Specific Types of Buyer Fraud
As a seller, in order to protect yourself against buyer fraud, you need to be able to recognize and watch out for different types and perpetrators of fraud. Some of these include fake support sites, “accidental” overpayment, fake companies, and fake banks.
Fake Auction Support Sites
It isn't hard for computer criminals to create a fake Web site that mimics a real company's Internet operation. Users of eBay and PayPal get frequent e-mail from cyber-thieves trying to get them to click on a Web link so they can “fix” an urgent problem with their account. If you do click on the link, you are taken to a site that looks very much like a page within the real eBay or PayPal. Online auction veterans know these sites are set up specifically to steal credit card numbers, passwords, and other personal information. Yet, online auction newcomers often are fooled and become victims of identity theft and credit card theft.
If you accept money orders from winning bidders, be very careful of the “accidental” overpayment ploy. A number of auction sellers have been hit hard by this scam. For example, suppose you have listed an item and gotten a winning bid of $18. The buyer sends you a money order — oops, for $180. He says he can't get a replacement and pleads that he needs the merchandise soon. Just cash the money order and mail him a refund when you send the merchandise, he suggests. The money order looks good. The bank accepts it and credits the money to your account. So, you buy a $162 money order and send it to the “hapless” buyer. Unfortunately, a few weeks later, you get a message from your bank. The money order the buyer sent you was counterfeit. You now owe the bank $180 and fees. Meanwhile, the crook has happily spent the $162 you sent him, and he's enjoying or reselling the free merchandise he got from his scheme.
Under Federal Reserve Regulation CC, a bank must make the funds from a bank draft or cashier's check available to you within forty-eight hours. But the average bank draft or cashier's check can take two weeks or longer to clear. It may take several more weeks to discover that the instrument is counterfeit. Don't spend the money from a bank draft or cashier's check until you're sure it's good.
Never accept overpayments from buyers. They know the winning bid price, and they should know the shipping costs from your listing or e-mail contact. If they can't do the math and get within a few dollars of the correct total, or if they claim poor English language skills and misunderstood your listing, a red flag should go up.
Fake Escrow Companies
Criminals sometimes set up phony online escrow companies and victimize sellers who are new or too busy to do a verification check. The scam works like this: Your high bidder says he wants to use an online escrow company and gives you a link to one that he says has done a good job for him in the past. So you go to the link, fill out the transaction forms and receive confirmation that the buyer indeed has put the agreed price into escrow. Trustingly, you ship the merchandise to the “buyer.” After the inspection period is over, you go back to the online auction site — and it's gone. So is your high-dollar merchandise. Unknowingly, you shipped it to the address of a motel, and the “buyer” checked out soon after he got your package.
Online auction sites generally recommend only one online escrow company: Escrow.com. If a buyer refuses to use that link and says she wants to deal through another site instead, be certain that it is a real, bonded escrow company. Notify the online auction site if you suspect that you are dealing with a fraudulent buyer.
Fake Drop-Ship Companies
Many online auction sellers use drop-ship companies as a source of salable merchandise. The seller picks an item from the drop-shipper's catalog and lists it for auction on eBay or Yahoo! or another site. The drop-shipper usually supplies a photograph and a description of the item. When the winning bidder pays, the seller keeps the profit but sends the rest of the money to the drop-ship company to pay for the catalog item. The drop-ship company then sends the item to the buyer, with the seller's return address on the box. Numerous legitimate drop-ship companies are online, offering auction sellers everything from cameras to purses.
Unfortunately, cyber-crooks also can set up phony drop-ship companies, and these sometimes victimize auction sellers who don't do any verification checking. The crime usually happens like this: An auction seller decides to try using drop-shipping to increase his sales. So, he goes online and starts looking at drop-shipper Web sites. One site catches his eye. The prices in the catalog seem very good. He believes he can auction the items for a decent profit. So, he opens an account on the spot, gives them a credit card number and other personal information, and picks an item from the catalog to list for auction.
The winning bidder, however, never receives the merchandise after paying for it and files a chargeback.
The online world is also alive with distribution schemes involving intermediaries and advisers who, for a fee, will try to act as your go-between when dealing with drop-ship companies. It may be best to avoid them all. Work directly with reputable drop-shippers or find other sources of merchandise to sell.
Astute criminals with computers can create seemingly real online banks with little effort. Fake banks have been used in schemes involving counterfeit cashier's checks. The seller gets a handsome winning bid and receives an official-looking cashier's check apparently issued by a bank. The seller goes online to the financial institution's Web site to verify that the check is good. Naturally, it is. The crooks have set it up that way. The unsuspecting seller ships the merchandise, deposits the check, and lives happily ever after, until his bank contacts him a few weeks later with the double-whammy — the check was phony and he is now part of a criminal investigation.
Who can I contact if I become a victim of online fraud?
Contact the nearest law enforcement agency and the Internet Fraud Complaint Center (IFCC) via its online site. The IFCC is a partnership between the Federal Bureau of Investigation and the National White Collar Crime Center.
Most of the time, online auction transactions will proceed without any problem whatsoever. Still, you must stay on guard. The best way to protect yourself as a seller is to keep common sense well ahead of profit motives. Never forget that the online world is alive with illusions and traps, as well as real wonders and conveniences. What you see may be a lot less than you will get, no matter how good and convincing the Web site appears. Be persistent and thorough when you check out the background (and the