How to avoid the scams of the online fraudsters

If you're carried away by the excitement of an internet auction, don't forget some commonsense rules, says Dawn Hayes
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The Independent Online

EBay is one of the best-known online brands in the world, so it is perhaps surprising that it has kicked off its first advertising campaign on British television. No doubt it makes good commercial sense to exploit its growing profile. However, eBay will not have been pleased with the publicity surrounding the news about the teenager who made off with £45,000 from selling non-existent goods on its auction website.

EBay is one of the best-known online brands in the world, so it is perhaps surprising that it has kicked off its first advertising campaign on British television. No doubt it makes good commercial sense to exploit its growing profile. However, eBay will not have been pleased with the publicity surrounding the news about the teenager who made off with £45,000 from selling non-existent goods on its auction website.

The UK is a key target for online retailers. Some six per cent of all retail trade done here is carried out online, compared with four to five per cent in the US, and it's growing at a rate of 40 per cent year on year, according to the Interactive Media in Retail Group (IMRG), which promotes online shopping worldwide. We spend more than £1bn a month buying goods online and more than half the UK's households are now online, spending an average of £230 a year.

According to James Roper, chief executive of IMRG, online shopping has been transformed in the past two years into an environment that is, for the most part, safe and convenient. "You're safer shopping online than on the high street," he says. "It's now written in European law that you can return goods bought online within seven days, which you can't always do on the high street. If someone uses your credit card to buy goods online, you are guaranteed to get your money back."

However, that does not apply to auction sites such as eBay, which are not retailers but agents that connect buyers and sellers online. And as online sales increase generally, so do fraud losses, borne by banks and retailers. According to the Association for Payment and Clearing Services, fraud losses accumulated from people buying goods either online or over the phone on UK-issued cards rose to £116.4m in 2003, up from £2.5m in 1994.

The Pontypool teenager who racked up £45,000 by selling non-existent goods was able to do so by persuading buyers to pay for them through money transfers. He succeeded because eBay allows buyers and sellers to contact each other directly. His adventure lasted 13 months, undermining eBay's claim that it bans disreputable buyers and sellers.

The eBay site is not short of advice about how consumers should conduct their transactions and protect themselves. But, says Victoria Sayers, a spokeswoman for eBay in the UK: "It's amazing how many people just abandon common sense online." However, it is not difficult to see how people can get carried away in the atmosphere of an auction.

The other problem is that online fraud is constantly changing. One of the latest scams is for buyers to pay for what appears to be a DVD, minidisc or iPod, but which turns out to be simply advice about where to get the items. This may be explained somewhere in the text but inexperienced users have been caught out to the tune of hundreds of pounds.

"This is one of the biggest scams at the moment and it's hard for eBay to stamp it out," says Robert Gregory, a retail analyst at the market research firm Planet Retail. In these circumstances, victims have no recourse to compensation available from eBay.

Neither do the Pontypool teenager's victims, since they dealt directly with the seller instead of going through the secure electronic payment schemes available on the site.

PayPal is eBay's own electronic payment system, which transfers money from the buyer to the seller so they can't see each other's bank or credit card details. If the goods never arrive, eBay offers compensation of up to £250, due to rise to £500 next month. Those buying something more expensive should use an electronic payment scheme, such as Escrow, which holds the buyer's money until they have received the goods. Still, for those who run into difficulties, it can take a very long time to get compensation.

Buyers, says eBay, should never purchase anything on its site without first checking the seller's history on the site through the "feedback" button. In addition, they should contact the seller to ask questions and get a feel for the person. Buyers should never pay by money transfer; they should use a secure electronic payment system, such as PayPal, Escrow or Worldpay.

FACT FILE: DON'T BE A VICTIM

* Know who you are dealing with - get the seller's phone number (not a mobile) and postal address (not a Post Office box).

* Never disclose your PIN to anyone.

* Ensure the locked padlock or unbroken key symbol is shown in the bottom right of your browser window before sending card details. The beginning of the retailer's internet address will change from "http" to "https" when a purchase is made using a secure connection.

* Make sure your browser is set to the highest level of security notification and monitoring.

* Click on the security icon to ensure that the retailer has an encryption certificate.

* Check statements from your bank as soon as you receive them.

* Print out your order and keep copies of the retailer's terms, conditions and returns policy.

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