Online Auctions: Tips to Avoid Getting Scammed on Ebay and Other Online Auctions

Escrow Services: How to Buy and Sell Online Without Getting Scammed

Tips for Using Escrow Services for Buying and Selling on Ebay and Other Sites

The problem: how to exchange money for an online auction sale (like on Ebay) without getting scammed.  If you are selling something, what is an acceptable form of payment when you can't take a credit card?  If you take a check and ship the product, by the time the check bounces, the merchandise is gone!

You may think that you needn't worry because a seller has a good rating: Do not use a seller's positive feedback to gauge their honesty! The rating is not suitable for big ticket items. It is not foolproof, and a scammer may build a good rating on small items before unfolding a large money scam. And thanks to eBay account hijacking, You cannot be sure that it really is the person who owns the account.

If you are the buyer, and you send real money, if the seller is a scammer, you will never receive anything... or you will receive a box of rocks or a phonebook... but not what you ordered!

So what is a safe method to exchange money for a product so neither the seller nor the buyer are scammed?

Escrow Services

There is an answer, it's called escrow services.  An escrow service is a licensed and regulated company that collects, holds, and sends a buyer's money to a seller according to instructions agreed on by both the buyer and seller. Typically, once the buyer receives and approves the item from the seller within an agreed time frame, the escrow service then sends the payment to the seller.

Escrow is available for any purchase, but typically is used for large purchases of $500 or more, or any amount that either party feels they cannot afford to lose.

But before you rush off to Google to look up the first return on a search for escrow services, consider that, as of 2008, most of the escrow services advertised are scams. See this page for a story about the subject.

So we have to identify the legitimate escrow services first. The simple answer is Escrow.com:

Here's what eBay says about escrow services:

"There are fraudulent escrow services, so use caution if a seller suggests using a service other than www.escrow.com. If your trading partner insists that you use a specific escrow service and will not accept www.escrow.com (or an eBay approved international escrow service for international transactions) as an alternative, please decline the transaction and report the seller or buyer to eBay:"

Why not use PayPal?

Paypal is fine for small transactions, but offers no protection than Western Union, which is little to none. PayPal provides you with a PayPal Account, which is not the same as a real merchant account such as this from Costco or this free Merchant Account. Your money is deposited into a PayPal account, which PayPal Controls, rather than your own bank account. PayPal can choose to freeze your PayPal account at any time they choose, and take the money away from you. And since you have linked it to your checking account, they can, in theory, and some say in practice, pull your money directly out of your personal bank, without even a phone call or e-mail.

If you think want to dispute their decision, you will be at their mercy. If you read the terms of service, you agreed to all of this, when you signed up. If you do want to contact PayPal, here are their numbers: (402) 935-7733 or 877 672-9725.

See these pages for complaints about PayPal:

On another note:

If you do use PayPal regularly, you should consider getting this $5 security key that helps to secure your PayPal account. The key generates a random code every 30 seconds which you must use to access your account. Even if a thief has your email address and password, they still won't be able to get in without the code.

So the answer is Escrow.com

Yes, and here's how to proceed:

If you have decided to use escrow, here's how it works:

  • Both parties (buyer and seller) agree to use www.escrow.com for the payment transaction.
  • The buyer sends payment to www.escrow.com rather than directly to the seller.
  • www.escrow.com tracks the shipment of the item.
  • Once the buyer confirms receipt of the item, www.escrow.com will send payment to the seller to complete the transaction.

Read EBay's Frequently Asked Questions about escrow services.

If you are ready to start, here is a link to Escrow.com's sign-in page. here is what to expect will happen:

  1. Agree to use escrow. Either the seller or the buyer can contact the other to propose using escrow. Both must agree to use escrow before the escrow process begins.
  2. If you are buying or selling via eBay:
    1. If you are purchasing via eBay, sign in to eBay's Escrow page. After the listing ends, sign in to the escrow page and enter your item number.
    2. Review your information. if you are buying on eBay, they will show your current contact information for you to verify before it is forwarded to the escrow company. Sellers in Multiple Item Listings will need to indicate which buyer this escrow process applies to.
  3. Sign in to the escrow site or create a new account.

