Kay Robinson: BBB Report

The BBB is issuing an alert to warn online car shoppers that scammers are posing as phony escrow services in order to defraud consumers out of thousands of dollars.

Internet thieves are now using escrow service fronts with some new twists to steal money and personal identities. The scope and cost of Internet fraud is stunning. For 2007, the Internet Crime Complaint Center processed 219,553 complaints and the Federal Trade Commission reported that nearly $526 million was lost via Internet fraud. The FTC also reports that 28 percent of online fraud victims sent funds to scammers via hard-to-track wire transfer services — a favorite tactic of fake escrow services.

The purpose of an escrow service is to create a safe environment where both the buyer and seller feel comfortable exchanging money and goods knowing they can’t be taken advantage of. Unfortunately, scammers have realized they can cash in on this type of transaction by creating a facade of trustworthiness as an escrow company.

Escrow fraud is typically perpetrated through online auctions or classified Web sites. Both eBay and Craigslist have posted warnings to consumers about escrow fraud on their Web sites, but the BBB notes shoppers continue to fall for the scam as the cons become more sophisticated.

Victims of escrow fraud are often shopping online for big-ticket items such as a used car when they come across a deal that is often too good to be true — perhaps several thousand dollars below the Blue Book cost. When the buyer and seller make contact, the seller recommends using a specific third-party escrow company in order to protect both of their interests. The escrow company contacts the consumer and requires that he or she wire the payment for the item through Western Union or MoneyGram, and then the car will be delivered. After wiring the money, the buyer does not receive the car and usually never hears from the seller or the phony escrow service again.

Recent complaints to the Golden Gate show that escrow fraud scammers are taking increasingly sophisticated steps to instill a sense trust in their victims. Scammers, using the name “Best Auto Trades,” created a complete Web site that explained the escrow process in detail, required the buyer to register through the Web site and even provided a transaction number and the supposed escrow officer’s contact information.

Fraudsters are also not above appealing to car buyers’ emotions. The seller justified the low cost by claiming the vehicle belonged to his son, who was recently killed in Iraq. Victims were told that the car was in the possession of USA-Transports — a fake, supposedly Chicago-based service — and that they needed to work with the company to arrange payment and delivery. Some victims thought they were wiring money to USA-Transports to cover shipping fees and other victims were told by USA-Transports to wire payment to a third party that would serve as an escrow service. Despite the fact that USA-Transports provided a tracking number and even called to confirm the scheduled delivery, the car never arrived.

Escrow fraudsters are even resorting to stealing the identity of legitimate companies in order to rip off consumers. Global Payments Inc. an Atlanta-based business that provides electronic transaction processing, but does not provide escrow services for person-to-person transactions, recently discovered that its identity — including its logo — was being used to perpetuate escrow fraud through Craigslist. The real Global Payments Inc., has received more than 50 e-mail inquiries from consumers who responded to the Craigslist ad wanting to know why they hadn’t received the car they paid for or wanting to make sure the company did provide escrow service.

Perpetrators of escrow fraud have learned that every detail they provide and every step they require the buyer to take creates a greater sense of trust in the company, These scammers know that the more intricate and complicated the process, the more legitimate it will seem.

To avoid escrow fraud, buyers should be leery if the seller pressures them into using a particular escrow service. The buyer should always check the company out first at www.bbb.org.

While escrow scammers might devise a company name and set up their own Web site to back up their fraudulent activities, many are resorting to simply stealing the identity of a legitimate company. After checking with the BBB, buyers should contact the supposed escrow company directly to ensure it has not been a victim of corporate identity theft.

A legitimate escrow site will not ask to do a person-to-person money transfer using Western Union. Legitimate escrow companies ask that buyers wire money from their bank account to the company’s bank, and will provide a routing number and account number for their financial institution.

A buyer should confirm that the escrow service is licensed and bonded with the appropriate state agency (usually the state in which the escrow service is located) and avoid using an offshore escrow company.

Kay Robinson is president of the Better Business Bureau of Central East Texas, serving 19 East Texas counties. To contact the BBB in Tyler, call 903-581-5704, and in Longview, call 903-757-3611 or 800-443-0131, or visit the Web site at www.easttexas.bbb.org. The organization can be e-mailed at info@tyler.bbb.org.

Kay Robinson
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