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Secure Trading and Downright Fraud
by Brian McGregor

In this article on secure trading, I am going to take a serious look at the issue of fraudulent trading.

First, let me share with you an email I received recently from a customer:

*********
Hi Brian,

Just something to remind people of perhaps in your newsletter, sellers beware.

This happened to me twice in the same day.

Basically people buy your items (usually in a large qty) then pay with PayPal. Fine you say, but they ask you to send them to a different address than PayPal gives you. People must be made aware that this leaves you with no protection and usually indicates fraud.

So I did a quick crosscheck - eBay location Estonia, PayPal location USA, deliver to Estonia!

Then again - eBay location New Zealand, PayPal location USA, deliver to Ukraine!

I didn't send the items and sure enough two days later the PayPal payment was reversed for one of the transactions.

So please remind sellers to be wary and to never send to locations that don't match with eBay or PayPal locations or you will lose your goods and your money.

Regards
Jon
*********

Thanks to Jon for this reminder for all of us to be careful.

This example is one of the two ways criminals try and get you. If you are a seller, they will "pay" you, and you ship the goods. You then find out their payment isn't real.

The most used trick here is to pay you via PayPal. You're happy because you see the payment in your PayPal account. So, you ship the goods. After you have confirmed the goods have been shipped, the buyer then contacts PayPal and reports you for defaulting on delivery. The first you know about this is when PayPal email you to tell you they have taken a "disputed" payment from your account. You're left with a problem to sort out, and your goods are on their way to your buyer who has paid nothing.

If you are a buyer, the simple fraud here is that you make the payment but don't receive the goods. There are two favourite ways the fraudster can get you here. First, if they have hijacked an eBay account they will have acquired all the excellent feedback of the person they've "taken over", and your suspicions are reduced. You assume this seller is the person with the eBay ID in front of you, so you pay by cheque or PayPal - or by Western Union, a favourite of fraudsters because you can't trace where the payment goes to. (If you use PayPal, the seller will empty their PayPal account before you have time to become suspicious of their non-delivery)

If the amount is particularly high they could suggest you protect yourself by paying via escrow. As the escrow process is new to many eBayers, they helpfully propose an escrow company they've used a few times before. When you check out the website of the proposed escrow company, it looks impressive and official, so you go ahead and pay your money to the escrow company. For the seller, this is the end of the transaction. They've got your money, but you won't be getting any goods. Their escrow company is also fraudulent, along with about 90% of all escrow companies!

I am always concerned to hear of decent people who have lost money on eBay due to criminal activities of the few.

I am also concerned by eBay's apparent lack of emphasis on this matter. Their justification seems to be that it only arises is a tiny fraction of completed auctions. I heard an eBay spokesman recently on BBC Radio 4 say that less than 1 in 10,000 of auctions are affected by some kind of fraud. This works out at 0.01%.

This may not sound like a high percentage, but it's everything if you're the one caught up in it! Also, if you extrapolate that percentage into numbers of auctions affected, the figure becomes both alarming and unacceptable.

In eBay's Quarterly Report for the quarter ended 30 June, 2004, they state that there were 332 million listings. If this quarterly figure is converted to an annual number by simply multiplying by 4, we get around 1,300 million listings per year.

Given that approximately 50% of listings conclude with a successful sale, this means that 650 million transactions are completed annually.

Now, we apply the 0.01% to the number of successfully concluded auctions to find out how many transactions are, according to eBay, affected by fraud.

The number we arrive at is 65,000 auctions per year. That's 1,250 per week, around 180 each day.

And each one of these cases represents an individual who has their life turned upside down as they attempt to find their way through the eBay and/or PayPal customer service fog, try to contact other impacted buyers or sellers, try to talk sensibly to their bank, and deal with a police service who can fob them off. The last mentioned isn't surprising, as the knowledge of the average PC of internet fraud can probably be written on the back of a sergeant's stripe.

And this all takes time. While it's going on, the fraudster is probably moving on to their next victims with apparent impunity. Or, at the very worst, they have the inconvenience of eBay suspending their account. Oh horror upon horror! That must be really worrying for the thieves. They have to go to the bother of setting up a new eBay ID before they can carry on stealing from people.

Unfortunately, eBay appear to downplay this as not being a serious issue.

