronics and jewelry, where the goods can be quickly fenced for cash.
The buyer may do a chargeback, sell that plasma screen TV or two carat diamond
for three or four grand while you get nothing- now you have even paid extra for
their overnight shipping.
Paypal recently instituted a
'Seller Protection Policy' to help protect sellers from chargebacks.
Supposedly, this new policy will protect sellers against fraudulent examples of
a chargeback- see the
Seller Protection Policy at Paypal for more info. For other ways to
prevent fraud while using a Paypal account, please see this article:
Fraud Prevention Tips for Sellers.
Register at Paypal
Bid Shielding
Bid shielding is when a fraudulent
buyer places a high bid early in an auction, only to cancel it right before the
end of the auction. They do this for the purpose of buying the item under
a different screen name or allowing an acquaintance to do so, only at a much
lower bid price. Once their initial high bid scares off any competitors
and locks up the auction win, they are free to withdraw their bid and snag the
item for next to nothing during the final few minutes of bidding.
Unfortunately, there is not much
that can be done about bid shielding until after the fact- If you are seller
with an expensive or large demand item, and you get an early high bid, you may
want to check out that seller's feedback. If they have a lot of negatives,
look for a history of cancellations. If they have a history of this
activity, zap em! Pull the plug. You can cancel their bid, and even
block them from bidding if you feel it's justified. Just be careful not to
overdo it with this policy.
Let's suppose you are selling your
$54,000 Picasso drawing- if you see that a ridiculously high bid (potentially a
shield or 'for kicks' bid) has come in on your item, or you see that one of your
bidder's feedbacks is zero or in negative territory, you may want to cancel
their bid before the auction ends. If you do, you do not have to do do
business with this person. You can also block bids from certain bidders,
so you don't have to worry about them in the future.
However, consider these options
wisely, and use them sparingly- canceling a bid or blocking out a user ID from
bidding is the social equivalent of slamming a phone receiver down in mid
sentence during a phone conversation. It's a sure fire way to make
customers furious, and never see their business again- which is, of course, the
point. Just be absolutely certain that you want to burn your bridge with the
other person over a bid cancellation- because you will.
The Deadbeat
Beater
For sellers, the deadbeat bidder
is unfortunately one of the most annoying and common problems out there. A
deadbeat bidder is someone who bids in an auction, wins, and then refuses or
neglects to pay. This is also known as 'buyer remorse'. The buyer is
'remorseful' that they bought the item- their solution: they aren't going to
pay.
The deadbeat bidder is not so much
an actual criminal as they are a costly nuisance. Sometimes these people
are just lazy or forgetful, or perhaps they have been using the Buy-It-Now
button a little over zealously and then realize they can't pay for their auction
wins. The sad reality is that online auctions can be more compelling than
Vegas to some people- auction addictions are quite real among compulsive
shopping types.
The most annoying deadbeat bidder
out there is the 'for kicks' bidder who does it on purpose as a game, with
absolutely no intention of paying. Sounds unbelievable, but it's true-
there are some people out there who are so bored and have so much time on their
hands, they can think of nothing better to do than hassle hard working online sellers for a cheap thrill. These are usually teenagers who are just
discovering online auctions for the first time, and probably consider this some
'brilliant and original' ruse. Of course, it's not. Basically, it's the
e-commerce equivalent of a prank call, except that it has a real financial cost
to the seller other than harassment.
You don't really see the 'for
kicks' deadbeats that much these days, as the novelty has worn off. This is
similar to how you'll rarely ever see those annoying key chain laser dots on
movie screens or in your rear view mirror any more- it's unimaginative, and so five years ago.
It's just no longer cool as a joke (not that it ever was).
Regardless of their motivations,
deadbeat bidders are still a real threat to the bottom line for auction sellers.
What many accidental or casual deadbeats fail to realize, is that their actions
do cost the seller money. Never mind the amount of opportunity cost or time wasted in a
bad deal, there is the expense of listing and re-listing the item, as well as
seller's responsibility for the item's final value fee.
The truly aggravating part about a
deadbeat not paying, is that there probably were one or more other persons out
there willing to bid real money in the same auction, who would have eagerly
completed the deal and not wasted everyone's time. So two people get
burned.
