How to bid safely in online auctions By Amy C. Fleitas
Bankrate.com
With no mall, no traffic, no crowds and low prices, online
auctions are a simple solution to shopping. But, just as you
need to guard your wallet in the mall, bidding and buying online
requires vigilance as well.
Online auction fraud was the No. 1 reported consumer fraud
complaint in 2003, says the Federal Trade Commission. The FTC's
database logged more than half a million complaints last year
and 55 percent of those were Internet-related complaints.
The FTC says it's cracking down.
"We're working with partners virtually coast to coast to stop
scammers in the virtual world," says Howard Beales, director of
the FTC's Bureau of Consumer Protection.
Operation Bidder Beware, coordinated by the FTC with the
National Association of Attorneys General, is targeting Internet
auction scams that bilked thousands of consumers out of their
money and merchandise.
"Law enforcement will do what it can, and responsible auction
sites are trying to police their own market," says Washington
State Attorney General Christine Gregoire. "But the single most
powerful tool to protect consumers is education."
So as online auction fraud continues to grow, savvy shoppers
must learn to protect themselves.
Know the product
The best way to avoid getting taken is to do your homework.
Research the item -- compare costs at other auctions and at
brick-and-mortar stores. Auction sites aren't necessarily
offering the best price or information. A little shopping around
may prove the item auctioned as "rare" is available at the Kmart
down the block -- and for a lower price.
Consider the risks
Check out the auction site. Some sites, like Amazon's auction
site, offer full fraud coverage for items not delivered or
fraudulently represented -- but only up to $2,500 and only when
using their Amazon Payments feature. Other payment methods,
excluding cash and third-party wire, are insured up to $250.
Ebay offers similar fraud protection but at a cost and with a
much lower maximum. For items never received or misrepresented,
eBay provides protection up to $200, minus a processing fee of
$25. Buyers using eBay's electronic check option don't have to
pay the processing fee. All methods of payment, excluding
third-party wire transfers and cash, are covered.
Paying by credit card is the best insurance, regardless of site.
Most credit card issuers provide 100 percent online protection.
Debit cards may or may not offer similar protection.
Know the seller
One of the worst mistakes an online shopper can make is not
researching the seller. Most sites provide a seller's rating and
feedback history for each sale. Read it.
A seller with several negatives in his feedback should be
avoided, as should a seller with no feedback. The Internet Fraud
Watch warns that while a lack of complaints doesn't guarantee a
smooth transaction, a history of complaints is a good indication
not to bid.
Unfortunately, shifty sellers have figured out a way around
negative feedback by creating fake testimonials. The seller
either sends them himself, using an alternate e-mail account, or
conspires with other bidders to give higher ratings. Some shill
testimonials are easy to spot -- numerous positive responses all
posting from the same e-mail address.
It's still 'Buyer beware'
Before trusting any seller, ask lots of questions about the
product -- regardless of the item's description or photos. Be
wary of any discrepancies, any items sold "as is," high shipping
charges or significantly delayed shipping dates.
Ask for the seller's phone number and physical address. Verify
by calling. An e-mail address is a flimsy means of contact that
may be untraceable. If a seller is located outside the United
States, differing laws may complicate resolving disputes.
Be especially cautious of sellers offering a large number of
popular collectibles and other expensive items. The IFC warns
that because the items can't be examined or appraised until
after the sale, claims about the condition or value of an item
may be faked. Photographs aren't necessarily accurate. They may
not show the item's flaws or could be taken from a catalog or
another auction.
How to pay
Because credit cards offer protection, they are always the best
way to pay. But many sellers are individuals (rather than
businesses) and don't have access to credit card verification
equipment.
Do not deal with sellers who demand payment in cash or
third-party wire transfers. These means of payment are not
traceable and offer no protection. Most legitimate sites have
secure payment options that do not require sellers to purchase
any equipment. Ebay offers Paypal and Amazon offers Amazon
Payments.
Even if an auction site offers insurance, bidders are not
guaranteed a refund if the deal goes sour -- only the chance to
appeal for a refund. If cashier's checks and money orders are
the only means of payment, you'll need to decide if you're
willing to risk losing your investment if you're unhappy with
the item and the seller won't reimburse you. Any seller who
asks for a bidder's Social Security number, driver's license
number or bank account information should be reported to the
site's fraud program and to the Internet Fraud Complaint Center.
This information is not necessary for a sale and exposes the
bidder to identity theft and fraudulent account charges.
Making the bid
Once you've done all your homework and are ready to place a bid,
decide how high you're willing to bid for the item and stick to
it. This prevents heat-of-the-moment decisions especially in
highly competitive bidding. You will also protect yourself from
falling prey to shill bidding.
If you win the bid, print out the photos, descriptions and
e-mails exchanged with the seller. Insure the item and pay
promptly. Keep all records until the item is received and
verified. If there are problems, first try to work it out with
the seller. If a dispute can't be resolved, contact the credit
card company and the auction site. If that doesn't work, a
report should be made to the Federal Trade Commission.
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