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Internet Fraud

Not your grandfather’s Internet fraud

When most people think of Internet fraud, they picture a grammatically-challenged Nigerian stuck in a boiler room emailing you that he is actually a preternaturally endowed and scantily clad young woman. Interestingly, this young woman is interested in paying you an enormously large stipend for your unique ability to send checks and merchandise through the mail. In actuality, while the Nigerian scam is still finding its share of patsies, it is getting so long in the tooth that scam-baiting Nigerian scammers has become its own cottage industry.

eBay’s dirty little secret

So what is the most prevalent form of Internet fraud. Well, you might be surprised to learn that online auction fraud accounts for 44.9 percent of Internet fraud complaints referred to the FBI’s Internet Crime Complaint Center (IC3).

This is more than twice the number of complaints received for the next highest category, check fraud (19 percent).  While it comes as no shock that most scammers are male, it might surprise you to know that the majority of Internet fraudsters reported to the FBI are from the United States, with more than half of the bad guys residing in one of seven states: California, Florida, New York, Texas, Illinois, Pennsylvania and Georgia. 

While the number of complaints is decreasing, the overall dollar loss from Internet fraud is increasing, totaling nearly a quarter of a billion dollars in 2007 alone. And that is just counting reported cases.

Types of auction fraud

A comprehensive list of online auction fraud schemes would fill its own book – and be out of date as soon as it hit the shelves. One of the most prevalent scams is of course taking your money and not sending the merchandise. While this type of scam is often associated with new sellers, seasoned scammers may "hijack" the legitimate account of a reputable seller.

Scammers hijack accounts through random emails asking you to pay for an item. The hope is that you may have coincidentally won an auction and do not notice the Web site linked from the email is a fake. You type in your password and voila. 

More than money

Other scams include selling bootleg or grey market goods.  Big ticket items, such as vehicles, may come with expensive to repair hidden defects.  Shill bidding and fine art fakes are two other types of online auction fraud, which may cost you thousands of dollars. Most importantly, if you resell bootleg, stolen, or fake items, you may find yourself in criminal trouble as well.   

Protecting yourself

Although eBay does have a buyer protection policy, unless you have been scammed for exactly $200, it is probably not going to turn your frown upside down.

Since eBay charges a $25 processing fee for the "service," all auctions under $25 are immediately excluded and auctions from $25 to $50 are probably not worth jumping through all the reimbursement hoops. eBay’s policy will also only pay you a maximum of $175. So if you just got ripped off on that new car, $175 is probably not going to do a lot to ease the pain. eBay is simply not in the business of helping people who have been scammed.

Jumping through hoops

PayPal also has a rather complicated counter-intuitive dispute resolution policy. While eBay encourages you to contact your credit card company if you suspect fraud, PayPal will void your PayPal claim if you contact your credit card company before the PayPal claim process is completed. This is especially strange since eBay owns PayPal.


The key is that if you are bidding more money on an online auction than you would be willing to lose, examine the online auction’s fraud and buyer protection policies very carefully.

Also, if the seller has a ridiculously low "buy it now" price, is located out of the country, and/or suggests a strange payment method, you might want to pass on the auction altogether.

For all other auctions, check the seller’s percentage of positive feedback and the length of time the seller has been registered with eBay. Even if you win an auction NEVER click on hyperlinks in auction emails you receive. If you have won an auction, log directly into your online auction account.

Other options

Most importantly, trust your intuition. If something does not seem right, or looks too good to be true, it probably is.

There is simply no way to ensure your online auction transaction will be 100 percent safe. You may also want to check out the possibility of  purchasing a similar item from a reputable online or local retailer.

Although the cost may be slightly higher (and sometimes even less), a direct purchase with the full protection of your credit card company may outweigh the risk associated with rolling the dice with our country’s most commonly reported type of Internet fraud.

Brett Trout

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