The bottom line is this- As a
seller, you can stop deadbeat deals from hurting you by using the auction
house's own tools. For instance, ebay has a 'non-paying bidder alert',
which is a process that will help you notify bidders who are in jeopardy of
falling into the deadbeat category. You have to wait for a certain amount
of time to pass during each step of the process, but if you cross all the T's
and dot all the I's, ebay will refund your listing and final value fees for any
of these sour deals.
Another less common but equally
effective remedy available to sellers: You can cancel and block bids from
certain auction users whom you distrust or suspect of
Bid Shielding or other dirty ploy.
_______________________________________________________________________________
Other types of scams:
The Escrow Scam
The escrow scam can be perpetrated
against both buyers and sellers, though usually it's the unsuspecting buyer who
is burned. An auction buyer or seller announces that they want to use
escrow, either to pay or to receive payment.
Usually, escrow is a viable method
of payment. The buyer sends his money to an impartial third party, an
escrow house. The seller sends the item to the buyer, and after the buyer
inspects it and approves of the item, they contact the escrow house and give
them the thumbs up. Since the buyer has now approved the item, the escrow
house sends the seller the payment (see more on
escrow).
But with the escrow scam, one of
the auction parties is operating an illegitimate escrow website- The money is
sent from multiple auction parties, and after several weeks or months of
collecting money, the bogus escrow house disappears with all the cash.
Another method of scamming with
escrow, is similar to the chargeback scam:
the escrow user receives the item, then returns it with a fake or damaged item
and asks for their money back, or they don't return the item and say they did,
demanding a refund. For these reasons, some sellers are reluctant to use
escrow; also, escrow allows some bidders to think they are buying 'on approval',
in which they feel they can return any item when they develop
buyer's remorse.
In some instances, both the buyer
and seller are victims, and neither is an active participant in the fake escrow
house or the scam. The way to avoid escrow scams is simple: Use only
established escrow houses you can trust (see our list).
Also, our recommendation is to only use escrow on high dollar, rare items.
Scrutinize the other party's feedback rating, and make sure they understand how
to use escrow correctly.
E-Mail Spoofing of
ebay, Paypal and other sites
E-mail spoofing can occur with
almost any auction or payment site. Really, any e-commerce site on the web
is vulnerable. Spoofing is also known as "phishing", because people are
literally fishing for information by sending out a bogus e-mail in which they
are trying to spoof a legitimate business, with the hopes that you will click a
link and send them sensitive personal or account information.
The way it works is, you receive
an e-mail from what you think is PayPal, or ebay, etc. The
letter states that you must click a link in the letter, and update your account,
input a new credit card, verify your password or some other such thing. Of
course, if you don't do it right away, the email says, your account will be
cancelled, never to be re-instated, your computer will self-destruct and the sky
will fall, yada, yada.
So, to do the "right thing", you innocently log-in to your account, follow the instructions,
and input the requested info.
Unfortunately, you may have just
given your info to a ring of con-artists 'spoofing' a legitimate site- they may
now have access to your bank or credit card accounts, or you may find yourself
shut out one or more of your websites due to a changed password. They may
drain your Paypal account, or buy all kinds of stuff on a website, charging it
to you using other combinations of scams to defraud others with your screen
name.
Another danger when you are a
victim of spoofing or phishing is the criminal may gain access to your ebay
account, and using your hard earned good feedback score will run several high
dollar auctions for items they don't own and will not deliver when paid for,
like plasma screen TVs. Unsuspecting ebayers get burned on both sides of
this scam: you and your new "customers" you never even new about. Guess who gets
stuck with the angry e-mails, the headache, the negative feedback, and the
possible criminal complaint? You.
Spoofing is online identity theft-
first the con artist steals the website's identity and then yours. They do this by creating realistic
looking spam e-mails that they send out to hundreds of thousands or even millions of
people. These spams lead to bogus but convincing looking website pages
that mimic an actual e-commerce site. You may think you've reached a
Paypal login or ebay account update page, but you are actually looking at the
fraudster's site. Most of these have little tell tale signs identifying
them as fake, but some are quite convincing.
Once you start inputting the info
they ask for, you're done. They've got you in their ring, and you may not
even know you've been victimized until much later. At the least, they'll
sell your personal info to a data mining company- At worst, they will nuke your
bank accounts, credit scores and stock portfolios, not to mention your feedback
ratings and various website access.
Phight the Phishers: There are easy ways to spot and
avoid these scams:
Always be wary of anyone asking
for your password, credit card or other personal info- whether online, on the
phone or in person.
