WASHINGTON, DC . . .
Internet fraud reports are on the rise. According to Internet Fraud Watch, operated by the National Consumers League, complaints have increased 600 percent since 1997. Online auction complaints were the number one fraud complaint in 1998. Auctions were first in 1997 with 26 percent of the total frauds reported, but increased to an alarming 68 percent in 1998.

"More people are online, and more people are getting scammed," said Susan Grant, Director of the Internet Fraud Watch. "Consumers need to remember that con artists are everywhere -- even in cyberspace."

The majority of fraudulent payments -- a whopping 93 percent -- were made "offline" by check or money order sent to the company. "Requesting cash is a clear sign of fraud," says Grant. "Pay the safest way. If possible, pay by credit card because you can dispute the charges if there is a problem."

Since many online auction sales are made by individuals who are not equipped to take credit card payments, IFW recommends that buyers use escrow services. They take payment from the buyers and only pass the money along to the sellers after verification that the goods or services were satisfactory. Some auction companies have programs to insure transactions. There are usually small fees for these services, which might be paid by the buyer or seller. According to Grant, "With consumers spending several hundred, even thousands of dollars on auction items, the extra expense may be worth it."

While fraud reports are on the rise, so is traffic on the auction sites. "Many people who participate in online auctions have good experiences, but the increase in complaints points to the need for more consumer protection and increased education," according to Grant. IFW has been working with eBay.com and other auction companies to improve safety and stop fraud. Rounding out the top ten scams are, in order: auctions, general merchandise sales, computer equipment/software, Internet services, work-at-home, business opportunities/franchises, multilevel marketing/pyramids, credit card offers, advance fee loans, and employment offers.

The National Consumers League, founded in 1899, is America's pioneer consumer organization. NCL's three-pronged approach of research, education and advocacy has made it an effective representative and source of information for consumers and workers. NCL is a private, nonprofit membership organization dedicated to representing consumers on issues of concern. They can be reached at 1-800-876-7060

Understand how the auction works. Many online auctions simply list items that people want to sell. They don't verify if the merchandise actually exists or is described accurately.

Check out the seller. For company information, contact the state or local consumer protection agency and Better Business Bureau where you live and also where the company is located. Look at the auction site's feedback section for comments about the seller. Be aware that glowing reports could be "planted" by the seller, and that a clean complaint record doesn't guaranty that someone is legitimate.

Be especially careful if the seller is a private individual. Most consumer protection laws and government agencies that enforce them don't deal with private sales, so if you have a problem, it could be impossible to resolve.

Get a physical address and other identifying information. You'll need the seller's name, street address and telephone number to check them out or follow up if there is a problem. Don't do business with sellers who won't provide that information.

Ask about delivery, returns, warranties and service. Get a definite delivery time and insist that the shipment is insured. Ask about the return policy. If you're buying electronic goods or appliances, find out if there is a warranty and how to get service.

Be wary of claims about collectibles. Since you can't examine the item or have it appraised until after the sale, you can't assume that claims made about it are valid. Insist on getting a written statement describing the item and its value before you pay.

Use common sense to guide you. Ask yourself: Is what the seller promises realistic? Is this the best way to buy this item? What is the most I am willing to bid for it?

Pay the safest way. Requesting cash is a clear sign of fraud. If possible, pay by credit card because you can dispute the charges if the goods are misrepresented or never arrive. Or use an escrow agent, who acts as a go-between to receive the merchandise and forward your payment to the seller. Another option is cash on delivery (COD). Pay by check made out to the seller, not the post office, so you can stop payment if necessary.

Let the auction site know if you have a problem. Some sites investigate problems like 'shills' being used to bid prices up or other abuses of the auction system. They may also want to know about sellers who don't deliver or misrepresent their wares. A bad record may result in a seller being barred from using the site again.

If you would like Commercial Business Intelligence to investigate an Internet or online solicitation, call us at 805-658-8800.

If you want to report a possible scam, call the NFIC hotline at 1-800-876-7060. NFIC is a project of the National Consumers League.