No wonder my own email box has more and more anxious eBay members seeking advice in this area. And it's no surprise to me that there is a growing backlash against eBay by members who are unhappy about eBay's apparent disinterest in this area.

So, given the size of the problem. What can be done about it?

All that we as users can do is to be extremely vigilant and cautious in all our eBay activities.

Here is a list of practical steps, in no particular order, which buyers and sellers can take to help avoid becoming the next victim.

Hopefully you are already aware of some of these. It doesn't necessarily follow that if one of these applies the auction or person is fraudulent. But if you use your head, and build up a view of the overall transaction based based upon a number of these factors, you will reduce your chances of getting conned.

a) Stock photos and descriptions. Because they don't have the item they are "selling", some fraudsters use a stock photograph of the item. And they will probably use the manufacturer's product description too. So, stock photos and no original description might be a sign. Search for other auctions by the same seller, and see if they are brazen enough to advertise the same item more than once.

b) A price too good to be true often isn't true. A fraudster wants your money quickly, so you may find they offer to close their auction early with you as the "winner" having bid a price which you know to be somewhat of a bargain. Why would anyone close their auction early if the price hadn't reached market levels? I'll give you one guess.

c) High value or high volume, newly registered sellers. Although the vast majority of new sellers are genuine and honest, be cautious of buying from people selling high value items in bulk, very early on in their eBay career. This pattern isn't quite normal. Think back to your own first sales. You would have been tentative, and probably have tried single, low value items initially. So, a new seller fitting this profile may be someone who has perhaps been previously suspended and has registered another ID.

d) 1 day listings. Although 1 day listing are used by genuine sellers who have more than one item or who want a quick sale, unfortunately this duration is attractive to fraudsters too. They sometimes use a 1 day auction duration to gain a quick sale before their actions can be reported and acted upon. So, be extra wary on auctions with 1 day listing.

e) Invitations to trade off eBay. This is a classic ploy of fraudsters. Having made some kind of contact with you, or you with them, they will invite you to purchase or to sell off eBay i.e. without using eBay's auction services. The attraction here to the fraudster is that they can drive the transaction along the lines they prefer, whether that be escrow, PayPal etc. Another reason why trading off eBay is not a good idea is that you have to keep your own formal records of the transaction, and you forfeit any cover from eBay buyer protection and PayPal buyer protection. Plus, and this might be a minor point, but you will not be able to leave feedback to let others know your experience with this seller/buyer.

f) Payment methods with no recourse. Fraudsters prefer to chose payment methods in which the buyer has no protection, like wire transfers where the buyer has no way of tracing where the money is going. Western Union Money Transfers are a favourite and should be totally avoided. Postal orders are similar though they are a popular payment method among the genuine sellers as they require no clearance time. Bank transfers and cheques can only provide the possibility of your bank investigating the details of the account the money was transferred into. For the best protection use Paypal and fund with a Credit Card, although there are limits on this which you should check out with PayPal.

g) Unusual sales pattern. If your seller's feedback indicates that they normally deal in collectables, DVDs or other specific items, be suspicious that they are suddenly listing laptops, plasma TVs or other high value items. This change may indicate that this seller's account has been hijacked.

h) Bad english gives you a pointer. Some fraudsters operate from abroad but pretend to be in UK. As they aren't particularly adept at the english language they might use a translation tool like Babelfish to create their emails to you. So, watch out for emails that are not good english. In itself, it doesn't prove anything, there are plenty of genuine UK eBay sellers for whom english is not their first language. But it might add to further evidence you have.

i) Location Location Location. In the case of lazy fraudsters you might find their locations don't match up. By that I mean the auction says the goods are in the UK, but the seller's ID details show their location to be, say, Ukraine. This is not a good sign. Often in these cases if you contact these seller you will receive an excuse as to why the item is not in the UK, and therefore can't be collected in person. In short, if an auction says the item is in the UK and the seller says that it is not, I would avoid the auction. And don't forget to cross check with their PayPal account, and see in which country this resides.

j) Avoiding the question. Beware auctions that carry a message asking you to contact the seller via a given email address as opposed to via 'Ask seller a question'. This could be an account hijacker trying to prevent buyers from 'Asking the seller a question'. They want to stop this from happening because such questions will be routed to the real account owner.