If you receive an e-mail asking
you to log-in somewhere, visit a site, or provide sensitive information, check
the address in the e-mail header and the URL they want you to click on or enter-
If any information looks odd, is obscured or unreadable, be immediately
suspicious. You will always be able to see an e-mail header from a
legitimate company. Also, many sites such as ebay, now post their
legitimate website addresses on one of their pages, so you know when you are
logging in to the right area.
When logging into a website, look
for 'https' at the start of the URL, or for the little yellow padlock in the
lower right hand corner of the screen. This indicates a secure connection
(128 Bit SSL). Most sites use this when asking for personal information
during a log-in session.
Be suspicious of e-mails from
companies that don't feel right; The logos may look weird, color schemes may be
a bit off, there may be misspellings or grammatical problems. These are
definite clues that a spoofer is at work.
Beware of any e-mail that is of a
suspicious, urgent or threatening nature. Our fraud division recently received an
e-mail that looked like a dead on accurate portrayal of an ebay e-mail.
The return address and link even appeared legit. But, the e-mail was
asking us to log-in and change some data. Of course, the letter also
threatened that if we did not do so, that our account would be terminated without the
possibility of re-activation. Well gee... this sounds a little heavy handed,
doesn't it? We immediately knew then that we were looking at a bogus and
spoofed e-mail- A submission of the spoof letter to the auction house confirmed
our suspicions.
Always be suspicious of any e-mail
that asks you to login to an account anywhere- To confirm such an e-mail, DO NOT
click on any links or download any attachments in the e-mail. Forward the
e-mail to the site's fraud division, and then log-in to the website by closing
the e-mail, and entering the commonly known URL or home page website address in your browser
manually.
Once at the site's home page, navigate to the log-in page and verify whether
there is actually a problem. Only input an address you know is the real McCoy, like
ebay.com or Paypal.com. Never input the address from a suspected spoof
e-mail, especially if it involves a sub-domain like bidder.ebay.login/123/etc.
Filing a Fraud Complaint
Like the saying goes: A fool and
his money are soon parted. Only, with online auctions you don't have to be
a fool to be a victim. Plenty of smart, unsuspecting people are conned
every day. In fact, it's a safe bet that right now, as you read this,
someone is being cheated out of their money. Scammers and con artists have
gone high tech, and online auctions provide an all too easy medium for them to
ply their trade.
OK. Now we'll tell you what to do
if you feel you have fallen prey to auction fraud. Plus, we'll tell you ways to help prevent it.
Keep reading- it's
time for a little legal and civil payback!
If you used a credit card for
payment, your'e in luck: immediately request a
chargeback. If you sent a mail order for your purchase, contact the mail order company and
report the fraud. Send copies of your complaint or any findings/decisions
from any legal proceedings.
In the cases of the empty box or
phone book scam, these types of auction fraud are bizarre and rare, but do
happen. If you fall victim to one of these crimes, IMMEDIATELY collect up
all the packing materials, any bogus items mailed, any 'invoices' or other
package contents, and the box or package itself. You're going to need all
of it. To the extent that it's possible, try to avoid touching any items
or inner packaging that were sent to preserve the possibility of fingerprint
testing, if required.
Print out copies of all your documentation from the sale,
including postal slips, auction description printouts, credit card receipts,
money order slips, etc. When you have gotten everything together, take it
all down to your local post office (or to the UPS, FED-EX or other mail delivery
carrier office). Ask to speak to a postal inspector, or in the case of
private carriers, whomever handles their fraud complaints. File a case
with whomever you talk to, and leave copies of your documentation with them.
We would advise keeping originals for your files. Get a business card from
the person you speak with, and write notes about your visit, the date, their
name, office number etc. Let them know you are doing this. Ask them
what the next step is, and when you can expect a follow up. Thank them,
and then go home and prepare for the next few steps:
File a complaint with your state attorney general's office.
They may even have a special division which handles internet fraud- If not, just
file a regular business fraud complaint. Check the blue pages in your
phone book, or use a search engine online to find your state office's
information. Also, file a complaint with the attorney general's office in
the seller's home state. File a complaint with your local Better Business
Bureau, and definitely file one with the business bureau in their home state or
town.
Most importantly: File a complaint with the
Internet Fraud
Complaint Center, the FTC (the Federal
Trade Commission), the
US Postal Inspection
Service, and the National Better
Business Bureau online websites. Accurately describe exactly what
happened in the sale, and if requested, provide them with copies of any e-mail
documentation between you and the seller.
