BBB Shares Data On Scams
Concerned consumers filed a class action lawsuit against Facebook in August that “…seeks to put an end to Facebook’s policy of actively soliciting, encouraging, and assisting scammers it knows, or should know, are using its platform to defraud Facebook users with deceptive ads, and compel Facebook to either compensate Facebook users for their losses or disgorge the billions of dollars in profits it has unjustly earned from such misconduct.”
Some fraudsters hinder the ability of people to get their money back by using payment methods with little or no safeguards. If consumers use credit cards or PayPal to buy items online, they may receive a refund if they challenge fraudulent purchases. Many people, however, are not aware of this protection.
Online shopping fraud has been growing for several years, but dramatically increased during the pandemic, according to BBB research. A BBB survey found 29% of people shopped online before COVID, increasing to 37% by the end of 2020. With many stores closed and people staying at home, online shopping increased. But even with fewer lockdowns in 2021, consumers continue to shop online.
With consumers increasingly worried about supply chain disruptions and forecasts for record-breaking online spending for the 2021 holiday season, it is especially important for online shoppers to know how to protect themselves from deceptive advertising and online scams that may trick them into purchasing non-existent merchandise.
Consumers report online fraud ranging from sales of nonexistent vehicles, pets and products to counterfeit goods to costly free trial offers.
The largest group of BBB Scam Tracker reports — 40% of the total — involve victims of online ads found on Facebook and Instagram.
Consumers tell BBB that Facebook and Instagram are often not helpful in addressing violations of their own policies when consumers receive nothing at all, counterfeit goods, or items that were inferior to what was advertised and purchased. These encounters often take place after seeing enticing social media ads placed by operations in China.
How common is online shopping fraud?
For the past five years, online purchases of goods have comprised the largest number of reports to BBB Scam Tracker and been deemed by BBB Institute to be the riskiest scam in 2020. Over the last two years, reports from victims have skyrocketed.
In 2015, online shopping fraud accounted for 13% of all Scam Tracker reports with a monetary loss. By 2021, 64% of all Scam Tracker reports with a monetary loss involved online shopping issues.
Complaints directed to the Federal Trade Commission (FTC) and reported losses more than doubled over the last two years and are on pace to quadruple to $394 million.
This is not just a U.S. phenomenon. Losses reported the Canadian Anti-Fraud Centre (CAFC) tripled in 2020. FTC and BBB Scam Tracker data reflect trends rather than the total amount of this fraud.
The FTC previously has found fewer than 10% of fraud victims report it to BBB or law enforcement, suggesting the problem is much larger than these numbers reflect.
What kinds of fraud are involved in online shopping?
Most online fraud reports examined involve a response to online ads on Facebook and Instagram. After placing an order, victims either receive nothing or get items that are either counterfeit or dramatically different from those promised.
For example, the CAFC’s Barry Elliott reports he has seen accounts of people buying a cordless drill online but only receiving a screwdriver from China.
A victim told BBB she ordered a rattan sofa for her patio but received a burlap bag from China months later.
Scammers often take photos or other elements from legitimate businesses, post them on Facebook and Instagram and take online orders at websites they create. These tactics can result in lost sales and a flood of complaints to honest businesses from angry victims who locate them after being scammed.
The victims do not realize that their money went to the scammers who posted the advertisement. In addition, many businesses report trying to get fake ads taken down by Facebook and Instagram takes many hours of extra work and is a large burden.
Many counterfeit items are sold over the internet. Scammers claim to be selling trademarked or copyrighted goods, but if they send anything, it is a fake replica. The items often are produced in China by the same scam gangs that sell other goods deceptively. This is a huge issue for those selling legitimate brand name goods.
For more on the massive worldwide problem of counterfeit goods and medicines, see the BBB study on counterfeit goods scams.
The Department of Homeland Security recently observed: “American consumers shopping on e-commerce platforms and online third-party marketplaces now face a significant risk of purchasing counterfeit or pirated goods.”
It also states that actors such as payment processors, social media websites and online marketplaces “aid, abet or assist” these transactions.
The other reports to BBB primarily fall into three categories, each of which has been the subject of previous BBB studies.
Pet scams: These account for 35% of BBB Scam Tracker reports about online shopping in 2021. As the BBB has reported, those have more than doubled over the course of the pandemic with more people staying at home and finding it a suitable time to add a pet to the family.
For example, BBB received 117 reports of pet scams in June 2019, but in June 2020, those had increased to 320. Scammers take money from victims, but no pets are delivered. BBB received 4000 complaints about pet scams in 2020. For more information about pet scams and how they work, visit bbb.org/all/petscams.
Vehicles: One of the top sources of online shopping complaints are fraudulent sales of cars, boats, RV’s and other vehicles. Scammers steal photos of those items from elsewhere on the internet, post them for sale and ask interested buyers to send money to a supposed third party for payment and shipping.
These scams often claim to be associated with eBay, which has a buyer protection program to safeguard sales on its platform. Victims never receive the vehicles. Craigslist now charges to post advertising for vehicles. Scammers now post many ads on Facebook Marketplace, which has eclipsed Craigslist as a source of classified ads, according to an article in ProPublica.
