How to keep from getting ripped-off in e-commerce and online auctions

by Bruce Stewart4 May 2000 - There is no doubt that Internet fraud is on the rise, and along with the explosive growth of onlinecommerce the opportunities for abuse have skyrocketed. Combine the ease of completing transactions and the cloakof anonymity the Net offers with the general level of naivete of the new online consumer, and high-tech banditsare in the middle of a virtual gold rush.

by Bruce Stewart

4 May 2000 - There is no doubt that Internet fraud is on the rise, and along with the explosive growth of online commerce the opportunities for abuse have skyrocketed. Combine the ease of completing transactions and the cloak of anonymity the Net offers with the general level of naivete of the new online consumer, and high-tech bandits are in the middle of a virtual gold rush.

Last year alone, more than $3.2 million dollars of Internet fraud was reported to the National Consumer's League Internet Fraud Watch. This represents a 38 per cent increase since 1998, with no signs of slowing down anytime soon.

If you're reading this online publication, you've probably already delved into the world of e-commerce. Once discovered, the convenience of ordering anything from that hard-to-find printer ribbon to roasted chiles straight from New Mexico - all from the comfort of your own home - is pretty hard to beat.

Whether you're buying goods from Web-based businesses or bidding and selling in the growing area of online auctions, there's plenty of opportunity to get ripped off. This article will cover the basics of online transactions, focusing on how to do it safely. We want to help you feel as comfortable as possible doing business over the Internet, but also to understand the risks.

To make sure you are aware of all the relevant issues of doing business online, we'll discuss the basic things you need to know about e-commerce today, like secure servers and auction feedback systems. We'll cover the safe practices you should follow if you're ordering goods and services online, as well as what pitfalls to avoid.

Of course we'll also include a selection of online resources to further your knowledge in how to keep from getting ripped off as you venture into an e-commerce world.

Safe practices for doing business online
There's a long list of things to be aware of when doing business online. Follow these safe practices and you will greatly decrease your odds of falling victim to fraud. Some of the recommended steps are just common sense—the same type of things you need to keep in mind in any kind of transaction.

You'll save yourself a lot of worry if you can deal with known companies that have a proven track record and a respectable reputation. Of course in the online world, nobody's been around that long, so sometimes that can be a little tricky.

If you have to do business with a company unknown to you, it's worth your time to do a little checking up on them. Make sure you have good contact info for them, including a telephone number and mailing address. Check with your state or local consumer protection agency, or the Better Business Bureau, about the company's complaint history.

Make sure you have a clear understanding of what it is you are buying and what the terms are. Find out ahead of time specifically what you're getting for your money, and what the exact cost will be, including all shipping charges. Be sure you are aware of the terms, conditions and methods of payment. If there are any ambiguities, contact the vendor for clarification before making the purchase.

It's usually a good idea to make online purchases by credit card. You will have more recourse if the goods never arrive or are not what you expected, as you may dispute the charges and keep your credit card company from paying if there is a problem.

Along the same lines, you should be aware that there are differences in doing business with companies and doing business with individuals in the eyes of the law. You will have more legal recourse against a company than an individual if things go sour.

One of the most important things you can do to protect yourself when making purchases online is to be sure that you are using a secure browser and the transaction is encrypted. This means your credit card and other sensitive information won't be zipping around the Internet tempting any enterprising young hacker with a packet sniffer to grab it.

To determine if a Web page is being served from a secure server look at it's URL; it should start with "https" rather than "http." You can also look at the security icon at the bottom of your browser's window. In both Navigator and Internet Explorer, a secure Web page will be signified by a locked padlock icon. An unsecure page will have an unlocked padlock icon in Navigator, and no security icon at all in Internet Explorer.

It should probably go without saying, but we'll say it anyway: Keep good records of all online purchases and transactions.

Finally, it is important to review your credit card statements carefully and promptly. This is most likely where a case of online fraud will show up. The sooner you contact your credit card companies about any suspicious or unauthorized charges, the better your chances of keeping the crooks from getting any money.

Auction Tips

Here are some tips specifically for those of you participating in online auctions.

  • First, make sure you understand exactly how the auction works. There are different types of auctions, and differences in how the various services work.

  • Be aware that the auction service probably makes little or no attempt to verify the sincerity of seller's claims.

  • Check out the seller as much as possible. If it is a company, try the Better Business Bureau; if it's an individual check into his or her feedback section on the auction site. Feedback sections that encourage previous customers to rate sellers (and buyers) are now incorporated into most online auction services.

  • While feedback sections can be very helpful in establishing a good track record for a seller, you must still be careful. Positive reviews can be faked in some cases, and an empty feedback section is certainly no guarantee that there won't be problems.

  • Be especially skeptical of claims about collectibles and insist on written appraisals and verifications where appropriate. One of the most common ways that people get ripped-off in online auctions is by believing fraudulent claims about authenticity, history or value of unseen items from unknown sellers.

  • Pay by credit card if possible, check if necessary, and never by cash. If you have any problems make sure and let the auction service know, as well as take the time to describe your experience in the seller's feedback section.

A good idea for adding some peace of mind to doing business with strangers, especially when dealing with big ticket items, is to use an online escrow service. Companies like I-Escrow provide this service, where the buyer sends his payment to the escrow company, then the escrow company tells the seller the payment is in hand and they may deliver the purchased item. The buyer then has a short period of time to approve the purchase and authorize the escrow company to release the money to the seller, or to reject the item and return it to the seller. The escrow service waits until the buyer gives the OK to turn the money over to the seller, or until the seller says he has received the returned item, in which case the payment gets returned to the buyer.

What to Avoid
In the world of e-commerce and online auctions there are some things that should definitely be avoided. Steering clear of sites that fail in any of the following areas is a good way to reduce your chances of getting ripped off online.

  • Don't do business with sites that have no privacy statements. Read a site's privacy statement closely to make sure it is saying something of substance, and not just saying they'll do whatever they please with your info—in legalese.

  • Avoid doing business with sites that can't be checked up on. If a site will not divulge a street address and telephone number, something fishy is probably going on. Without contact info to follow up with if something goes wrong, you will have little or no recourse.

  • Don't use auction sites that don't have feedback or referral systems. Without some means of checking up on sellers you are practically buying blind.

  • Don't make online purchases using credit cards with sites that don't have secure, encrypted transaction systems. If you see the open padlock icon in Navigator, or no security icon in Internet Explorer, don't submit your personal information.

  • Never do business with companies or individuals who have contacted you via spam. Besides being one of the banes of online activity, unsolicited commercial e-mail is a common way that crooks try to entice their victims.

Online Resources

Here are a few Web sites that offer more information about safety and e-commerce:

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