Online auctions: Beware

Would you risk your money in an online auction?

Fraud or other difficulties have been reported by 41% of people using online auctions to buy goods over the internet in the United States.

Online auctions, such as the popular Yahoo and eBay sites, allow shoppers to place their best bid on the internet in the hope of being awarded the goods.

Our internet Fraud Watch statistics show that online auction scams aren't going away.

Susan Grant
Internet Fraud Watch

But although 35 million people in the US have participated in such auctions - about one third of the US online population - almost half of them have made complaints, according to the National Consumers League (NCL).

And the NCL's Internet Fraud Watch has found that online auctions have consistently topped the group's infamous fraud leagues, far outstripping other internet transactions such as simple merchandise sales offered by retailers.

In addition, auctions are often for high price, high quality goods, meaning that the money at stake is often more than for traditional virtual shops.

Each complaining victim lost an average of $326 (£220) last year.

Bitter complaints

Late arrivals, the arrival of the wrong item, the arrival of damaged items, and a complete lack of arrival of any kind - be it late, damaged or mistaken - were the bitter complaints of the buyers.

Buyers' complaints

20% late arrival

11% received wrong item

10% received damaged items

10% items never arrived

Sellers' complaints

34% late payment

27% never received payment

20% buyer changed mind

5% cheques bounced

1% buyers use stolen credit cards

But sellers also had plenty of gripes, with over half of sellers saying that the buyers had caused them problems, which included late payment, cheques bouncing, buyers changing their minds, or buyers using stolen credit cards

The NCL advises that buyers make purchases by credit card, look for information about insurance, and consider using an escrow service.

Escrow services - where a third party holds the buyers' money and only forwards it to the seller when the buyer has received the goods - have a low profile and buyers are reluctant to pay the commission.

"Our internet Fraud Watch statistics show that online auction scams aren't going away. The survey confirms the need for buyers and sellers alike to know more about how services can protect them," said Susan Grant, director of NCL's Internet Fraud Watch.