Individual and Organized Buyer Fraud
Sellers get the most focus in online auction fraud discussions. Most fraud complaints involve (1) sellers who don't send the goods that buyers have paid for, and (2) sellers who send items that don't live up to the descriptions in auction listings. However, fraudulent buyers are also on the prowl, constantly looking for opportunities to steal money and merchandise from honest and naive sellers.
Sometimes, you may deal with individual opportunists who are trying to trick you. Other times, you may be going head-to-head with organized crime. However, if you stay alert and know the warning signs of buyer fraud, you can protect your auction sales operations, your valuable feedback ratings, and yourself against identity theft.
Unfortunately, not all winning bidders are model citizens. Some of them will:
Demand that you accept a payment method you don't want to use
Claim that you didn't ship the merchandise and demand a refund
Claim that you deliberately shipped damaged merchandise and demand a refund
Return an item similar to the one you shipped (but not the same one) and demand a refund
If you have stated clearly in your sales policy that only certain payment methods are accepted and the buyer refuses to use any of them, you can notify the online auction site and not complete the transaction. For example, you can click on eBay's Dispute Console link to report an unpaid item dispute and also file for a refund of eBay's Final Value Fee that it charges a seller after a bidder wins his auction.
To handle claims that you didn't ship the merchandise or that you sent something that was broken, you may have to deal with the U.S. Postal Service, credit card companies, and online auction site personnel.
If small amounts of money are involved and you have no proof that the buyer is trying to commit a fraud, it may be easier to surrender the refund and avoid a long-running dispute. You can block the user from bidding again in your listings, and you can try to do a better job of screening bidders before they become winning bidders.
To set Buyer Requirements for future listings, go to the Buyer Requirements page. On this page, you can:
Block buyers who registered in countries to which you don't wish to ship
Block buyers who have a feedback score of −1, −2, −3 or lower
Block buyers who received strikes for two Unpaid Items within the past month
There is also an option to block a bidder who is winning or has won a certain number of items in the past ten days. This option can be applied to all bidders or only to those with feedback scores of 5 or less. Yet another option on the Buyer Requirements page enables you to block bids from any buyer who does not have a PayPal account. This feature is very popular with sellers who accept PayPal only.
If a winning bidder makes a fraudulent payment, contact a local law enforcement agency and the police department in the buyer's location. Notify the online auction site as well.
Sellers of expensive items often encounter a buyer tactic that is forbidden on many auction sites, yet still occurs with predictable regularity. Soon after posting a new listing, a seller may get an e-mail message from a potential buyer offering to buy the item for a certain price if the seller will end the auction right after she bids. Sometimes, the price is attractive. But experience shows the under-the-table bid frequently is less than half the price that ultimately wins the bidding. The potential buyer knows the item's real value and is trying to scoop it up cheaply so
Organized crime groups in Eastern Europe, Africa, and other areas have become enthusiastic users of the Internet to perpetrate frauds in other countries. Online auction buyers and sellers have often been their prime targets. Some of their scams involve:
Fake auction support sites
Fake escrow companies
Fake drop-ship companies
Fake online banks
If you sell and ship items to overseas customers, watch out for the following warning signs of buyer fraud, as identified by participants in eBay's international shipping forum:
A buyer asks you to end the auction early and offers to pay more than the current high bid.
The winning bidder is in Indonesia, Nigeria, or Romania and wants to pay with a Western Union money order. Unfortunately, counterfeiters in these countries have created thousands of fake money orders.
The winning bidder asks you repeatedly to send the item before you have received the payment.
The winning bidder wants you to ship overseas FedEx overnight (so they'll have the merchandise before your bank discovers their payment is bogus).
A potential buyer contacts you via e-mail and asks you to sell the item to them off the auction site.
The winning bidder wants to pay with a credit card but wants to use your merchant account, rather than pay through the auction site.
Be wary of brand-new buyers with very slow feedback scores, such as zero. All buyers and sellers start at zero and work their way up. However, if someone opens a buyer's account one day and starts bidding on very expensive items the next day, proceed with caution. When creating listings on eBay, Yahoo! and some other auction sites, you can screen out bidders who don't meet minimum feedback levels.