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BBB Warns Use Caution When Bidding in Online Penny Auctions
BBB serving Vancouver Island is warning consumers to use extreme caution when participating in online penny auctions sites. The discounts offered on penny auction sites are tempting, but BBB warns bargain hunters that they should stop and do their research before making their first bid.
December 02, 2013

BBB serving Vancouver Island is warning consumers to use extreme caution when participating in online penny auctions sites. The discounts offered on penny auction sites are tempting, but BBB warns bargain hunters that they should stop and do their research before making their first bid.

Online ads, often designed to look like news reports, are cropping up on popular websites claiming that you can get great deals on iPads and other electronics with online penny auctions.

To participate in a penny auction, users must set up an account and purchase bids with a credit or debit card. Each individual bid may cost less than a dollar and bids are often sold in bundles of 100 or more. Every item has a count down clock and as people bid, the cost of the item goes up incrementally and more time is added to the clock. Even if you don’t win the item, you still have to pay for the bids you placed which can add up over time. The winner of an auction is not necessarily the highest bidder but rather, the last person to bid when the time runs out.

With the promise of high-end items at a 95 percent reduction in price, many consumers have been lured to penny auction sites and ended up losing hundreds of dollars. BBB has received 338 complaints so far this year related to penny auctions. Penny auctions rank 31 out of 84 on the BBB’s list of most complained about industry categories.

 “Penny auctions may look like a good deal, but many consumers don’t factor in the cost of bids,” said Rosalind Scott, President & CEO of BBB serving Vancouver Island. “As a result, they sometimes end up paying more than the item is worth.”

“Proponents say the setup allows companies to make a profit while offering huge discounts to their customers. However, others argue the pay-per-bid model equates to illegal gambling. Several penny auction sites have been sued on those grounds,” said Scott.

BBB cautions consumers to be sure they understand how such sites operate before signing up.For those who decide the reward is worth the risk, BBB offers the following tips:

Research the penny auction site with the BBB first. Not all penny auctions are created equal and the BBB ratings on various sites range from A- to F. Before signing up, always research the penny auction site with your BBB at: www.bbb.org.

Read the fine print carefully. Before providing any personal information or signing up for any “free” trial with a penny auction, read all of the fine print carefully on the website. Pay close attention to details on sign up and annual fees, minimum bidding requirements, maximum prize amounts and how to get a refund.

Know what you’re buying. Before bidding on an item, research how much it costs elsewhere and keep track of how much you’re spending on bids overall to see if you really are getting a good deal.

Set a limit and stick to it. Know how much you can spend and keep your total costs below that number — including the item price and the money you are spending on bids. Be prepared to walk away from the bids you already made if the price gets too high.

Keep a close eye on your credit card statement. Many have complained to the BBB about being unexpectedly charged more than $150 just for signing up. Some unsuspecting consumers were also automatically charged for more bids when they ran out or for a yearly registration fee.

Complain to the BBB if you feel you’ve been ripped off. If you feel a penny auction site has misled you, file a complaint with your BBB. BBB has assisted customers in resolving their issues, including getting refunds. If the business does not cooperate, your complaint will still go down on the company’s BBB Business Review and serve as a warning to others.