  4. Set and agree on terms. Both the buyer and the seller need to agree to the terms of the escrow process, including:

    • Who pays shipping
    • How much shipping will cost
    • Length of the inspection period
    • Who pays escrow fees
    • Are shipping fees refundable
    • Conditions for accepting the item
  5. Buyer pays into escrow. The buyer now uses a credit card, cashiers check, money order, personal check, or business check to pay the agreed-upon amount into escrow.
  6. Seller ships the item. The seller ships the item directly to the buyer using a traceable shipping method (FedEx, UPS, United States Postal Service Delivery Confirmation). The seller is required to provide the escrow company with the tracking number.
  7. Buyer inspects the item. The buyer now gets to look over the item and notify the escrow company whether they accept it or not.
  8. If the item is accepted (or the inspection period runs out) the funds are paid to the seller by check within five business days if the seller is in the United States.
    If the item is not accepted, the buyer must return the item to the seller. In this case, the buyer is required to pay the return shipping fee and the escrow fee. This rule minimizes casual returns. Payment, minus the escrow fees, is then returned to the buyer.

Tips for selecting and using other escrow services

  • Other Countries:
    These are escrow services that eBay recommends for countries outside the United States:
  • No emails: A legitimate escrow site will never send you an email telling you to either send your money or or your product to the other party. The transaction is only tracked online, and never through emails, which are inherently not secure.
  • No Western Union: Remember: NEVER, NEVER use Western Union to send money to someone you do not already know and trust. eBay itself tells you not to use Western Union to pay for auctions. A Real escrow company would never tell you to wire them money via Western Union, e-Gold, VUpay, etc. Western Union transfers CASH from one Western Union location to another, not to a real and traceable bank account!
  • Do a Google search: To check out an escrow service, do a Google search on the escrow's web site's name. Legitimate escrows have many Google results. Fake ones will typically have only one search result, or more commonly, none. Also look for complaints other victims have posted online.
  • Watch out for "Dear Sir": If they address you as "Dear Sir", it's probably a scam, because they are using pre-written form letters. A real reply would address you by name.
  • Always require a signature: As a seller in an auction, sending an expensive product through an escrow, you should ALWAYS require a signature for delivery.
  • Use escrow companys that have been in business for 4 years or more: Do not deal with an escrow company unless you absolutely verify they are at least 4 years old through Division Of Corporation lookup. Don't believe anything the company says about themselves, such as on the Company Information page. Always independently verify all claims.
  • Never ever use the escrow service recommended by the other party, whether you are the buyer or seller.
  • Watch out for absurdly low prices: Be extremely suspicious about any large ticket item that is priced well below similar models for sale. For example, if a luxury car is $15,000 cheaper than all the others, it's could be a phony scam sale. They use these lower prices to suck you in.
  • Offers to pay insurances and shipping are a clue to a scam: The person you are dealing with offers to pay the shipping and insurance.
  • Look for the eBay "Changed ID" icon next to the seller's ID name. If they changed their ID in the last 30 days, don't deal with them yet. Few legitimate people change their ID on eBay, as it takes time to build crediability. The vast majority of ID changers are due to fraud scammers.
  • Look for the secure connection: https: When you log into a fake escrow site, it will usually not start with HTTPS:// at the beginning of the URL, and the "SSL secure padlock icon" will not come on at the bottom of your browser. This means the site is not a secure site, and is therefore a fraud.
  • Transfers should be to the escrow company's bank account: A real escrow company would tell you to use YOUR bank to wire money to THEIR bank, with their routing number and account number. There is a form you fill out and it must show who their beneficial bank is. You must still verify with your bank where the receiving bank account is REALLY located for their bank account before you wire, it could be a bogus account in Romania, Latvia, Estonia, the Carribbean.
  • Always try to close your deal in person if possible. Do the math: if you just saved $5,000 on the car, spend $300 on a plane ticket to go see it.
  • Never buy or sell to a foreign location: Don't buy a large ticket item from a foreign "seller" online. Go get the item yourself, or don't close the deal. Escrow won't work for huge dollar items abroad.
