Tips To Avoid Online Auction Fraud

Over the past decade, e-commerce has been one of the fastest growing segments of the American economy, with hundreds of billions of dollars changing hands via the Internet every week, and experts predict that it will continue to grow in the coming years. Nowhere is this growth more rampant than in the area of online auctions. Ten million people a year buy and sell goods on eBay alone, and it seems like new auction sites are popping up on almost a weekly basis – and no wonder. Millions of products find their way into these auctions put up for sale by both small businesses that wouldn’t have access to a worldwide market otherwise, as well as private individuals and craftspeople – more often than not at prices far below what you could expect to pay in any brick and mortar shop. Millions and millions of dollars are spent (and saved) in these auctions every week!

Unfortunately, millions of dollars are also lost every year due to fraud on the part of some sellers. While studies indicate that the majority of online auction merchants are indeed selling what they are advertising, fraud in online auctions seems to be on the upswing. While most reputable auction sites take every precaution possible to ensure the legitimacy of their sellers, in the final analysis it is really a matter of caveat emptor (“buyer beware”). Here are a few tips to help you make certain that you actually get what you pay for.

•Understand how the auction works. Many online auctions simply list items that people want to sell. They don’t verify that the merchandise actually exists or that it is described accurately, and they can’t guarantee that the sellers will keep their promises.

•Check out the seller before you bid. Some auction sites have feedback forums with comments about the sellers based on other people’s experiences. Be aware that positive reports may have been “planted” by the seller and negative comments could be from a competitor. Other sources of information are state or local consumer protection agencies and the Better Business Bureau. Negative information is a good warning sign, but a clean complaint record doesn’t guarantee that your transaction will go smoothly.

•Be careful if the seller is a private individual. Many consumer protection laws don’t apply to private sales, though government agencies may take action if there are many complaints the same individual or criminal fraud is involved.

•Be especially cautious when dealing with sellers in other countries. If you have a problem, the physical distance, difference in legal systems, and other factors could make resolving it very difficult.

•Beware of “shills.” The seller may try to raise the price artificially by making bids under fictitious names or recruiting other people to make bids. Using bogus bidders is illegal and a violation of online auction policies.

•Get the name and contact information of the seller. The name, physical street address, email address, and phone number are helpful to have for checking the seller out and following up later if there is a problem. Don’t do business with anyone who refuses to provide that information.

•Be wary of claims about collectibles and other expensive items. Since you can’t examine the merchandise or have it appraised until after the sale, don’t assume that claims about its condition or value are true, or that photographs are accurate. Print out and save the description and any photos to document the claims that were made.

•Ask about delivery, returns, warranties and service before you pay. Get a definite delivery time and insist that the shipment is insured. Ask about the return policy. If you’re buying electronic goods or appliances, find out if there is a warranty and how to get service.

•Look for information on the auction site about insurance. Some auction sites provide insurance that covers buyers up to a certain amount if something goes wrong. Others may have links to third-party programs that offer insurance for a fee. Read the terms of the insurance carefully. There is often a deductible, and there may be other limitations or requirements that apply. For example, you may not be covered if the seller had a negative feedback rating on the auction site at the time of the transaction.

•Pay by credit card. Under federal law, you can dispute the charges if you paid the seller with a credit card and the goods were never delivered or if they were misrepresented. If you are paying through an intermediary service, ask what happens in the case of disputes.

•Look for bonded sellers. Some sellers are bonded through programs that have investigated their business backgrounds and credit histories and guarantee your money back if they don’t fulfill their promises. Click on the program symbol to learn how the bonding program works and verify that the seller is a member in good standing.

•Consider using an escrow service for expensive purchases that aren’t covered by insurance or bonding. For a small fee, an escrow service takes your payment and forwards it to the seller once you confirm satisfactory delivery. If there is a dispute, the escrow service may act as a referee. Ask if the service is licensed and bonded, and how you can confirm that with the appropriate agency.

•Try mediation to resolve disputes. Not all problems are due to fraud. Sometimes people simply fail to hold up their side of the bargain in a timely manner or there may be a misunderstanding about something. Some auction sites provide links to third-party mediation services that help people resolve disputes. There may be a small fee that is usually paid by the party who requests the mediation.

•Inform auction sites about suspected fraud. They may have policies to remove sellers from their sites if they use “shills” or don’t live up to their obligations.

The above mentioned tips are just a few of the steps you can take to protect yourself from auction fraud. The vast majority of the millions of transactions per year performed via online auctions turn out satisfactorily for both the buyer and seller. However, as with anything else, reasonable care and precautions need to be taken when doing business online. Taking just a little extra time to check out the seller – and avail yourself of the services and protections available to you through both the auction sites and third party agencies can help you to make certain that you get what you pay for -- every time.