Consumer Protection - ESCROW FRAUD I

 

10 tips for spotting online escrow fraud

 

Most victims learn about escrow fraud the hard way -- by becoming victims. Don't let this happen to you.

With all the escrow fraud on the Internet, it's paramount that you scrutinize an escrow site carefully before signing up for any service. Otherwise you risk losing your money, merchandise and personal financial information to scammers.

These 10 tips will help you spot a phony escrow site before it's too late.

1. Watch out for copycat sites
Escrow.com is a legitimate escrow site, recommended by eBay. Many scammers copy content from Escrow.com when they build their phony escrow sites. Internet Escrow Service (IES) is a wholly-owned subsidiary of Escrow.com. IES only provides escrow services to Escrow.com. Any site that claims otherwise is fraudulent.

2. Call customer service
Call an escrow site's customer service number. Not being able to get a live person on the phone is a big red flag. If you call and get a fax or a generic voice mail that says leave a message, than it's probably a scam. Avoid any escrow service that doesn't list an address or phone number. "It's a buyer-beware environment on the Internet," says John Hambrick, a supervisory special agent with the FBI at the Internet Crime Complaint Center. "The consumer needs to get on the telephone and converse with folks and verify their credentials."

3. Don't be talked into using a particular escrow service
Be suspicious of using an escrow service recommended by an online buyer or seller. Be sure to scrutinize the site carefully before using the service. "When the seller directs you to an escrow site of their choosing, that's a warning flag," Hambrick says.

4. Verify and then trust
Verify any and all endorsements and credentials on an online escrow site. Are those really www.truste.com, www.bbb.com and www.verisign.com VeriSign Secure seals on an escrow site? Be sure to check.
"You're not being paranoid. It's a check you can do in two seconds," says Jeff Ostroff, who runs CarBuyingTips.com .
Ostroff has helped shut down about 500 phony escrow sites since last summer.

Study all licensing information carefully. Being licensed as an independent escrow company is no mean feat. Contact any licensing authority listed on the site and verify that the site is actually registered. Check this information carefully. Many scam sites have ripped off the legitimate license number of Internet Escrow Services, a subsidiary of Escrow.com.

You'll also want to check when an escrow site's domain name was registered. Many scam escrow sites say they've been in business for years but only have been registered for a few days or weeks. You can use a "Whois" tool at any domain name registrar, such as Register.com, to find out.

5. Steer clear of escrow sites with sloppy content
A sloppy Web site is probably a scam. Spelling errors, grammar problems, inconsistent information or broken links are good indicators that an escrow site is a scam.
Of course, a polished Web site is no guarantee an escrow service is legitimate. A flashy, flawless escrow site could still be a fake.

"Some of them look so unbelievably real," Ostroff says.

No matter how good an escrow site looks, be sure to verify all claims and content.

6. How you pay could be a tip off
Take a close look at how an escrow site asks you to pay. If an escrow site asks you to make a payment to an individual or agent rather than a corporate identity, it's a scam. A legitimate escrow service will never ask you to send your money or your product to the other party.

Beware of escrow sites that use person-to-person money transfers such as Western Union and MoneyGram. Western Union is not affiliated with any escrow service.

An escrow company on the up and up will ask you to wire money from your bank to their bank. They'll provide you with a routing number and account number. If you wire money to an escrow service, ask your bank to tell you where the wire transfer is being sent.

7. Do a Google search
Search for the escrow site on Google or another search engine. If your search turns up zero results, be wary. If your search turns up consumer complaints about the escrow site, avoid doing business with the site.

8. Be wary of "safe" and "secure" online escrow companies
Scammers love to use those words "safe" or "secure" when naming scam sites. A dash in an escrow company's name, such as secure-escrow.com, is another red flag. The dash seems to show up in many phony company names.

Avoid escrow sites with Web addresses that end in "org." A legitimate escrow service would never try to pass itself off as a nonprofit organization. You'll also want to avoid escrow sites with Web addresses that end in ".biz", ".cc", ".info" and ".US".

EscrowFraud.com and CarBuyingTips.com have long lists of known escrow fraud sites on their Web sites.
CarBuyingTips.com lists screen shots of 12 common escrow scams.

9. Don't be blinded by a super deal
Many phony escrow sites place phony ads on Internet auction and classifieds sites. These ads promise potential buyers and sellers unbelievably good deals.

"A lot of times they'll put up a car and try to sell it for under market values, thousands less," Ostroff says. "And of course, there's no car."
Another tip off is when you send an e-mail to a buyer or seller and you get a scripted, "Dear Sir" response, referring you to an escrow site that they've used many times.

And if a seller offers to pay shipping and insurance on a really big item, that's another red flag that the deal may not be on the up and up.

10. Pass on overseas escrow companies
Avoid escrow companies based outside of the United States. Many escrow scammers are based overseas. You'll want to stick to an online escrow site that's based in the United States and one you've checked out carefully. It's also a good idea to use an escrow company recommended by an online auction site. For example, eBay recommends using Escrow.com for transactions valued at $500 and up.

10 tips for spotting online auctions

More and more people are turning to online auctions in hopes of finding top-notch goods at fire-sale prices or making a few bucks off the baubles and gadgets collecting dust in their garages.

