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Things to take note to prevent e-auction fraud when a consumer participating in an e-auction.
Saturday, June 28, 2008
An e-auction is an electronic “reverse” auction where suppliers use internet-based software to bid against each other online and in real time against a published specification. Industry experts predict a veritable explosion of e-auction fraud cases as the number of e-auction participants continues to increase. Online auction fraud is already the most frequently reported form of Internet fraud. Types of e-auction fraud consist of bid shielding, shilling, fake photos and misleading descriptions, improper grading techniques, selling reproductions and so on.
In order to prevent e-auction fraud, e-auction participants can choose to participate in a voluntarily identity verification process. This is because the e-auction sites have had problems finding a practical way to verify the personal identification information of their users. eBay uses the services of Equifax to verify user identities for a $5 fee. Verified eBay User, a voluntary program, encourages users to supply eBay with information for online 
verification. By offering their Social Security number, driver’s license number, and date of birth, users can qualify for the highest level of verification on eBay.
Besides that, e-auction participants can elect to use an escrow service, typically paying up to 5% of the total transaction value. The escrow fees are based on the amount of the transaction and the method of payment. A neutral third party holds the buyer’s funds until the purchased item arrives and is found to be what was bid for, arriving in the condition described in the auction. For items valued at more than $200 or when either a buyer or seller feels the need for additional security, eBay recommends escrow services.
Furthermore, e-auction participants can also go for purchasing insurance for certain auction transactions. eBay offers insurance underwritten by Lloyd’s of London. Users can cover up to $200, with a $25 deductible under “Fraud Protection Program”. The program is provided at no cost to eBay users.
Others than that, e-auction participants can also decide on having some offered items authenticated as a result of the e-auction sites view the transactions on their sites as private and do not vet the offerings or descriptions themselves. The seller nominally pays for the authentication, but the payment is typically reflected in an increase in the winning bid, due to the additional security. eBay has begun to provide third parties to authenticate certain offered items, at the option and expense of the sellers.
E-auction participants can also opt for educating themselves about their auction counterparts, with varying degrees of reliability, by accessing the e-auction sites’ feedback forums. The e-auction sites solicit feedback from their users, in the hopes of turning their customers into equivalent of their police force. The eBay Feedback Forum allows registered buyers and sellers to build up their online trading reputations. It provides users with the ability to comment on their experiences with other individuals.
Labels: e-auction, week6
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