For an in-depth look at vehicle vendor scams and how they work, see BBB’s study on vehicle vendor scams at BBB.org/scamstudies.
Free trial offers: Many BBB Scam Tracker reports involve health/nutrition offers using bogus “free trials” of weight loss products, erectile dysfunction products or more recently, CBD products.
Despite law enforcement efforts, reports to BBB Scam Tracker continue to go up. Note that only a small fraction of victims of this type of scam report to BBB or law enforcement. Read BBB’s study on free trial offers at BBB.org/scamstudies.
What makes online purchase fraud work?
Those shopping online can find goods by doing an internet search, by clicking an online ad on social media, or by shopping at an online platform such as Amazon.
The BBB survey of those who reported online purchase scams to BBB Scam Tracker found that the top online platforms on which they looked for products were: This survey found that 64% of respondents were actively searching for a product when they lost money, 21% were passively looking and 15% were not looking at all.
A BBB study found that victims first encountered the ads where they placed orders on Google 32% of the time. One of the features of search engines is that paid advertisers’ sponsored links will appear at the top of the search results page.
Images can be advertisements as well, again appearing at the top of search results and leading shoppers to scam websites. Scammers often pay for these sponsored links.
Feeling safe on sites like Amazon
Counterfeit goods are common even on sites like Amazon.com. Because Amazon allows third party sellers to advertise on its site and ship themselves, you still need to be careful.
Over half the goods sold by Amazon are by third parties. Amazon collects payments and then reimburses the third parties. There are reports that Amazon gets 15% of sales by these third-party sellers.
In a CBS interview announcing these efforts, Amazon conceded that counterfeiting is a problem on its site. According to CBS, “the company caught 3 billion suspicious listings last year before buyers even saw them but can’t say how many counterfeits actually made it onto the site.”
The role of Facebook and Instagram in online shopping fraud
A large number of BBB online shopping reports can be traced back to Facebook and its subsidiary Instagram.
BBB found that victims who were not actively looking for a product, but lost money in the transaction, began with Facebook or Instagram 70% of the time.
This is consistent with a study of complaints to the FTC. The FTC data spotlight from October 2020 found about one of every four online shopping complaints mentioned issues beginning on social media and Facebook and Instagram account for 94% of complaints where victims got nothing and a social media platform was involved.
In looking at data from the first half of 2020, 43,391 people (23%) reported to the FTC that the problem started on social media. For the 9,832 who ordered goods that never arrived, victims said the transactions started on social media, with 7,502 of those specifically noting the use of Facebook or Instagram (94% of those that identified a specific platform). The International Trademark Association (INTA) has warned about social media. Many counterfeit online goods are sold through ads on Facebook and Instagram, which share the same ad network.
Facebook and Instagram as attractive locations for scammers’ advertisements
Facebook is the biggest social network worldwide. It has roughly 2.91 billion active users. For many, Facebook is a comfortable place to stay connected with family and friends. Therefore, the ads that appear in Facebook feeds also may feel safe.
In reality, the ads that appear are targeted to users. After making an online purchase at one site, ads for similar goods often appear on other sites visited.
Crooks understand how Facebook targets shoppers and have developed strategies to reach those likely to be interested in buying their bogus products. Fraudsters steal photos and copy websites of honest retailers, offer goods for sale, take payment and either ship nothing or send inferior knockoffs.
They can quickly form corporations, put up a page on Facebook, buy advertising space and then advertise on Facebook feeds.
Victims who click on an ad are taken to a website developed by the scammer where they can place an order.
If an ad or website is taken down, scammers can immediately replace it with a new one. These ads have long been the bane of brand name companies selling trademarked goods such as sunglasses, designer handbags and running shoes.
For example, it has been reported that 25% of luxury goods sold through Facebook advertising are fakes.
But the problem today goes far beyond the risk that someone will get counterfeit sunglasses. Now almost anything can be sold online. This is especially threatening for small businesses trying to market their products online.
Sales can rapidly disappear to crooked sites, not only depriving honest businesses of sales but also resulting in a flood of complaints directed to the real company when victims are ripped off.
How do online scammers exploit payment systems?
The BBB Institute’s study of online purchases in 2020 found that of those who lost money, 35% paid with a credit card; 23% paid with PayPal; debit cards were used by 20%; Zelle payment apps were reported 7% of the time, and prepaid cards 3% of the time.
A review of BBB complaints involving payment through Zelle showed that almost all of those were by pet scams. People should never pay for an online purchase using Zelle.
There is no protection when a scammer is involved and no way to recover funds.
It is unusual for scammers to seek payment through credit cards. That is because credit card companies keep a reserve of funds to cover chargeback requests from victims.
A 1% chargeback rate is high for those holding merchant accounts, and the companies can assess fines or terminate the accounts.
The banks that support the system have strong incentives to avoid losing money to scammers. Researchers at NYU closely examined sales of counterfeit goods, however, and found that they are almost always paid for with a credit card.