At online auction sites, you can sell and bid upon just about anything under the sun -- antiques and collectibles, computer equipment, sporting goods and Beanie Babies -- all from the comfort of your PC. There are upwards of 150 online auction sites.

As they grow ever more popular, auction sites are becoming a magnet for the unscrupulous. In fact, according to Internet Fraud Watch, operated by the National Consumers League, online auction complaints were the number one fraud complaint in the U.S. in 1998.

How do scheming surfers take advantage of legitimate auction users? Some sellers will employ a second email address or a friend (called a "shill" in auction lingo) to artificially pump up the prices for a particular item, forcing a buyer's bid upwards or sometimes prompting a bidding war.

Another scam has the buyer using another email address or a friend (called a "shield") to drive up prices and discourage bids on an item she wants. At the last minute, the shield withdraws the high bid, allowing the buyer to win the item at a lower price. While most auction sites forbid retracting a bid once it's made, shields either take advantage of the few exceptions to this rule or simply use a phony email address to make and withdraw the bogus bid. It's hard for an online auction user to spot a shill or a shield through the faceless online world (There are ways to avoid them -- see Tip 5).

The more obvious and frustrating scam occurs when a winning bidder or a seller sends the money or the goods but never receives what was promised in exchange. Unfortunately, if you've sent money or merchandise and the other side doesn't come through, long distance and lack of contact information can make it very hard to collect. While most auction sites won't take any steps to force a sale, some sites now guarantee some transactions under $250 -- meaning you'll be reimbursed if you haven't received your money or your merchandise. Either way, prevention is still the best medicine(See Tips 6 and 7).


While auction sites are scrambling to combat fraud, the nature of online commerce makes it virtually impossible to eliminate it totally. I've pulled together 10 tips to help you avoid some of the common pitfalls of auction scams.

1. Educate yourself. Start slowly, both as a buyer or a seller. Carefully read the auction site's rules and FAQ pages before listing an item or making a bid. (You may also want to check out AuctionWatch, which offers information on auction basics, a glossary of techie auction jargon and other tips and tactics.) Spend some time on a particular site to get the lay of the land. The auction sites have different rules, which can be quite technical, so if you switch sites, make sure you understand the differences. When you're ready, start by bidding on relatively inexpensive items, or, if you're selling, first sell a low-cost item or two. This reduces your risk while you learn how online auctions really play out.

2. Check out sellers and buyers. Take time to find out more about the buyer or seller you're dealing with. Stay away from transactions with minors if you can spot them (called "kid-bids" in online auction jargon). Check out feedback on the other party -- auction sites allow users to post positive or negative comments about their experiences with other users. Be extra cautious when dealing with users with negative or no feedback. And remember, you can't always believe positive feedback, since a user can use an alternate email address or a friend to pad their feedback with undeserved comments.

3. Be wary of untraceable users. While most sites require sellers to supply billing information (including an e-mail address and a physical address) and sometimes pay a listing fee up front, most sites don't require buyers to put up any funds or credit card information in advance. That makes it harder to find someone should a deal go sour. (Amazon, which requires and verifies credit card information from buyers and sellers, is an exception.) Worse, most auction sites don't prevent users from using anonymous email addresses. For example, Web-based e-mail services, such as those provided by hotmail.com, myownemail.com, Yahoo! and Excite, may require a physical address for registration, but they don't verify the location or the user's identity.

4. Check retail prices before bidding. Don't assume you'll get a great deal -- or even a good one -- just because an item is being auctioned online. Internet auctions have become such big business that some folks (and even stores) are making an online living by buying low and selling high. Check the price of the same or a similar item elsewhere. (Consider using Excite's product finder to search online stores, classified ads or auction sites for comparable prices.) Don't forget shipping and insurance costs, which may make buying locally a better deal. After you've figured out a fair price for the auction item, set the highest price you'll pay and stick to it. If you don't, you may get swept up in the heat of the bidding moment and end up paying higher than retail, perhaps as the victim of a clever shill.

5. Watch for shills and shields. Spotting a shill on the Internet can be difficult, but not impossible. Do a search of a seller's past sales. Often the same shill will have bid on everything the seller has offered, to artificially jack up the price of the seller's offerings. The shill's email address may have the same domain name as the seller's (or an anonymous domain name) and the shill may have little or no feedback, or feedback that comes from the same seller or another shill with the same domain name. To spot a shield, look for the same person in other auctions in which the winning bidder has participated. Has this person ever actually won one of the auctions, or has he withdrawn his bid at the last minute? Some sites allow sellers to cancel suspected shield bids. However, no one can spot every scamster, so the trick here is don't get caught up in a bidding war.

6. Contact the other party by phone. Always telephone the other party before completing the deal to confirm the details of what you've bought or sold, to verify the other party's phone number and to discuss details such as payment and shipping. Buyers usually pay shipping and insurance costs.

