Thousands of Consumers Fleeced by Auction Scams
DES MOINES. Iowa Attorney General Tom Miller, the Federal Trade Commission, and 27 other state attorneys general today announced a law enforcement crackdown targeting Internet auction scams that bilked thousands of consumers out of their money and their merchandise.
The crackdown, Operation Bidder Beware, coordinated by the FTC in conjunction with the National Association of Attorneys General (NAAG), resulted in over 55 criminal and civil cases, including one in Iowa. Auction fraud is the single largest category of Internet related complaints in the FTC's Consumer Sentinel database, which logged more than 51,000 auction complaints in 2002. Complaints about Internet auctions or Internet sales, generally, rank in the top ten among complaints received by the Iowa Attorney General's Consumer Protection Division in 2002.
"Iowa, the other states and the FTC will work together to fight Internet auction fraud," Miller said. "These actions send a strong message of deterrence to anyone contemplating taking money for products offered for sale via Internet auctions, but not delivering the goods."
"The most effective way to fight Internet auction fraud involves a team approach among law enforcers," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "We're working with partners virtually coast to coast to stop scammers in the virtual world."
Many of the cases involve straightforward scams where consumers "won" the bid, sent in their money, but never got the product for which they paid. But defendants in one FTC case combined auction fraud with serial identity theft in order to conceal their identities and lay the blame on innocent bystanders.
The Iowa action involved a settlement agreement, an Assurance of Voluntary Compliance, obtained by Miller's Consumer Protection Division against Greg Hughes of Casey, Iowa. Miller said that his office had received consumer complaints that Hughes, operating under the name, Hughes Online Services, took money from consumers for products such as clothing and other goods, but failed to deliver the merchandise. The settlement requires Hughes to pay reimbursement to any consumer who purchased merchandise from him but did not receive delivery. Consumers who have claims must file refund requests with Miller's Consumer Protection Division on or before June 20, 2003. Miller said that the settlement also requires Hughes to deliver goods upon receipt of payment from consumers in future sales.
The FTC shut down 4 auction scams and U.S. District courts froze their assets, pending trial. In addition, 28 other state and local law enforcers have announced 56 law enforcement actions including lawsuits, cease and desist orders, consent agreements, assurances of voluntary compliance, warning letters, and criminal prosecutions.
In addition to the law enforcement, the FTC, the Iowa Attorney General's office, and other state and local law enforcers are launching a consumer education campaign to alert consumers about Internet auction fraud, and provide tips on how to avoid falling prey to it.
"The actions taken by my office and our state and federal partners protect Iowa consumers by helping to ensure that when they buy products over the Internet, they get what they pay for, regardless of where the seller is located," Miller said. "Law enforcement will act when there are violations, and responsible auction sites will try to police their own market. But perhaps the single most powerful tool to protect consumers is education."
Miller suggested consumers follow these tips to reduce the risk of falling victim to auction fraud:
- Become familiar with the auction site. Find out what protections the auction site offers buyers. Don't assume one site's rules are the same as another's.
- Before bidding, find out all you can about the seller. Avoid doing business with sellers you can't identify, especially those who try to lure you off the auction site with promises of a better deal.
- If the seller insists on using a particular escrow or online payment service you've never heard of, check it out. Visit its Web site and call its customer service line. If there isn't one, or you call and can't reach someone, don't use that service.
- Protect your privacy. Never provide your Social Security number, driver's license number, credit card number, or bank account information until you have checked out the seller and the online payment or escrow service, if you're using one, to ensure legitimacy.
- Save all transaction information.
- If you have problems during a transaction, try to work them out with the seller, buyer or site operator. If that doesn't work, file a complaint with the Iowa Attorney General's Consumer Protection Division by calling 515-281-5926, or by e-mail to: email@example.com, and the FTC at www.ftc.gov or call toll-free 1-877-FTC-HELP (1-877-382-4357).
- Check out the FTC's Internet Auctions: A Guide for Buyers and Sellers, available at the FTC's Online Shopping Web site (www.ftc.gov/onlineshopping) for other tips on how to avoid Internet auction fraud.
Miller said today's action followed earlier actions by his office in February, 2000, against Iowans who sold products through Internet online auctions but failed to provide the merchandise to buyers.Defendants in those actions included Daniel Schnathorst of Norwalk and Karen Striley of Clinton.
Participants in Operation Bidder Beware include the attorneys general of Alaska, Arizona, Arkansas, California, Connecticut, Delaware, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Dakota, Tennessee, Washington, West Virginia and Wisconsin and members of California's Computer and Technology Crime High Tech Response team, including the San Diego District Attorney, San Diego City Attorney, Orange County District Attorney and Orange Police Department.
Copies of the FTC complaints and a comprehensive case list are available from the FTC's Website at http://www.ftc.gov.