Defending Against Fraud

Online scammers abound. Here’s how you avoid them.

by staff writer
- Apr 02, 2008

It began with the utopian concept of a "people's market" where anything could be bought or sold for a fair price. eBay has since evolved into a platform for global electronic commerce, where on any given day, auction pages and stores burgeon with more than 100 million items listed for sale.

As with any street fair or open marketplace, intermingled among the vast array of legitimate vendors are assorted pick-pockets, con artists and hawkers of counterfeit merchandise. And although fraud occurs with only a small fraction of eBay trades, it's a real bummer when it happens to you.

The best defense against fraud is awareness. And an ounce of prevention is worth a pound of cure. The first thing to be aware of is that online scams aren't only a problem for buyers. Sure, there are some shady dealers out there just waiting for some unsuspecting soul to hand over their credit card number or wire cash for a purchase that never gets shipped. However, there are lots of ways sellers get fleeced online, as well.

Funny money

One of the most common ways sellers get scammed is through dodgy payment methods—from fake money orders to the age-old rubber check. It's best to stick to traceable, secure forms of payment that create a paper (or electronic) trail. But even these are vulnerable to abuse by artful fraudsters.

Using PayPal, while not fool-proof, is a good way to discourage many types of online payment fraud. For one thing, it eliminates the risk of bad checks. For another, if a buyer claims they never received the item, or that it was received damaged, they have to go through PayPal to dispute it. If the buyer files a damage claim, insist that the product be returned—and verify it is actually the item you shipped (even down to serial numbers where applicable)—before you issue a refund.

If you do accept checks—whether personal or bank issued (cashier's check)—take the time to verify the funds before you ship the product. You can state in your auction terms, for instance, that checks are subject to a 10-day hold, or that items will not be shipped until payment has cleared.

Postal money orders have built-in safety features that ordinary money orders don't

When dealing with money orders, be wary. In fact, if you can avoid them altogether you'll probably be better off. Many online scams involve money orders—particularly international ones—that turn out to be counterfeit. Whether you deposit one into your bank account or cash it on the spot, if it is later discovered to be fraudulent, you will be held liable for the amount. Imagine merrily skipping away from the ATM feeling a few G's richer, only to have that money yanked from your account 30 days later—long after you have shipped your product out the door, and spent your profits.

It's a good idea to state in your terms that you only accept money orders issued by the United States Postal Service. Postal money orders are generally safer because they require a government-issued ID to purchase and have built-in safety features that ordinary money orders don't.

To determine whether you're holding an authentic postal money order, hold it up to the light. You should see two unique markers. The first is an image of Benjamin Franklin repeated top to bottom on the left side of the money order. The second is a dark security thread running top to bottom just to the right of ol' Ben, with the tiny letters "USPS" facing backward and forward. If either of these markings is missing, it's a fake.

Next, examine the two areas where the face value is printed. Any discoloration indicates erasure and is a sign the money order is fraudulent.

Be aware also, postal money orders have a maximum face value of $1,000 in the U.S. and Canada, and $700 internationally.

In no case should you accept overpayment—that's a sure sign of a scam. If a buyer is asking to be reimbursed for an overpayment that came in the form of a personal check, money order or cashier's check, don't fall for it. If you receive an overpayment, return it and request a payment in the proper amount to avoid any risk.

False profits

Other recognizable scams include the fake Item Never Received (INR) claim and its close cousin the Buy and Switch. To safeguard against INR rip-offs, always ship items with a tracking number and insurance, and keep all shipping records at least until you receive feedback verifying the buyer received the item. Verify payment before shipping anything, and only ship to a verified address. Be wary of international payments and shipping information that is different from the address on the buyer's eBay account.

Buy and Switch scammers purchase an item then ask to return it for a refund, except the item they "return" is not the same item you shipped. The best way to avoid getting tripped up by this type of con is to keep detailed pictures of the item, including any unique attributes (e.g., serial numbers, flaws/damage, etc.). Consider marking items you sell in an inconspicuous spot or—better and more MacGyver yet—with a special pen that can only be detected under a black light. And don't refund any money until you have received and verified the item.

If a buyer insists on using an escrow service other than to transfer payment, be wary. For every authentic, reputable escrow firm, there are probably a dozen or more sham companies set up for the sole purpose of defrauding gullible online traders. With an escrow service, payment is only released to the seller after the merchandise has been received and inspected by the buyer. If you hand over your product to one of these fly-by-night escrow companies, kiss the item—and your money—bye-bye.

Remember, you have the right to set your own terms and conditions, as long as they are within eBay's rules. Establish a standard policy that you can use with every listing—then stick with it is eBay's only approved escrow service. Other upstanding escrow companies can be found, but you should always verify their authenticity and reputation before doing business. If the firm's Web site has a Better Business Bureau logo on it, verify with BBB that the company is actually a member, and check out its standing. You can also do a "Whois" lookup on using the escrow company's name. If the firm is only weeks old, it's most likely a fake.

Gone phishing

One online rip-off that continues to dog even the most vigilant in cyberspace is known as phishing. Phishers have become increasingly sophisticated at faking e-mail messages from eBay, PayPal, banks and the like, asking users to click on a link that leads to an official-looking Web site. These scammers dupe users into giving up personal details such as passwords, bank account numbers, social security numbers, and other information that can be used to forge identities and wreak general havoc.

On eBay, a phisher who successfully steals your password can hijack your account, and list non-existent items for sale—at the expense of your good reputation.

The surest defense against phishing is to always go to eBay and related sites through your own browser bookmark, or by manually typing in the Web address. It's also important to note that a secure site, such as eBay, will never ask you to verify personal information in an e-mail. If you receive an e-mail that asks you update your information—no matter how legit it looks—delete it at once. If there's any question, visit the site on your own, not through a link in the e-mail.

Bad, bad bidding

Bidding scams are another way online sellers get defrauded. In this ruse, the first bidder places a very low bid. A second bidder (either the same person using a different account, or an accomplice) places a high bid but cancels the bid moments before the auction closes, leaving the low bid as the winner.

One way to protect yourself from this type of scheme is to set a reserve price on your listing—which could have the unwanted effect of discouraging genuine bidders. Another strategy is to place a notice on your auction page that you have the right to back out of any deal if you suspect fraud.

Vigilance pays

Remember, you have the right to set your own terms and conditions, as long as they are within eBay's rules. Establish a standard policy that you can use with every listing—then stick with it.

A good rule of thumb is to be as accurate and thorough as possible with your item descriptions and photos. Disclose and document any little flaw that could trigger a dispute. Don't give buyers any reason to complain.

To further protect yourself online, change your password often, and avoid using password hints like birthdays, middle names or other linkable words that can be used to steal your identity.

Most of all, trust your gut. If you suspect you are being scammed, you probably are.

But don't let a few cyber-creeps take all the fun out of your online selling experience. You can play it safe and still enjoy eBay's global Internet bazaar.

About the Author

Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.

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