Don't Get Caught in the Web

Like any frontier, the Internet attracts its share of outlaws. The Wild West had highwaymen, bank robbers and Doc McGillicudy's Miracle Remedies and Ointments. The Wild Web has its own rogues' gallery: pyramid-scam marketers, fraudulent e-mail spammers and dubious offshore gambling operators.

Despite the very real threat of online fraud, the reassuring truth is that a little common sense will keep you out of trouble. In fact, all the old saws still apply: Don't believe everything you read, stay away from certain neighborhoods and always remember that if it sounds too good to be true, it very likely is.

Just Like the Real World

For a newcomer to the Net, the trick is to remember that bad things are basically the same, online or off. "Don't be so excited by the novelty of the Internet that you lose sight of your common sense," says Susan Grant, director of IFW, the Internet Fraud Watch, a project of the nonprofit National Fraud Information Center. "There are a lot of claims on the Net that are outrageous: Work-at-home schemes and pyramid franchises, claims that you can get valuable prizes or free trips easily--none of which are true."

Grant says IFW received as many consumer complaints in the first six months of 1999 as it did in all of 1998. According to IFW's figures, the vast majority of fraud complaints deal with merchandise and services bought online or via Web ads and e-mail solicitations.

To qualify as an online scam, the actual purchase doesn't have to take place online. In fact, the majority of victims' payments--93 percent--were made offline by check or money order after the buyer responded to a Web or e-mail ad.

The number-one area of complaint? Online auctions, an increasingly popular activity that lets buyers bid on goods and services offered by individuals or companies. Auctions topped the complaint list in 1997, with 26 percent of the total reported frauds and increased to an alarming 90 percent during the first half of 1999, according to IFW.

The typical scenario: A buyer enters a winning bid online for an item, sends a check, money order or even cash by mail, and never hears from the "seller" again. It's a serious problem. But you can easily avoid getting fleeced by following some basic precautions.

Shopping and Auctions

If you shop on the Web at an auction or online store, avoid sending a check or money order whenever possible, and never send cash, says Grant. Stick to reputable outfits and pay by credit card, since it's much easier to track purchases and cancel the transfer of funds.

Keep in mind that many online auctions are basically neutral venues of exchange, much like a flea market, and do not offer you any purchase protection. (Things are getting better, however. EBay, the auction supersite, is now offering buyers free insurance for purchases up to $200, minus a $25 deductible.)

At auctions, however, it's not always possible to pay with your credit card. Person-to-person auctions almost always require payment by check or money order. That is why many scams are perpetrated there, though there are certainly plenty of legitimate people selling things. It's almost impossible to track down auction crooks: Scamsters who know what they're doing use aliases and have payments sent to anonymous drop boxes.

There are a variety of ways to protect yourself, some strategic, some commonsensical. "If there isn't a contact name, phone number and real address--not a P.O. box--stay away," warns Peter Hampton, whose grassroots advocacy group InterGOV runs the ScamWatch Web site. "You wouldn't believe the people who contact us with no phone number, no address, no idea who they just sent their money to."

All the major person-to-person auction sites use a peer-review system to encourage fair dealing. This allows buyers and sellers to indicate whether they've had a positive or negative experience when trading with someone else. These comments are reflected in a feedback rating--the better the rating, the better that user's track record. If you like bidding at auctions, stick with reputable sellers.

For big-money items, consider using an online escrow service, such as i-Escrow. For a small fee (usually 5 percent of the transaction), the service will hold your money until you receive the goods and O.K. payment to the seller.

E-Mail Fraud

Another busy vehicle for online fraud is unsolicited e-mail, or spam. "An awful lot of unsolicited e-mails are fraudulent offers to make money, or they may be offers to sell dubious products like illegal cable TV descramblers," Grant says. "I think you have to be extra cautious when someone you don't know is contacting you out of the blue, whether it's over the phone or through the computer."

Just like in the real world, perpetrators of e-mail scams take advantage of current events to swindle people. Grant says some recent examples include Y2K scams and false charities related to the Balkan crisis.

Believe It or Not?

"There's a really funny report we got--an unsolicited e-mail from a company that purported to be a sex-research institute," recalls Grant. "It offered $100 million for having sex with an alien. You just needed to send $19.95 to get on the list."

ScamWatch's Hampton has another tale to tell. "This the most awesome case I ever heard. A man paid $1,200 cash for a Furby doll and lost the whole thing. The seller was outside the U.S. and gave him a song and dance about currency conversion and how they needed cash. This was a very rare Furby, so the man very carefully wraps up twelve $100 bills, makes sure the envelope is secure and properly addressed, and sends it off. Of course, he got nothing in return. When something like this happens, we don't know what to say. You just don't send $1,200 in cash to someone you met over the Internet."

Keep Your Wits About You

ScamWatch's Hampton says that while it's important to use common sense on the Internet, people shouldn't let online trouble spots prevent them from taking advantage of this fantastic new technology.

"The Internet is the greatest educational tool ever," he says. "Enjoy the Internet and, most important, learn how to use it. Fraud is out there, but it's proportional. It grows because the Internet grows--at about 17,000 people a day."

"You just need to look at things that are promoted on the Web the same way as if someone were calling you out of the blue to sell you something," says Grant. "You need to use some critical thinking and look at things with a cold, clear eye."