The Federal Trade Commission (FTC) and 29 state attorneys general on Wednesday announced a sweeping initiative designed to get tough on Internet auction scam artists.
As many as 57 cases involving criminal or civil violations are currently pending with at least 37 individuals charged and under prosecution for alleged crimes.
Howard Beales, director of the FTC’s Bureau of Consumer Protection, and Christine Gregoire, Washington state attorney general, took the podium to announce Operation Bidder Beware, a consumer education and law enforcement coordination program.
Beales said the FTC currently has 51,000 complaints of Internet auction fraud in its database that add up to about $37 million in consumer losses. The most common complaints are seller’s failure to deliver goods, identity theft, stolen and counterfeit goods, and phony escrow accounts.
Both Beales and Gregoire stressed education as the most potent tool in this new battle.
“Our message to consumers is, ‘do not be afraid to browse auction sites, use your credit card – not cash, check or some other form of payment, and check out an auction site before you participate,” Gregoire said.
But one of the most pernicious scams, involving identity theft, allows criminals to pose as legitimate sellers on trusted sites such as eBay.
Readers of Antique Trader Magazine, for example, have seen their legitimate selling identities tied to bogus auctions on eBay. Ebay has been reportedly slow to take these auctions down.
“This is an ongoing controversy,” Avivah Litan, analyst with Gartner told internetnews.com. “eBay doesn’t want to get involved, even after they have been alerted of identity theft.”
Beales called this a double scam. “I steal your identity as a seller and then lure a buyer into the fraud,” he explained.
But neither Beales nor Gregoire had any specific, new weapons to launch against these complex schemes. “Fraud in any new medium is constantly evolving,” said Beales. “We need help from consumers and auctioneers like eBay.”
Gregoire said many of the perpetrators fit a profile. “They are often quite young and male,” she said.
Beales said consumers should pay with credit cards or use an escrow service. However, a recent victim of fraud who shared the stage with Beales and Gregoire, lost $1300 using a phony escrow service.
“I shipped a laptop computer after seeing the money was there in the escrow account,” said Rick Skinner of Norfolk, Va. “I never got the money.”
Skinner said he made contact with they buyer on eBay and the buyer convinced him to conduct the transaction at a different Web site using Premier Escrow Service.
“This is the kind of thing that should raise red flags,” said Gregoire. “If someone tries to talk you off of a particular site, or insists you use a specific escrow service – be suspicious.”
Beales made it clear that he thinks existing laws are up to the challenge of combating these new scams. “It is not a problem of laws, but of criminals finding new ways to hide. We will find better ways to sniff them out.”
Litan thinks consumers may just have to wait for market pressures to take their toll.
“Right now nobody wants to tackle the issue of identity verification for Internet auctions because there is no money to be made. Maybe sites like eBay will take more of a lead here when business starts to take a bigger hit.”