Tips to Avoid Online Escrow Fraud

8/2/2005

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If you purchase "big ticket" items at online auction or classified ad sites, you probably know the value of using an online escrow service. For a small fee, it will hold your payment until you confirm that you received the product you were promised within an agreed upon period of inspection. The service then forwards your payment to the seller. If all goes well, the terms of the sale are met and everyone ends up satisfied.

However, all is not well if you have unknowingly chosen to do business with a fraudulent escrow site. The Better Business Bureau has received reports of escrow fraud involving the online sale of cars, boats, motorcycles, jet skis and similar items. Scam escrow services attract shoppers through spam e-mails, "recommendations" by unethical sellers or fraudulent displays of fake logos from BBB or other well-known seal programs.

The BBB offers the following tips for finding a reputable auction escrow service:

  • Trust your gut feeling. If the site offers unbelievably good deals or requests info not pertinent to the sale (such as your Social Security number), beware!
  • The cheapest service is not necessarily the best service. Investigate the track record of several escrow companies before you make a selection. Go to www.bbb.org to confirm that a business is a BBB member or to pull up a reliability report on its marketplace record. If the site displays a BBBOnLine seal, confirm its participation at www.bbbonline.org.
  • Check the Web site of the escrow company. Sites with domain names ending in .org, .biz, .cc, .info, or .US should be avoided. Find out when the domain name was registered using the “Whois” tool at a domain name registrar. If the name was just registered a few weeks ago, that is a red flag.
  • Does the site have poor grammar, misspellings or lots of typos? That is typically a sign that the site is phony.
  • Does the Web site tell you where the business is located (street, city, state) and give a phone number? If not, that is a red flag. Without a physical address, you cannot check with state authorities to determine if the service is licensed and it will be harder to check its record with the BBB.
  • If the site provides a telephone number, call to see if you can speak to a person. If you get a generic voice mail that asks you to leave a message, do not waste your time
  • Find out whether the service is licensed and bonded and confirm that with the appropriate state agency (usually the state in which the escrow service is located). Avoid using an offshore escrow company.
  • How does the online escrow service arrange payment? If it asks you to make a payment to an individual or an agent, rather than to a corporate entity, it is most likely a scam. Also, a legitimate escrow site will not ask you to do a person-to-person money transfer using Western Union. Legitimate escrow companies ask you to wire money from your bank to their bank, and provide you with a routing number and account number for their financial institution
  • Be wary of escrow services that contact you via e-mail to solicit your business. Reputable escrow services do not use spam advertising. Also be leery if the seller pressures you to use a particular escrow service; that could be a warning flag.
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