Coeur d'Alene, Idaho based Ulf Wolf writes about Online Escrow Fraud and other Cybercrime for Escrow.com.
Online Escrow Scams are a little like promoting the sensible (and often life-saving) use of life jackets, and then selling fake ones, guaranteed to drown you.
Betrayal
Online escrow scams amount to betrayal, and a massive one at that; and at a growth-rate of nearly twenty new such sites a week, they pose a very real threat to the innocent online buyer or seller.
So what precisely are they?
Online Escrow Scams, or Online Escrow Fraud are sites made to look like—often achieved by copying, wholesale, pages from bona fide sites—real, trustworthy online escrow companies.
Bona Fide Online Escrow
That said, what is an online escrow company?
The real thing, the licensed (which they must be in all states) online escrow company is much like the brick and mortar version we deal with when buying or selling a house that instead protects the parties in an online transaction, say through an auction site or an online classifieds site.
It works like this:
Step 1: Buyer and Seller Agree to Terms
Both parties agree to terms of the transaction, which includes a description of the merchandise, sale price, number of days for the buyer's inspection, and any shipping information.
Step 2: Buyer Pays the Online Escrow Company
The buyer submits an available payment option. The online escrow company verifies the payment. Processing time varies by payment method.
Step 3: Seller Ships Merchandise to Buyer
Upon payment verification, the seller is authorized to ship merchandise and submit tracking information. The online escrow company verifies that the buyer receives the shipment.
Step 4: Buyer Accepts the Merchandise
The Buyer has a set number of days for an inspection and the option to accept or reject the merchandise.
Step 5: The Online Escrow Company Pays the Seller
The escrow company pays the seller by the method selected by the seller. The transaction is complete.
Protection
A bona fide, accredited escrow company acts as a secure third party to protect both the Buyer and Seller.
How Buyers are protected:
The escrow company tracks the shipped merchandise and verifies it was delivered.
The Seller is not paid until the Buyer accepts the merchandise, or the inspection period expires.
How Sellers are protected:
The escrow company confirms when the Buyer receives merchandise.
The Seller is authorized to ship only after the escrow company verifies good funds.
The Fraudulent Online Escrow
As often as not, the fraudulent online escrow company teams up with a fraudulent seller, who—once you have bought his goods, out of the “goodness of his heart”—suggests that you use an escrow company (one that he recommends, mind you) to make sure all stays above board and all goes well.
You as a buyer may appreciate such a considerate seller and agree to use the suggested site, which, once you have transferred the fund to them, does not intend to pay anyone but themselves.
It is an ugly betrayal.
How to Guard Against Online Escrow Scams
There are several things you can do to ensure you will never fall victim to one of these scams.
Department of Corporations
The easiest and best way to avoid becoming a victim of an online escrow scam is to call the Department of Corporations for your state to make sure the escrow company you plan to use is properly licensed. In California that is the California Department of Corporations toll-free number 1-866-ASK-CORP (1-866-275- 2677).
Personal Information
Never disclose financial or personal information like your Social Security number, credit card number, or bank account information until you have verified that the online escrow company you are using is properly licensed.
Steering
A buyer or seller who insists on using a particular online escrow company is probably trying to steer you towards a fraudulent escrow services site.
No Address or Phone
Watch out for escrow company sites that do not have an address and phone number listed. If the site does list a phone number, call the number and be sure you speak to a live person. A generic voice mail is a sign that the company may be fraudulent.
Question Them
Send the escrow company an e-mail question. If you do not receive a response, do not do business with them.
The Site Itself
Sometimes a phony escrow company Web site can be detected by its sloppy content, with spelling and grammar errors and inconsistent information. Other times, the site's information may have been copied from legitimate escrow company sites.
Transaction Processing
Find out how the online escrow service processes transactions. Avoid sites that do not process their own, but require users to set up accounts with online payment services instead. Legitimate escrow companies do not use person-to-person money transfers like Western Union or MoneyGram or direct you to send your payment to an individual rather than a corporate entity.
Trusted Logos
Fake escrow company sites often display logos from the Better Business Bureau, VeriSign Secure, TRUSTe, and even the Internet Fraud Complaint Center. Check to make sure the escrow company really is endorsed by these organizations.
Domain Extensions
Avoid escrow company sites with domain names ending in .org, .biz, .cc, .info., or .US.
Too Good To Be True
Be wary of a seemingly terrific deal. Scammers post online classified ads and offer items via online auction with very low prices. Remember, these so-called “deals” are just the hook to get you to use a phony escrow company site.
Escrow.com
Licensed by the state of California—as well as by the States of Idaho and Arizona, who require separate licenses—Escrow.com is the only on-line escrow company credentialed to serve every state of the Union, and who indeed does so 24/7.
To quote eBay: “Pay safely - beware of fake escrow services when you consider using them to pay for your eBay item.
“For eBay transactions, you should use eBay's only approved Escrow Company: www.escrow.com.”
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