Therefore, the bogus websites selling these goods must have access to the credit card and banking system. The research shows almost all of these transactions are handled by a small number of banks in China.
The NYU study looks at how credit card payments are processed for counterfeit goods. Over two years, they purchased 424 branded products. All of the goods were drop-shipped from China and were of poor quality. They concluded that the criminal gangs that produce counterfeit goods outsource fulfillment and payment processing.
Online scammers are increasingly requesting payment through PayPal. PayPal has a buyer protection program designed to safeguard transactions so it seems secure.
Users do not receive a monthly bill from PayPal. The system instead links to victims’ bank accounts and credit or debit cards. Nonetheless, victims reporting to BBB often cite difficulties getting a refund through PayPal when they receive goods that are very different from those that they ordered, and news stories report similar experiences.
Several sources report that it is more difficult to get refunds through PayPal and suggest that its customer service personnel may simply not be trained adequately on these issues.
They also state that it is more effective to talk to an actual customer service person at PayPal than it is to use its online complaint system.
Use caution if doing an internet search for PayPal’s customer service number as that has been a source of scams; instead, go to PayPal’s website directly and connect that way.
Victims who realize they have been scammed first try to contact the operation from which they made the purchase. This can be a difficult and frustrating effort.
A BBB survey found that 62% of victims reported that they tried to contact the seller more than three times. Even scam websites that claim to have a return and refund program rarely honor them. It can be difficult to reach a customer service person. Instead of a refund, victims are often offered discounts on future purchases. Sometimes the company asks people to be patient and claims that the goods will arrive. Credit card companies and PayPal have policies that offer refunds if goods are counterfeit or sold fraudulently.
Those who don’t receive what they ordered — nothing, counterfeit goods or inferior items — should call the customer service number on the back of their card to ask for a refund, a process known as a chargeback.
Credit card companies have anti-fraud policies.
Consumers can find the policies online for Visa, MasterCard, Discover or PayPal.
Many people are not aware that they can dispute charges, and do not ask for a refund. In one study of free trial offer scams, BBB found that 42% did not request a charge back on their credit card.
If shoppers don’t receive their orders, they often have success in getting money back if payment was made by credit card, debit card or through PayPal. Victims should act quickly to dispute charges with credit card companies.
They typically have 120 days (four months) from the date they receive the goods OR from when they learn that they were counterfeit. Those with Visa cards have a maximum of 540 days (18 months) from the original transaction. PayPal gives victims 180 days (six months).
How to avoid this fraud?
• Use BBB.org to check a business’ rating and accreditation status. Some crooks may copy the BBB seal. If it is real, clicking on the seal will lead to the company’s BBB profile.
• Scamadviser.com can often tell you how long a website has been in operation. Scammers create and close websites regularly, so a site that has only been operating for a short time could raise red flags.
• Do an internet search with the company name and the word “scam.” This may locate other complaints about the site. Check out the website before making a purchase.
• Scammers frequently post positive reviews on their websites, either copied from honest sites or created by scammers. • One resource to check reviews is at BBB.org.
• Some review websites claim to be independent but are funded by scammers.
• Look at the bad reviews first. These are more likely to be real and can help identify scams. Scrutinize reviews.
• Use caution if the site does not have a U.S. or Canadian phone number or uses a Gmail or Yahoo business email address.
• Look for the company’s physical address. Search for contact information: Keep a record of what you ordered:
• Make a note of the website where you ordered goods.
• Take a screenshot of the item ordered in case the website disappears or you receive an item that differs from what was advertised.
Pay by credit card:
• Credit cards often provide more protection against fraud than other payment methods.
• Use a third-party payer such as PayPal.
Where to complain if goods do not arrive or are not as advertised
• Better Business Bureau – File a complaint at BBB.org or report a scam at BBB.org/scamtracker.
• Federal Trade Commission (FTC) – File a complaint at reportfraud.ftc.gov or call 877-FTC-Help.
National Intellectual Property Rights Coordination Center – Report intellectual property and counterfeiting violations to iprcenter.gov/referral/view.
• Internet Crime Complaint Center (IC3) – File a complaint at ic3.gov/complaint.
• Canadian Anti-Fraud Centre – File a report at antifraudcentre-centreantifraude.ca or call 1-888-495-8501.
• Facebook – Report ads that violate Facebook’s policies by clicking the *** next to an ad to go to facebook.com/business/help.
• Instagram – Report copyright infringement or other policy violations at help.instagram.com. Amazon – Report suspicious activities and webpages at amazon.com.
• Google – Report scams at google.com.
• PayPal – Call PayPal at (888) 221-1161 to speak with a live person instead of using its automated system if you receive an item that is not as advertised.
• Your credit card company – Call the phone number on the back of the credit card to report the fraud and request your money back.
(For a hard copy printed version of this article to save for future reference, see Sunday, December 5, 2021 Focus Daily News which is available on newsstands or in our offices at 1337 Marilyn Avenue in DeSoto.)