UPDATED - An Anatomy of Fraud: Don't Let it Happen to You

By: Richard Brewer-Hay

Hi everyone, As a former law enforcement officer this kind of fraud really makes me cringe because it could have been easily avoided! Recently we learned about a woman who was victimized by a fraudster because she didn’t realize that there is no relationship between Craigslist and eBay postings, and did not follow eBay’s general buying safety tips: mainly, if it looks too good to be true, it probably is! These types of scams are getting more common, so please beware. Here is a step-by-step account of what happened:

Trust and Safety

1. Buyer found a car with a Kelley Blue Book Value of $9,970 listed on Craigslist for $2980. (This price with free shipping—too good to be true?)

 

2. Buyer contacts seller through Craigslist.
3. Seller e-mails buyer and pretends this will be an eBay transaction through eBay Safe Pay Insurer (there is no such program).

4. Seller sends buyer spoofed, or fake, eBay Purchase Protection Membership and seller “certification”—claims coverage up to $20,000.

5. Seller sends another spoofed but official-looking document specifying transaction conditions from the eBay “Vehicle Purchase Protection Department” which does not exist.

6. Seller sends spoofed “eBay payment instructions” and buyer is required to pay immediately with MoneyGram (Instructions contradict eBay policies- MoneyGram is banned on eBay.com)

7. Buyer pays with MoneyGram but doesn’t receive car and is out $2980.
8. Buyer brings complaint to eBay and law enforcement.
9. Buyer is not eligible for eBay Vehicle Purchase Protection Program (VPP) because it was not an eBay listing and eBay does not cover transactions off eBay.

Here are some tips that would have helped the buyer avoid her loss:
• Consider buying on eBay; we have the PayPal Buyer Protection Program and also a Vehicle Purchase Protection Program specifically for eBay Motors. See more tips from eBay Motors at http://www.motors.ebay.com.
• When buying on eBay, look at seller’s ratings and reputation.
• If you are shopping on Craigslist, follow its safety tips: http://www.craigslist.org/about/scams. If you are shopping on eBay, don’t be lured off of the safe confines of the site to complete transactions.
• Research the item as far as model, price, book value etc., read description carefully and look for the eBay VPP if you are buying on eBay Motors.
• Be sure that requests for payment come through eBay channels and are in keeping with eBay policies.
• Never use Western Union, MoneyGram or wire transfer services because they leave you exposed to fraud and with little recourse. You are automatically covered by the eBay VPP for all eligible listings on eBay Motors.

Please see the warning message posted on the eBay Trust and Safety Community Message Boards.

Thanks and have a safe and happy holiday!

– Rich LaMagna
Online Safety Advisor, eBay

UPDATED 1/6/2009

Hi Everyone,
I hope that you have all enjoyed a pleasant holiday and wish you a safe and prosperous New Year!

I’d like to address some comments and emphasize that my goal is to provide information and advice to allow eBay customers to make informed decisions and have a safer online experience. I am a paid consultant to eBay and not an eBay employee. While I fully support and agree with eBay and PayPal policies, my job is to promote online safety.

As for the suggestion that I need to get out into the world more—during 28 years of federal law enforcement experience and almost 10 years in the security field in the private sector, I’ve lived and worked in four different countries and traveled to about another 30 on business; I also try to keep up with the latest in online safety issues. Here are a few points I’d like to make:

Although @Laura Greenfield’s question pertained to bank and wire transfers I’d like to address other payment forms since they were also raised.

Some people indicated that they often use money transfer services or bank wire transfers as sellers and have had no problem from regular corporate clients and wholesale customers. Granted that the risk is greater for the buyer than the seller and dealing with known clients does reduce some risk. However, suppose the buyer makes a claim that the item was not received or otherwise flawed? For both buyers and sellers, taking the transaction off eBay leaves you with few protections and options. This could also result in a dissatisfied buyer, who might leave negative feedback which is harmful to your DSRs. Why risk it? I recently attend an industry meeting where a Western Union security official stated that he does not recommend their service for payments to other than known and trusted individuals.

If you use PayPal, the buyer is protected for the full purchase price of the item plus shipping costs on eligible transactions? The seller is protected for unauthorized payments and “Item Not Received” claims. Credit card companies also offer recourse and protection that bank and wire transfers do not offer. That is another reason why wire transfers are no longer legal on eBay. Buyers expect safe, convenient and fast transactions, which PayPal and other online payment services offer– there is a good reason why 90% of eBay shoppers prefer online payment services, as do most eCommerce buyers.

I’ve done bank wire transfers for my own business and they are costly and inconvenient—I’ve wasted valuable time sitting in front of a bank employee doing a wire transfer which often takes 24 hours to complete. Recently, I had to go back to the bank a second time because they made an error on the transaction and the recipient had to wait another 24 hours for the money. As for trusting PayPal, as a buyer, I recently filed claims with PayPal on items and services that were not as described—they responded immediately and I had my money back within 12 hours.

Here is what Western Union and the Federal Trade Commission say on their sites about money and wire transfers as well as other payment methods:

Western Union

Remember, Western Union recommends against using the Western Union Money Transfer® service to pay for online auction purchases. It is important to note that Western Union does not offer any type of purchase protection or escrow service and is not responsible for the nonreceipt
or quality of goods or services.

Federal Trade Commission(OnGuardOnline.gov)

Carefully consider your method of payment. Don’t send cash, and don’t use a money wiring service. To protect both buyers and sellers, some auction sites now prohibit the use of wire transfers as a method of payment.

Online Payment Services. Online payment services are popular with both buyers and sellers. They allow buyers to use a credit card or electronic bank transfer to pay sellers. They also may protect buyers from unlawful use of their credit cards or bank accounts because the online payment service holds the account information, not the seller. Many sellers prefer online payment services because the services tend to provide more security than, say, personal checks.

Wire Transfers. The FTC recommends that buyers not wire money (via a money transmitter or directly to a seller’s bank account). …..In fact, to protect both buyers and sellers, some auction sites now prohibit the use of wire transfers as a method of payment.

Finally, I’d like to address the issue of personal checks:
• Checks can easily use a forged signature
• Checks can be easily written when there are insufficient funds in the account
• Bank accounts can be opened in bogus names (see identity theft)
• Checks contain personal information that should only be given to trusted merchants
• Banks will not make good on bad checks and will charge fees
• Checks take longer to clear
• Checks on foreign currencies take very long to clear and require fees

Frankly, as a buyer, seller and business person, I can’t imagine why anyone wouldn’t want to use PayPal or another approved electronic payment method.

To file a complaint with the Federal Trade Commission go to FTC.gov.

Thanks for your comments and Happy New Year!

Rich LaMagna
Online Safety Advisor