k) eBay can vouch for me. A warning about a relatively new tactic used by fraudsters. If you are proving hard to land as a buyer/seller, they may claim they can get eBay to email you proof of their validity so that you can trust them. eBay, of course, will never do this. The email sent out, however authentic looking, is fake and is designed to get you to part with your money.

l)A PayPal warning. There are fraudsters who use stolen PayPal accounts to accept payments. To lower the possibility of this, you can check if your sellers location is one of PayPal's permitted countries by clicking here: http://www.workwinners.com/nlr701.htm

m) Passwords. Never have the same password on your eBay and PayPal accounts. Or indeed on any other financial or personal site. Change your passwords every 30-60 days on both eBay and PayPal.

n) Escrow. If your seller asks to use escrow, and proposes an escrow company they've used before, this is an indication they are fraudulent. There are many fake escrow sites which will take your money fraudulently. The only escrow site recommended by eBay is http://www.escrow.com. An alternative in the UK is http://www.auctionpix.co.uk

o) Pointers in feedback. Try to read the positive feedback as well as the negative. Read the way your seller responds to negative feedback as this will often give you an idea of how the seller will react if something goes badly wrong. If the seller is offering high value goods, be wary if their feedback has been built up quickly from low value purchases. Also, if the overall rating is good, but there are a disproportionate number of negatives in recent days/weeks, this might indicate the account has been taken over.

p) Credit Card payment. For high value items, or for amounts of money you can't afford to lose, make sure you pay by credit card which has online fraud protection. This will give you some recourse if the seller is fraudulent. In this context, paying via PayPal is not the same. PayPal do have a buyer protection scheme, but there are criteria which the eBay auction has to satisfy in order to qualify. Even if the transaction qualifies, PayPal's standard protection has a maximum value of £250. Note that payment by debit card provides zero protection.

q) Telephone check. If this is a high value item, use the Ask the seller a question link, and request they email you with their telephone number as you have a few questions about the auction. Any reputable seller will give you a telephone number to call. Call it, and see if you get through to the genuine seller.

That's all in my list. If you have any further ideas on how to prevent fraudulent transactions on eBay, please let me know and I will promote these through future newsletters.

If you believe you've spotted one of these fraudulent listings, or you're involved in a fraud auction here are some steps you need to take:

1) File a complaint with eBay Rules & Safety immediately: http://pages.ebay.co.uk/help/contact_inline/

2) In order to be considered for eBay's Buyer Protection Program, you should immediately submit a complaint via email to ukbuyerprotection@ebay.com.

Read about the Buyer Protection Programme here: http://pages.ebay.co.uk/help/confidence/items-fraud.html

3) Find the other party's contact information. You can get all their eBay registered contact details here: http://pages.ebay.co.uk/help/confidence/know-seller-contact.html

4) Locate and Contact the perpetrator's trading standards office via the local authority area in which they live.

5) Contact your local police

6) Contact the police in the area of the perpetrator

7) If you still get nowhere use the small claims court (it can sometimes work to fill in the paper work and send a copy to the seller, giving a deadline to pay up or you will file the claim with the court. Don't forget to claim expenses and time taken chasing this. You can process the claim online here: https://www.moneyclaim.gov.uk/csmco2/index.jsp

Some Auction Fraud Resources:

Fenton Smith's Site listing Fraudulent Escrow Services http://www.sos4auctions.com

Here's a dreadful website name, but some interesting real stories of fraud on eBay. Note, you have to register to read the stories. http://www.eBayersThatSuck.com

AuctionBytes Fraud Forum - one of AuctionBytes excellent forums. Here you can read about many real live examples of fraud on eBay. http://www.auctionbytes.com/forum/phpBB/viewforum.php?f=28

I hope this information helps to make your trading more secure.


About the Author

Brian McGregor is an internet business creator, consultant and author. He is the author of several books including 'The eBay Formula', an essential guide to selling successfully on eBay. He has also written many articles and is published on the internet and in the printed media. He is also editor of the eBay Auction Newsletter, which you can subscribe to free. For a free ebook on how to use the leverage of eBay to help your business grow, go to http://www.leads-generation.co.uk/lgdl. For full information about Brian, go to his main website http://www.workwinners.com


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