|EcommerceBytes-NewsFlash, Number 628 - October 15, 2003 - ISSN 1539-5065 3 of 3|
Jeff C. bought an LCD computer monitor on eBay last month. He used eBay's PayPal system to pay for the item - $455 plus shipping. The seller, a single mother of three by the name of "Courtney," was trying to supplement her income to provide "a better quality of life" for her kids, according to the auction description. Courtney had over 500 positive feedback ratings from her trading partners in the 6 months she had been dealing on eBay.
However, things changed in September. Jeff and many others discovered to their dismay that this single mom with a stellar reputation not only didn't deliver their products, but had allegedly disappeared with their money. They say eBay suspended Courtney in mid-September and sent emails to her trading partners requesting them to file a form with a law enforcement agency.
After being scammed, buyers took a closer look at the feedback points Courtney had built up. They discovered that Courtney had been trading primarily in $2 items - up until September, when she suddenly began listing up to 43 items a day for much higher dollar amounts.
The case has similarities to the Dreksler incident earlier this year, where an Arizona couple defrauded sellers of over $100,000. Both sellers built a positive reputation ("feedback") selling small items, then switched to selling many high-ticket items at once.
In the Dreksler case, eBay's fraud detection system FADE did not detect the pattern, and eBay was criticized for taking no action on the Dreksker's account until almost 2 weeks after an eBay member spotted and reported suspicious activity on a public discussion board.
Courtney's victims said in this case, FADE did not detect the pattern of suddenly switching to high-priced items in large quantities. "This is something FADE should have picked up and it is shameful that they didn't," said Jeff, referring to eBay's technology for detecting fraudsters on their marketplace. "You'd think eBay would recognize and flag a 1000% average auction value price increase and block the ability for the seller to withdraw PayPal funds until an investigation took place."
Indeed, eBay promised financial analysts last year that upon acquiring PayPal in October 2002, eBay would become a safer place; the ability to share information between the eBay marketplace and the payment service would help them reign in fraud. eBay did not respond to inquiries made Tuesday about its fraud detection system.
As the holiday shopping season heats up, eBay is doing more to promote its PayPal service. Yet even though Jeff and others used PayPal to purchase their items, some say PayPal declined to reimburse them. One victim who filed a claim with PayPal said he got an email from PayPal reading in part, "Our investigation has determined that the seller is at fault, but we were unable to recover any funds from the seller's account. As stated in the PayPal User Agreement, Buyer Complaint funds recovery cannot be guaranteed."
Jeff used his bank account to fund the PayPal transaction, so he is not eligible for credit card coverage, and he didn't opt for PayPal's optional insurance. PayPal's new Protection Plan launched this week only applies to certain qualified sellers.
eBay has a fraud protection program in which it insures purchases up to $200 with a $25 deductible. Buyers who purchased items from Courtney plan to file complaints with eBay once the 30-day waiting period has passed.
In the meantime, Jeff says he will be much more careful when buying items on eBay in the future.
"I probably won't purchase expensive computer and electronic items on eBay unless they are from an identifiable company, as the discount doesn't make it worth it most of the time. I definitely will use a Visa card to increase chances of reimbursement."
So where will Jeff buy his electronics in the future?
"Most of the time I can find online computer outlets that sell computer items cheaper than eBay, especially using Google's froogle.com."
About the author:
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to firstname.lastname@example.org.
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3 of 3
Interview with an eBay Vigilante - February 06, 2005
Victims of eBay Laptop Scam See Justice - May 07, 2004
PayPal Buyer Protection Policy Bears Close Scrutiny - February 08, 2004
This andat: Online Auction Roundup - December 21, 2003