  • Watch for these names: Avoid dealing with any escrow company that has a dash in the name, like secure-escrow.com. That is just a tip from experience - they just seem to be scammers. Similarly, Avoid any escrow company with eBay's name embedded in it, like Ebay-Escrow.com. They are all frauds. eBay uses the legitimate Escrow.com.
  • Avoid escrow companies that claim to be licensed in all 50 states, it's rarely true. Even some top escrow services refuse to license themselves in Arizona which has licensing requirements that dictate the deposit of an unreasonably large amount of money as a condition for a license. California has tough licensing requirements too, so if you don't see them licensed there, you know they are probably lying.
  • Watch for phony license numbers: Some fake escrow sites list a license # of: 963-1867. It was lifted from the legitimate Escrow.com.
  • Go to Whois.org or Register.com and do a "whois" lookup of the escrow company domain name. If the domain name was registered only weeks before, consider them to be fraudulent. The scammers usually reserve several names, rip off a few people, then dump the site.
  • Websites don't mean anything: Don't get fooled by the professional look of an escrow company website. Websites are easy to make.
  • Don't use a foreign escrow company: If the escrow company is located outside the U.S., don't use them. They are not governed by any U.S. Laws.
  • Check the Verisign logo: If the escrow site has a "Verisign Secure Site, Click To Verify" logo on their web site, it is most likely fraudulent. Click on the logo and if all it does is send you to Verisign's home page, they are fraudulent. Same with Internet Security Alliance, and TRUSTe logos.
  • Avoid escrow companies that use the names of well known companies in their name, like WellsFargoEscrow.com, WesternUnion-Escrow.com.
  • Assume that just about any escrow service with the word "Safe" or Secure" in their name are neither safe, nor secure.
  • Avoid dealing with any escrow company that has a ".ORG" as part of their name. Legitimate escrow companies are in business to make money, and should never try to pass themselves off as a non-profit organization, which is what the .ORG means. Any U.S. based escrow should end in .COM. Similarly, avoid escrows that end with .BIZ, .CC, .INFO, ,US, you get the picture.
  • If the escrow company has the BBB logo on their site, but the link does not go to a BBB review of their business, then the site is a fraud. Verify with the Better Business Bureau at BBB.com if they have a reliability report on your escrow company. Legitimate escrow services are members of the BBB, and should have a "Satisfactory Record" on the BBB Reliability Report that pops up.
  • Avoid dealing with an escrow web site that does not have BOTH their address AND theirphone number listed. Always call the phone number to make sure it's real. If you get a recording during normal business hours,  it's fraudulent.
  • Before you sign up, send the escrow company a simple email question and see if they respond. If they don't then consider them to be fraudulent.
     

Internet auction - basics

  • Get to know the parameters set by the site - they are in place to ensure user safety. Read the safety advice provided by the on line auction site before trading. Never step outside of these or outside of the site no matter how enticing the deal. Fraudsters will try to trick you into doing this. Like any popular activity you must ensure you know 'the rules of the game' because 'A little knowledge is a dangerous thing'.
  • When looking at an advertised item compare pricing. Beware of people offering you a deal below the current bid or reserve price, especially if they are contacting you direct. Remember 'If an offer sounds too good to be true it probably is'.
  • Get to know the seller by looking at their selling history and the goods they sale. Be extremely careful around the payment method used for persons selling with little or no selling history.
  • Don't get carried away in the excitement of winning an auction. Fraudsters rely on you being over keen and off your guard. It is never too late to ask questions of a seller to ensure that you are completely happy with what you are about to pay for. Do not follow through if you think it is a fraud, report the seller to the site.
  • Finally, if your site offers 'second chance' bidding on an auction verify that any notification of you qualifying for this 'opportunity' actually comes from the site and not from a fraudster impersonating them. You can do this by carefully checking the address from which the e-mail is sent or by contacting the site via its published website (Beware of using any hyperlinks or numbers attached to such a 'notification' as these may also be false).
  • "Always ask yourself, have I won the item, or have they won their next victim?"

