Online Auction Sites: It Pays to Make Sure You Are Protected
Federal regulators last year received more than 11,000 fraud complaints involving Internet auctions. In 1997, the number of complaints was a measly 107.
Online auctions are becoming more popular, but not enough people take the proper precautions. Most Internet auction sites make it difficult to determine whether and how trades and purchases are insured against fraud. Even large Web sites such as EBay offer only limited consumer protection.
Just last month, two EBay sellers pleaded guilty to charges that they defrauded bidders in connection with the sale of a painting by a famous artist. In December, an EBay seller was arrested and another indicted for allegedly cheating bidders out of thousands of dollars.
Executives at EBay are quick to point out that the fraud rate for the site has dropped, from one in 35,000 transactions in 1999 to one in 40,000 transactions in 2000.
Even so, I feel much more comfortable bidding at a site that uses an escrow system to make sure I get what I buy. Insurance that pays when a consumer gets victimized and the use of mediation services also go a long way toward making it easier to buy with confidence.
One of the best ways to stay safe on an auction site is to use a credit card. Credit card companies typically cover 100% of the cost of a transaction if a consumer doesn’t receive a purchased product or if the product received is not what was advertised.
Consumers may not have gotten this message, though, because only about 17% of Internet auction transactions are made with credit cards. Why such a low number? Many consumers just aren’t comfortable giving their credit card numbers out over the Internet. Compounding the problem, some online auction sites won’t accept credit cards because of the charges they have to pay.
Find out whether the Internet auction site you want to do business with insures transactions. Look at the coverage and any other practices and policies implemented by the site. Many auction sites offer only a few hundred dollars of coverage.
Under no circumstances should you use an ATM debit card, which draws funds directly from your checking account. These cards offer none of the dispute-resolution services provided by regular credit cards.
Finally, read any “terms of service” or “terms of agreement” listed on the auction site. Read the agreement in its entirety. Your failure to read such information won’t be a defense in any mediation or litigation. If the terms are vague or uncertain, you should consider finding another auction site with better, more clearly defined policies.
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Jeff Levy hosts the “On Computers” radio talk show from 9 a.m. to noon Sundays on KFI-AM (640).
