Avoiding Fraud in Online Auctions Jackson MI

As more people use eBay and other online auctions, 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 Internet fraud complaint in the United States.

eBay and other auction sites work hard to combat fraud, but the nature of online commerce makes it virtually impossible to eliminate it totally. Here are ten tips to help you avoid some of the common pitfalls.

1. Educate yourself. Start slowly, whether you're a buyer or a seller. Carefully read the auction site's rules and FAQ pages before listing an item or making a bid. Spend some time on a particular site to get the lay of the land. 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 the time to find out more about the buyer or seller you're dealing with. Check out feedback on the other party -- auction sites allow users to post positive or negative comments about their experiences with other users. Don't deal with users with negative feedback or no feedback. And remember, you can't always believe positive feedback, because a user can use an alternate email address or a friend to pad their feedback with undeserved praise. Note, in 2008, eBay changed its feedback policies and only permits buyers to leave feedback about sellers, not vice versa.

3. 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 brick-and-mortar retail stores are selling their goods online at regular retail prices. Check the price of the same or a similar item elsewhere by searching online stores, classified ads, and/or auction sites for comparable prices. Don't forget the costs of shipping and insurance, which may make buying locally a better deal.

4. Set a maximum price. 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.

5. Avoid scams. Educate yourself about common online auction scams such as fraudulently jacking up the price of offerings ("shills"), bid retraction, sales of stolen or counterfeit goods, and others. The more you know, the better you can protect yourself. (To learn more about common auction scams and how to avoid them, read Nolo's article Avoiding eBay Fraud.)

6. Learn how to resolve disputes. If problems arise out of an auction transaction (for example, the winning bidder doesn't pay up or the buyer never gets the item), use available services to facilitate a resolution, such as SquareTrade and PayPal's Buyer Protection Program. (To learn more about these programs and other ways to resolve disputes, read Nolo's article Resolving eBay Disputes.)

7. Choose a safe payment and shipping method. Buyers should pay in a way that can be traced, such as with PayPal or a credit card. (Never send cash, and never send payment to a P.O. box.) You can dispute credit card charges if the seller never delivers or misrepresents the goods. Always use a traceable shipping method (such as FedEx, UPS, or some types of U.S. Mail), and insist on shipping insurance. Because the buyer will have to sign for the package, she can't say she never got it.

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 email correspondence and the contact information for each buyer or seller you deal with.

9. Report any problems. Contact the auction site's customer service department if you have trouble with a buyer or seller. In addition, you can register a complaint with the National Fraud Information Center (www.fraud.org) and the FTC's Consumer Sentinel (www.consumer.gov/sentinel).

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 collectibles, 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.

To learn more about eBay strategies and rules, get The eBay Business Start-Up Kit, by Richard Stim (Nolo).