Internet auction - payment

Buyer:

  • Never use money transfers as a payment method whenever someone suggests this to you, even if it is by the seller after you have 'won' the auctioned item or when approached to step outside the on line auction site. There is little security in this, no matter what the seller says, and you are effectively sending your hard earned cash to a stranger 'on trust' alone. See our Money transfer pages for further information.
  • Being extremely careful around direct banking transactions to pay for goods. There is still little security in this area also, which increases if the seller has no or little trading history with the on line auction site you are using. You are still effectively still sending your hard earned cash to a stranger 'on trust' alone. There have been instances where people have sent money to bank accounts and not received the goods. This has been more prevalent when dealing with people with no or little trading history on the auction site as a seller.
  • Use on the online payment options or a reputable ESCROW account to pay for items. ESCROW is a payment system where both buyer and seller's financial details are held separately and in isolation by a legitimate third party company acting as 'middleman'. The buyer makes their payment into the Escrow account. The payment is only made to the seller the goods have arrived and been deemed satisfactory by the buyer. By doing so your transactions will be better protected and often insured. Never enter an Escrow account site through a link in an email sent to you by anyone, as it has not been unknown for fraudsters to set up fake Escrow websites. Use a search engine to locate the website or enter your chosen Escrow site through it's proper web address. Always check the url shown in your web browser address bar.

Seller:

  • When a check is accepted for payment, please be aware that although your bank or building society may after three days state that it has 'cleared', this only means that the money has passed between the banks. You remain liable if the check that you have paid into your account is forged or stolen, this may not come to light until the check is received by the other bank or the bank account holder queries a transaction on their account. This may take longer than you anticipate. The money is then taken back from you account so you lose not only the items that you have shipped to the 'Buyer' but also the money that the buyer 'paid' for the goods.
  • A common trick that fraudsters use is known as 'Criminal Cash Back' where a seller accepts a check for an amount higher than the value of the transaction, often to pay a 'shipping charge' to the buyers 'shipping agent'. This is actually paid to another fraudster who receives 'clean' money from you. You then find out at a later stage that although the check paid to you has 'cleared', it is a stolen or forged check, and you must pay the money back to your bank with no hope of getting the money back from the bogus 'shipping agent'. See out pages on Criminal Cashback pages for further information.

Tips to Protect Against Non-Delivery of Merchandise

  • Make sure you are purchasing merchandise from a reputable source. As with auction fraud, check the reputation
    of the seller whenever possible, including the Better Business Bureau.
  • Try to obtain a physical address rather than merely a post office box and a phone number. Also call the seller to
    see if the number is correct and working.
  • Send them e-mail to see if they have an active e-mail address. Be cautious of sellers who use free e-mail services where a credit card wasn't required to open the account.
  • Investigate other websites regarding this person/company.
  • Do not judge a person/company by their fancy website; thoroughly check the person/company out.
  • Be cautious when responding to special offers (especially through unsolicited e-mail).
  • Be cautious when dealing with individuals/companies from outside your own country. Remember the laws of different countries might pose issues if a problem arises with your transaction.
  • Inquire about returns and warranties on all items.
  • The safest way to purchase items via the Internet is by credit card because you can often dispute the charges if something is wrong. Also, consider utilizing an escrow or alternate payment service, after conducting thorough research on the escrow service.
  • Make sure the website is secure when you electronically send your credit card numbers.
     

And please let us know about any suspicious calls or emails you receive.  We look for patterns so that we can alert the authorities and victims to new scams, before it is too late!

 

 

 

For a comprehensive list of national and international agencies to report scams, see this page.