posted 05-16-2003 09:15 AM         

An interesting article from Fortune magazine about eBay. Note that I have
only included portions of the article and would highly recommend that you go
to the enclosed link to read all of the article . . .

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eBay's Worst Nightmare
Scammers like him are ripping off users. eBay could do more to stop them.
FORTUNE Monday, May 12, 2003 (for the May 26th, 2003 magazine)
By Melanie Warner http://www.fortune.com/fortune/technology/articles/0,15114,450899,00.html

Sitting in his eight-by-ten cell in a federal prison in North Carolina,
Michael Paul Jackson, 23, still marvels at how easy the whole thing was.
Several years ago when he decided to post fake auctions on eBay "selling"
products he didn't own, Jackson knew, in some recessed corner of his mind,
that one day he'd probably get caught. He just didn't imagine it would take
four years. "I never knew how easy it was to manipulate people," Jackson
said in a recent phone interview. "It was like taking candy from a baby."

All told, he stole $120,000 from more than 100 eBay users, most of whom
won't get any of it back. A student at Radford University, Jackson would get
photos of laptops and digital cameras from other people's auctions or
elsewhere on the Internet and pretend that he owned those items. If the
product retailed for $2,500, he'd sell it for $1,500, offering a killer deal
people found hard to resist. When someone "won" one of his auctions, he'd
ask for a bank check or money order and within a week or two the payment
would show up in his post office box. Jackson was having the time of his
life. . . Welcome to the dark side of eBay. Every day shifty opportunists
like Jackson lure hundreds of unsuspecting users with auctions that appear
legitimate but are really a hollow shell. They hop from user ID to user ID,
feeding the system with fake information and stolen credit cards so that
eBay can't tell who they are. Sometimes, like Jackson, they go on for years
and are shut down only after law enforcement decides to get involved, which
is something that's been happening with increased vigor over the past year.
In response to a dramatic increase in auction-fraud complaints, on April 30
the Federal Trade Commission banded together with the National Association
of Attorneys General to announce Operation Bidder Beware, a nationwide
crackdown and consumer-education campaign. Last year the FTC logged 51,000
auction-fraud complaints, double the number in 2001. "It's one of our top
priorities," says Barbara Anthony, Northeast regional director at the FTC.
"It jeopardizes the e-commerce marketplace and the confidence consumers have
in the Internet." These numbers include auctions on Yahoo.com and other
sites, but the bulk of them are on eBay, which boasts 85% of the online
auction market. . . While it's true that the vast majority of transactions
on eBay come off without a hitch, fraud may be more prevalent than the
company lets on. The company reports that only 0.01% of all completed
auctions are fraudulent, but the numbers don't include everyone who's been a
victim of fraud. They're drawn from people who go through eBay's
fraud-insurance claim process. That doesn't incorporate victims who for
whatever reason fail to complete the process, or those who don't start it in
the first place because they don't see the point of applying for the maximum
$175 reimbursement when they've lost, say, $3,000. The numbers also don't
convey the fact that in some areas of eBay you're much more likely to be
ripped off than in others. In the computer and consumer electronics
category, for instance, theft could represent as much as 5% of all auctions,
according to the fraud victims-turned-cybersleuths with whom FORTUNE spoke.
Driven by anger about having been scammed, these people spend as much as
several hours a day combing eBay for suspicious auctions and either
reporting them to the company or shutting them down themselves by becoming
the winning bidder--and not sending money. eBay vehemently disputes their
figures. "Ridiculous," exclaims Rob Chesnut, eBay's fraud chief, who
nonetheless declines to offer his own numbers for category-specific fraud. .
. On some level the exact fraud numbers don't even matter. The one person
who doesn't get his PalmPilot doesn't care that 99 other people did. He
quickly becomes disillusioned and loses faith in eBay, which is not what you
want happening on a system that requires a sense of trust to operate. It's
fair to say that fraud is just a thorn in eBay's side today, but if
discontent continues to spread among victims groups and those who hear their
horror stories, it could harm eBay's sterling reputation. "On a scale of one
to ten, I'd give eBay a two for dealing with fraud. I got nothing from
eBay--no support, nothing. I couldn't even submit a fraud claim because it
was past the allotted time to file," says victim Mindy Bollinger, who hasn't
been back to eBay since she was conned out of $1,400 last year.. .

Gary Weintraub, who lost $10,000 trying to purchase a 1981 DeLorean (he got
most of it back), certainly won't use eBay to buy a car again. "I'd only buy
something small, like under $50," he says.

. . . It's a good start, but critics don't think it's helped much. eBay's
biggest flaws, they say, lie in its feedback system, the much-touted
self-policing mechanism that's supposed to be eBay's first and last line of
defense against fraud. Feedback consists of users' evaluations of each other
after a transaction. The intent is to elevate the good guys and weed out the
bad, but it doesn't always work."People are still manipulating feedback to
make themselves look good," says Rosalinda Baldwin, who runs the watchdog
site Auction Guild. Want proof? Check out the feedback Jay Nelson got on
his now defunct "skunkker" ID. A 35-year-old Illinois native who stole
$200,000 on eBay, Nelson is now in prison in New Hampshire. "Skunkker" had
100 positive comments: "Excellent communication AAA+++ eBayer!!!," "THIS IS
WHAT EBAY IS ALL ABOUT!!!!," and "highly recommended" are three typical
ones. To pull that off, Nelson used multiple user IDs to buy his own
auctions, generously giving himself rave reviews. He also created the
illusion of authenticity by initially selling computers legitimately at
crowd-pleasing discounts. In other instances, he purchased lots of
low-priced items and promptly paid sellers. That generated favorable
reviews. But anyone checking his feedback couldn't tell that he was buying
$10 boxes of golf balls, not selling $2,000 computers. And by the time
negative feedback started rolling in from his subsequent fake auctions,
Nelson was on to a new identity. eBay has since added a feature to feedback
that lets you see whether the person in question was a buyer or a seller,
but because of the lack of education among the site's users, most eBayers
don't know how to use the tool to spot suspicious trends. . . Keeping the
feedback system free of loopholes is no easy task for eBay, as con artists
are constantly devising new ways to manipulate it. Teresa Smith, a
26-year-old from Springfield, Mass., was particularly clever. After her
first account was suspended, she talked two eBay users into working for her
in what they thought was a real computer business. Both users had good
feedback records, so Smith's victims never saw what they were walking into.
"I don't know how you could guard against that kind of fraud," says Jean
Zaniewski, an agent with the U.S. Postal Inspection Service who worked on
Smith's case. "[The user whose account Smith used] was convinced she was for
real. He'd gotten a computer from her at a good price, and Teresa's a very
good talker." After pulling off one of the largest eBay scams
ever--collecting more than $855,000 from 330 people--Smith turned herself in
to the Boston U.S. Attorney's office last October.

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More 'Pumpkin' photos . . . . . More cars and other stuff

quote:

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Originally posted by Prowler:
If you use a credit card for payment you're pretty well covered also. If they don't take credit cards, use PayPal and charge it to your card. If they don't take either, pass on the item unless the rating is super good and long standing.

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Alot of individuals, such as myself, that only sell 1-2 items a year(or less) and are not a company, don't have paypal or take credit cards. Just because someone doesn't do either doesn't make them any more a crook then those that do.

If folks are going to cheat, they can do so with/without paypal or credit cards and probably do.

posted 05-18-2003 10:22 AM         

With PayPal being so widely accepted by sellers, and free if you want it to be, I think it, or some other form of electronic payment, will become the required method of funds transfers in the not to distant future. Besides, it's very convenient.

It's a brave new world out there. Let's be careful.

JMO