View Full Version : Online auction scams soar

02-02-2005, 06:28 AM
Complaints nearly double

Carolyn Said, Chronicle Staff Writer
Wednesday, February 2, 2005

As online auctions explode in popularity, more crooks are muscling in on the territory.

Complaints about Internet auctions were the fastest-growing category in an annual Federal Trade Commission report on fraud released Tuesday. They almost doubled to 98,650 in 2004, up from 51,000 in 2002, and accounted for 16 percent of all complaints.

The total number of complaints about Internet-related crimes -- including fraudulent auctions, Internet services and scams in which the consumer was contacted or responded via the Internet -- was 205,568. The crimes cost consumers $265 million, with a median loss of $214, the FTC said.

Despite the rapid rise in Internet fraud, identity theft -- through credit card, bank and phone fraud -- continued to be the largest source of complaints. The FTC said 246,570 people reported that they were victimized, up from 161,890 in 2002.

Overall, consumers reported losing more than half a billion dollars to fraud last year, the FTC said. The agency received 635,173 complaints, up 57 percent from 403,688 in 2002.

"There's a certain percentage of our population that are con artists and scammers, let's say it's about 3 percent,'' said Rosalinda Baldwin, CEO of TheAuctionGuild.com, an upstate New York site that acts as a watchdog and information provider for online auction users. "As those people get more Net savvy, their business in the analog world is just going to move online."

"It behooves a person who is thinking about transacting business online to become educated," said David Steiner, president of AuctionBytes.com in Massachusetts. "It's not an innocent little playground anymore."

Some online auction fans have gone even further. Frustrated that auction leader eBay, as they see it, isn't sufficiently proactive about hunting down con artists, they've taken matters into their own hands.

False bids, fake receipts

Self-styled auction vigilantes try to combat online scammers by giving them a taste of their own medicine. Some submit false bids to auctioneers they believe are crooks, including sending fake Western Union receipts to trick the auction-holders into thinking they've landed a sale.

"We bait (scammers). We waste their time," said Keith, the moderator of a site called TheScamBaiter.com. He declined to give his last name for fear of reprisals from scammers.

"This weekend, a friend and I 'bought' 30 or 40 Super Bowl tickets from Romanian scammers," he said. "If we get four or five people baiting a single scammer, he has his hands full. He thinks he's going to get all this money."

Keith said he spends a couple of hours a day "baiting" auction scammers, fitting it in around his job as a Virginia building contractor.

"We've done a lot more damage to the scammers than eBay has ever done. We have it down to a science, where we're really confident whoever we're going after (is a fraudulent seller)," he said.

Keith said scam baiters also will launch "denial of service" attacks, in which hundreds of computers flood fraudulent sites with messages, effectively shutting them down.

The baiters have an unusual way to measure success.

"We also try to get death threats from (scammers)," Keith said. "Among scam baiters, a death threat is considered a trophy. That means you're doing your job, you really pissed them off."

EBay spokesman Hani Durzy said the company does not condone such practices.

"We believe there is a very clear line between community activism and vigilantism," he said. "Anybody who takes what we consider to be un-eBay like actions against other users because of an assertion they have, we request our community refrain from doing that."

Only a small fraction of 1 percent of eBay listings is confirmed to be fraudulent, Durzy said. Last year the company hosted 1.4 billion listings, including both auction and fixed-price items.

"In the grand scheme of things, it's a very rare occurrence on eBay," he said. "Fraud is not completely eliminated on eBay nor on any other open, transparent market."

Some eBay watchers say the company does all it can to downplay fraud complaints because it doesn't want to scare customers away.

"EBay is horrible," said Baldwin of TheAuctionGuild.com. "If you report too many scam sellers on the site, if eBay does anything about them, it's a miracle. And if you get too vocal about it, especially if you talk to a reporter, eBay suspends you. That's crazy. They don't want people hearing about fraud."

EBay said it takes complaints seriously.

"We look at every fraud report that comes into us," Durzy said. "We rely on the community to alert us to instances where they feel they have been wronged."

Marcy Fraser, who works in administration at UCSF, said she was disappointed with eBay's response when she bought a $150 mini-disk recorder that arrived dented and unusable.

"The auction company response was pathetic," she said. "I tried to do the eBay and PayPal (eBay's online payment service) mediation. They were both completely useless. They make you fill out a bunch of forms, make you wait, do what they call an investigation, which is basically sending e-mails to the sender, so it's your word against theirs."

After returning the damaged item and unsuccessfully requesting her money back, Fraser said she contacted police in the seller's hometown of Wilton, Conn. "Ultimately the problem was solved by a resourceful police detective, and my money was finally returned," she said.

'Trust and safety team'

Durzy said eBay has more than 1,000 people on its "trust and safety team," which includes engineers, code writers, analysts and fraud investigators. The company does not break out the number of fraud investigators.

The FTC said the Bay Area had the dubious distinction of registering high on the agency's list of regions with the most per-capita fraud complaints. The area of San Jose, Sunnyvale and Santa Clara had 2,988 complaints, or 172.1 per 100,000 residents, making it second in the nation after the Washington, D.C., region.

San Francisco, Oakland and Fremont ranked seventh in the nation with 6,748 complaints, or 163.6 per 100,000 residents.

Fraud prevention tips
Protect personal information

Share your credit card or other personal information only when you're buying from a company you know and trust.

Know who you're dealing with

Walk away from any company that doesn't clearly state its name, physical address and telephone number. A Web site alone or a mailbox drop should raise suspicions.

Don't rely on oral promises

Get all promises in writing, and review them carefully before you make any payments or sign any contracts. Read and understand the fine print in any written agreement.

Don't pay up front

Remember that legitimate lenders never guarantee a loan or a credit card before you apply, especially if you have bad credit, no credit or a bankruptcy.

Source: Federal Trade Commission

Link (http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/02/02/COMPLAINTS.TMP)