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Be Vigilant Against eBay Buyer Fraud

Consumers aren't the only ones who need to protect themselves when purchasing goods online. Here's how eBay business owners can protect themselves from common crimes and illicit practices.

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Most eBay buyers know to watch out for sellers who don't deliver the goods. After all, no one wants to pay for an item and then never have it arrive. But fraud isn't limited to sellers. There are plenty of fraudulent buyers, too, and you can protect yourself against them by knowing how to prevent the most common crimes and illicit practices.


Many eBay members treat eBay as a game and don't understand or don't care that it's a legal marketplace where laws apply. Undoubtedly, most of these are neo-postadolescents, but even some adults aren't above acting with this kind of disdain for the system, too. This is a real problem for sellers, perhaps the No. 1 problem. If the winning bidder doesn't pay, a simple auction turns into an unpleasant task of bill collecting.

To avoid this scenario, set up a system that notifies winning bidders about shipping and handling charges and how you prefer payment. If they don't pay after successive requests, notify eBay and relist the auction. EBay will not charge you in this case. Always give negative feedback to the nonpayers, but don't get emotional. Just state the facts.

Payment Fraud

By not shipping a product until payment has cleared, you're doing as much as you can to protect yourself. Although counterfeit checks, cashier's checks and money orders are easy to make, it's unlikely that someone would use them for Internet purchases. The culprit could be traced both through the Internet-access account and the delivery address. Nonetheless, it pays to be cautious, particularly when handling large orders.

Realistically, you'll probably ship before cashier's checks and money orders clear. But you're taking a chance in doing so. Don't ever ship before a personal check clears. Too many eBay sellers have been burned by buyers with insufficient funds. This is common knowledge on eBay.

Nevertheless, it's good customer service to ship as soon as you receive payment. You might receive bounced checks on which you can't collect, but you can factor these into your expenses. Physical stores often have to do this. You'll build your customer-service reputation by shipping immediately.

When to Ship

Deciding when to ship isn't easy, considering that waiting for a payment to clear is not good customer service. If you sell five-dozen $25 items each week and experience only one or two bounced checks, you might opt to ship as soon as the checks are received. Your loss is small and you need a lot of customers. Still, if you sell three $1,700 items a week, you might want to wait for a payment to clear before you ship your product.

If a check bounces, try cashing it again as long as your bank doesn't apply charges. In the end, when you've lost your patience and haven't been paid, report your loss to eBay and give negative feedback to the winning bidder. If the loss is large enough, pursue a remedy, such as filing a criminal complaint or filing a lawsuit.

Credit-Card Fraud

Credit-card fraud is widespread. Stolen credit-card numbers abound. The most quickly growing crime is identity theft. The object of the identity thief is to get cash and merchandise using someone else's credit card.

It's not a good idea to ship to a different address from the one for the credit card used to purchase the item.

The future for the safe use of credit cards looks brighter. Some cards have a CVV2 number (printed in the back of the card). Some require a PIN (personal identification number). The use of enhanced safety features will be much more widespread in the future. If you can use these safety features, do so. Until then, be careful.

Credit-Card Chargebacks

Many eBay sellers won't accept credit cards. They've been burned by unjustified chargebacks. That happens when a buyer contacts his credit-card issuer and claims that the seller did him wrong. The issuer charges the purchase amount back to the seller and credits the buyer's credit-card account. The issuer is invariably a financial institution such as a bank. Some banks do chargebacks automatically or perform only a cursory investigation. Others investigate, as they should. When the bank does investigate, the bank will naturally have a tendency to favor its customer, the buyer. Nonetheless, some banks favor the seller, oddly enough. It's a crapshoot. But don't let someone get away with an unjustified chargeback too easily. Contest it.

Customer Service

Plainly, credit cards are not risk-free. Walking out your door in the morning isn't risk-free, either. You'll need to assume some risks to do business. Accepting credit cards is one of them. Accepting credit cards is good customer service and is well worth the risk of chargebacks.

Fraud With a Valid Credit Card

Here's an example of how credit-card fraud can cause a loss. The names have been changed to protect the used-to-be innocent. The buyer, Mr. Slick in New York, sees Mr. Sellwell's new computer in an eBay auction ad. He contacts Mr. Sellwell in Los Angeles by e-mail to order 12 new computers to be shipped to an address in Pakistan. He gives a credit-card number. Mr. Sellwell, being no dummy, gets a phone number and calls Mr. Slick to verify the order. Mr. Slick verifies the order on the phone. Mr. Sellwell ships the computers. A month later the bank notifies Mr. Sellwell that Mr. Slick has charged back the purchase, claiming he never ordered any computers.

Mr. Sellwell calls Mr. Slick to find out what's going on. Mr. Slick denies ever making the order. (Yes, it's the same person on the phone.) Mr. Slick's e-mail address is now defunct. Mr. Sellwell reports this to the bank, which refuses to do anything about it. Mr. Sellwell then reports it to the attorney general in New York state and is told the case can't be won in criminal court. It's just Mr. Sellwell's word against Mr. Slick's word. So, the attorney general won't even investigate the case. Mr. Sellwell has no recourse through eBay, because the transaction took place outside of eBay. Mr. Sellwell has just taken a loss equal to the cost of 12 computers.

This true story illustrates two points. First, sellers can be the victims of eBay fraud. Second, don't ship to an address different from the one given for the credit card.

International Fraud

International fraud is so prevalent that few sellers will sell to those outside the U.S., at least in regard to the use of credit cards for payment. Although you might have some workable remedy inside the U.S., as a practical matter, you have none outside. If you don't receive a payment before you ship, you're taking a substantial risk of loss.

Transactions using, an eBay company that lets anyone with an e-mail address send and receive payments online, are an exception. The site verifies its credit-card holders and also allows members to use bank accounts.

Follow this advice and you'll avoid selling to fraudulent buyers. While it's possible some transactions will still go afoul, sales to honest buyers will likely far outweigh any losses.


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