eBay Thieves Make Auctions Tougher

The online auction world was shocked by the biggest eBay fraud in its seven year history. What made it even more astonishing is the fact that the crooked seller has a five history of successful sales on eBay, accompanied by thousands of glowing testimonials from satisfied buyers.

Stewart Richardson, owner of a Michigan store called Retired Figurine Exchange Inc., sold small figurines to eBay collectors, some of them costing thousands of dollars. The heart of eBay's seller-honesty system is "Feedback", which allows buyers and sellers to rate each other. Mr. Richardson earned 6,185 positive feedback points since he started selling on eBay in 1997, with an additional 58 negative and 56 neutral ratings from buyers who bought from him. These scores mean that 98% of the sales Mr. Richardson made resulted in satisfied buyers.

Richardson posted large numbers of auctions which concluded early in January, supposedly selling hundreds of figurines from an estate sale. He apparently sold items he didn't possess, listed the same item multiple times and even contacted losers in the auctions, informing them that the winners didn't pay and offering them the opportunity to buy. Then on January 17, he left for lunch and hasn't been seen since. Estimates of his stolen money range from $225,000-$400,000. Investigators later discovered that Richardson spent a total of about eight years in prison during the late 1950s and 1960s for a number of felonies, the most serious of which was assault with intent to commit murder.

Nor is he the only high-profile crook. Brian D. Wildman was convicted of wire and mail fraud for selling valuable sports card sets ? but not delivering them as promised. Other sellers were indicted for attempting to sell a fake painting for $135,805. In another case, sellers themselves turned into a vigilante group, seeking justice from a 35 year old man who sold computers and then failed to deliver. The angry buyers apparently broke the law in their attempts to retrieve their money back from the dishonest seller.

You and I are damaged by these reports. There are many people who are uneasy about internet sales in general, and these kinds of high-profile stories make it tougher for honest people. In truth, eBay claims that fraud includes only .01% of its transactions, but that isn't reassuring to a nervous buyer.

What can we do?

1. Plaster your identity everywhere. Put full contact information where all potential buyers can see it. Give as many ways to contact you as possible. Include your picture (and perhaps the dog and cat. :-) Choose anything that will let buyers see you as a real person with a stable life.

If you have testimonials and feedback from happy customers, tell the world. It's true that Richardson had these advantages, too, but he is newsworthy simply because he is an exception and not the rule. Generally, the feedback system works very well.

If you have special credentials, let buyers know. For example, perhaps you are a nurse who sells nutritional supplements or you are an antique dealer who has been in the business for 30 years and can prove it.

This kind of credibility is much more reassuring than a one page website and a free hotmail address.

2. Credit cards are the safest way to purchase anything. These days, it is possible for most entrepreneurs to accept credit cards through the auction sites or 3rd party processors, even if they don't have their own merchant account. Go even further and explain the safety of credit cards to your buyers.

In my one and only personal experience with auction fraud, there were dozens of other sellers who never received their merchandise. Those who paid by credit card, like I did, received their money back. Those who paid with cash or cashier's checks simply lost their money.

eBay has fraud protection, but it only covers $175.

3. Escrow is a great safeguard, although it is most practical for higher priced sales. It works like this:

a. The buyer sends the purchase price to the escrow company, who then verifies the funds
b. The escrow company notifies the seller who ships the merchandise to the buyer
c. When the buyer is satisfied, the money is released to the seller
d. If the buyer isn't satisfied, he can return the merchandise to the seller and receive his money back. These kinds of conditions are usually specified in advance. That is, "I changed my mind" usually isn't grounds for return of the merchandise. It normally has to be misrepresented in some way for a buyer return.

According to news stories, one of Richardson's buyers sent a registered check for $20,000. That money is lost for good. If the buyer had been careful enough to use an escrow company that loss would not have occurred. If you sell expensive items, always mention this option to buyers. Even if they choose not to use it, they will know you have nothing to hide.