The FTC will also lodge your complaint with the 'Consumer
Sentinel' website. This program is designed to track international fraud,
and assist law enforcement agencies around the world in combating internet
crimes waged against consumers. To check out their site for lots of great
info, visit: Consumer
Sentinel.
All these consumer protection websites have slightly different
complaint procedures, so do a little research and check out requirements at each
one first. If they ask if you want to press charges against the seller,
the answer should be an emphatic, YES.
Congratulations! You have just taken your first steps at
nailing the scumbag who cheated you.
When filing a complaint, if you are having trouble getting
help, the trick is to be persistent. Maybe the person doesn't have a
history of this kind of crime with the auction site, so the authorities you
complained to say they can't really help you? Even if they aren't willing
to help you right away, if and when several complaints do stack up against the
con artist seller, you will have a stronger case and they may come looking for
your help now.
One final word of advice: The fraudulent seller is
banking on the fact that you won't want to waste the time to file a complaint,
or are too embarrassed, especially if the dollar amount is not too high.
DISAPPOINT THEM! If you feel you are a victim of internet fraud, always
file a complaint, if you have exhausted attempts to resolve the problem with the
seller. They may even try and intimidate you with false information about
why you can't do this or that to retrieve the goods/cash, etc. If they add
this kind of insult to injury, make it your mission in life that they pay for
it. And if they threaten you physically or other wise, IMMEDIATELY
report this to your local police and the police in their jurisdiction,
especially if you have proof of the threat. The trick in any of these
situations is to start a paper trail; document everything, get the ball rolling
and don't let fraudsters and cheats get away with it.
Thinking that none of these folks are ever caught? Well
don't worry, a lot of them aren't laughing all the way to the bank anymore, and
we have proof. See over 35 criminal complaints filed, along with their
outcomes in the following FTC article:
Law Enforcement Efforts
to Combat Internet Auction Fraud.
We have provided a number of links to US government sites and
free info that will hopefully help protect you from falling prey to auction and
internet fraud. At the very least, these resources may aid in your quest
for justice. For more information, please check out the following:
I think I've been ripped off. Should I go looking for the
other person?
Recent national news coverage has
shown stories about the determined and disgruntled buyer, who shows up at the
sleazy seller's home or workplace, demanding their auction item. Some of
these stories have been funny or weird, some downright scary- Eventually, there
will be a tragedy that results from this type of situation.
We do
not recommend you EVER try and personally contact or visit someone whom you feel
has ripped you off. It may be tempting, but don't even think about it!
No
matter how principled it may seem at the time, doing something like this is
downright foolish and very dangerous! Recovery of personal belongings or
cash should ONLY be handled by professional law enforcement.
Please remember, not everyone
operates from the same moral code that you do, and you do not know what some
people may be capable of if you suddenly show up on their doorstep looking to
right a perceived injustice. They could be deranged, chemically
imbalanced, using a mind altering drug, or maybe just having a really, really
bad day.
Plus, maybe there's more going on
here than you're aware of: Perhaps the seller just spent 4 weeks in the
hospital or experienced a sudden layoff that has crippled his family and turned
their world inside out. Suddenly, there you are with all of your righteous
indignation, demanding that Flash
Gordon ring that you paid your hard earned 27 dollars for. The fuse to the powder keg has been lit.
Instead, contact the auction house
involved in the sale- It is their responsibility to check into these types of
fraud cases. If this fails, use the feedback system appropriately,
consider a report to the Internet Fraud Complaint Center and the seller's
local Better Business Bureau and Chamber of Commerce. Lastly, file a
grievance with your local authorities and the local authorities in that seller's
state or country.
Using these kinds of channels is
much more effective than a personal confrontation- it's the paper war that is
most annoying to these fraudulent sellers. If they are willing to rip you
off, they are a criminal. Shame is an effective tool against moral people,
but criminals can behave erratically when physically cornered, and a guilty
emotion on their part may suddenly be transferred into anger or rage at whomever
caused it.
In absolutely extreme cases, you
might consider hiring a private detective for the purpose of documentation and
eventual asset or financial recovery through legal means. But you should
never, ever, under ANY circumstances take the law into your own hands and mount
a field trip of the sort described above. It is not worth the risk to life
and limb and the potential consequences to either party: medical, legal or
otherwise... It's an auction item, and it's just not worth it.
See our detailed chart:
Online Auction Prevention &
Response Links
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