Net Fraud Rampant on Online Auction Sites

Neftali Pabon thought he had found the perfect Christmas gift for his 8-year-old son. He paid $80 for a new Gameboy Advance console on the online auction (search) site eBay in November and then waited for a package in the mail.

He waited and waited.

Finally, after his e-mails to the seller bounced back and Paypal (search), the payment intermediary, said the seller had closed her account, Pabon realized he had been had.

The Frederick, Md., resident was the victim of online auction fraud, the No. 1 category of consumer Internet complaints across the nation.

The Federal Trade Commission (search) said it received 98,653 complaints for online auctions nationwide last year, just under half of the 205,568 Internet-related complaints it received for the year.

The non-profit National Consumers League also said that half the Internet complaints it got last year were over auctions, and the Internet Crime Complaint Center — an FBI-led partnership — said that 71 percent of its referred complaints last year concerned Internet auction fraud.

And the numbers have been rising steadily. In Maryland, the number of online auction complaints to the FTC has gone from 401 reports in 2001 to 932 in 2002 and to 1,423 in 2003, peaking last year at 1,731.

Susan Grant, director of the National Fraud Information Center at the National Consumers League, said it is not surprising that online auctions generate so many complaints or that the lion's share are related to eBay, which claims 100 million users worldwide.

"That makes sense because eBay by far has the largest market share," Grant said. "Even though I'm sure that it's only the minority of auction users that are having problems, it accounts for a significant number."

The FTC said most online auctions problems occur when sellers misrepresent the true value of goods, withhold information about the product or the terms of sale, deliver goods late or — as in Pabon's case — do not deliver at all.

Pabon said he filed an online report with eBay about the fraud but got no response. No eBay representative was available to comment on his case. According to its site, eBay provides buyer protection for purchases up to $200.

Pabon also filed a complaint with the Internet Crime Complaint Center, now known as the IC3.

Consumers can also file complaints with national agencies such as the FTC and the National Consumers League, along with local agencies like the consumer protection division of their state attorney general's office.

In fact, IC3 encourages people who think they have been defrauded to file complaints with multiple organizations, including the site itself, the local and state police departments for both the buyer and seller, the shipper, the National Fraud Information Center and the Better Business Bureau.

Pabon's complaint was forwarded by IC3 to the consumer protection division of the Maryland Attorney General's Office, but there was little that office could do, said Jamie St. Onge, director of the office's consumer education unit. She said the office can only mediate disputes between consumers and businesses; it cannot act on complaints between private individuals, which rules out most online auction disputes.

Experts agree that fraud occurs when consumers forget to take preventative measures. Pabon said he made a stupid mistake when he failed to check the seller's reputation ratings on eBay.

"It was sort of negligent on my part," Pabon said. Had he checked, he said, he would have been warned off by critical feedback by other buyers on the same seller.

But his son, Dominic, got a Gameboy for Christmas, after all. Pabon went to a local Best Buy store and bought one for $79 — better than the deal he thought he had landed on eBay.

Pabon, who has not shopped online since, shrugs about his costly lesson.

"It happens," he said. "I just never thought it happened to me."

Capital News Service contributed to this report.