7. Choose a safe payment and shipping method. Buyers should pay in a way that can be traced, like a credit card or check. (Never send cash, and never send payment to a Post Office box.) Sellers shouldn't ever send the product unless they've received the money -- money orders and cashier's checks are a sure thing, but if you accept personal checks, wait until the check clears before sending the merchandise to the buyer. Always use a traceable shipping method (such as FedEx, UPS or some types of U.S. Mail), and insist on shipping insurance. Since the buyer has to sign for the package, she can't say she never got it. One good solution for both parties is to use UPS's collect on delivery system, which costs about $5 per delivery plus the regular shipping cost. The driver won't release the package until the buyer hands over a money order or cashier's check. Even better, escrow services (which charge from 3 percent to 6 percent of the sale price) let the buyer inspect the goods for a short period of time. Here's how they work: The escrow company collects and verifies the payment from the buyer, then notifies the seller, who ships the item. If the buyer finds the merchandise satisfactory, the escrow company releases the funds to the seller. If not, the buyer sends the merchandise back to the seller. There are several online escrow companies. The most popular are i-Escrow, Trade-direct and TradeSafe. They're excellent choices for transactions over $250.

8. Record every step of the purchase or sale. Print out all details of every transaction, including the original product description and the bidding history. Take pictures of items you send and receive. Also print all e-mail correspondence and the contact information for each buyer or seller you deal with.

9. Report any problems. Besides contacting the auction site's customer service or admin department, post your suspicions in AuctionWatch's "Shill Shack." If you're lucky, some good soul there may actually help you investigate your claim. In addition, you can register a complaint with the National Fraud Information Center.

10. Use common sense. If something is too good to be true, it probably is. Watch out for fakes -- online auctions have been known to list counterfeit Beanie Babies, watches and handbags. For rare or collectible items, have the seller send you a signed, written statement describing the product and its value before you pay for it.

How to Spot a Fraud Site

We encourage you to always use Escrow.com to protect your online transactions. Fraudsters often use a variety of excuses for why they cannot use Escrow.com. If you do choose to use a different escrow service, the following points may help keep you from becoming a victim:

• Fraud sites often claim they are associated with Escrow.com. However, Escrow.com is not associated with or affiliated with any other escrow site.

• Many sites claim their escrow services are provided by Internet Escrow Services (IES). This is because IES can be verified to be an independent escrow company licensed in California. However, Internet Escrow Services (IES) is a wholly owned subsidiary of Escrow.com and only provides escrow services to www.Escrow.com.

• If a site looks similar to Escrow.com, it is likely fraudulent. A legitimate company will spend the time and effort to create their own brand and will not steal the work of other companies.

• Fraud sites often claim they are recommended by eBay, eBay Motors, or Yahoo! Auctions. You may see the list of sites eBay actually recommends by http://pages.ebay.com/help/tp/payment-escrow.html clicking here.

• You should call the customer support number (if any) on the site. If there is no phone number on the site, or if you can’t reach the company, it could indicate the site is fraudulent. Consider whether you want to entrust your transaction to a company you can’t reach on the phone.

• Do a search for the company name on www.google.com (or similar search engine). Established companies will generally be listed. Fly-by-night companies will not generally be in the list.

• See if the web address of the escrow site is registered with the Better Business Bureau by entering it in their search.bbb.org search form.

• Determining the date that a domain name was registered can often give clues that a site is fraudulent. Many fraudulent sites claim that they have been in operation for several years, but their domain names have only been registered for a few days or weeks. To determine the date a domain name was registered, you can use the “whois” tool found at most domain name registrars.

• If a site uses person-to-person money transfers such as Western Union, it is probably fraudulent. See what Western Union says about fraudulent escrow services by clicking here.

• If the escrow site requests payment to an individual (or "agent") instead of a corporate entity, it is fraudulent.

• If a site only accepts wire transfers, e-currency, and other similar untraceable (or difficult to recover) payment mechanisms, it may be fraudulent. However, just because a site accepts credit cards does not mean it is legitimate – the site may be set up simply to steal credit card information. If you wire money to an escrow service, ask your bank to tell you where the wire transfer is being sent.

• If the site does not use SSL to protect user sign-in information, it is not a secure site and is most likely fraudulent. Most browsers display a padlock or similar symbol in their status bar to show you when your information is being protected by SSL. However, having a SSL certificate is no evidence that a site is legitimate.

• Be wary of sites that have escrow fees that are unreasonably low. It is unlikely that a site that charges as little as $2.00, for example, can legitimately perform these services and still stay in business.

• Being licensed as an independent escrow company is not a trivial procedure. Licensing is required by the laws of several US states in order to perform transactions in those states. One of the key states requiring licensing is California. If a site does not clearly state how it is licensed, it is probably not licensed.

If a site lists licensing information, it should list the licensing authority. Contact the licensing authorities listed on the site and verify the site is actually licensed by those authorities. Be cautious on the validation. Several fraud sites have in the past given out the legitimate license number of Internet Escrow Services (the wholly owned subsidiary of www.Escrow.com).

• Spelling errors, grammar problems, broken links, and inconsistent information (such as the location of the escrow company) are usually additional indicators the site is fraudulent.

• www.escrow-fraud.com keeps an updated list of the escrow scam sites and legitimate sites. Visiting this site will help you better protect yourself when transacting on the Internet.

 More