Net fraud complaints largely over auctions

Complaints about online auctions comprise nearly half the messages received by the government's new Internet Fraud Complaint Center, a project aimed at collecting and analyzing consumer complaints about suspected fraud on the Net.

The center has been receiving an average of about 1,000 complaints each week since it opened in May as a joint initiative of the FBI and the National White Collar Crime Center in Morgantown, W.Va. {see "New fed center targets Internet fraud," [FCW.com, May 8, 2000]}. The center collects the complaints at its Web site.

Online auctions were the subject of 48.8 percent of the complaints received by the center, an FBI spokesman confirmed after a report detailing the types of complaints appeared in USA Today. Typical complaints include suspected manipulation of the auction process through fake bidders who drive up a price and delivery of goods that don't fit the description provided.

Complaints about goods that were not delivered at all comprised 19.2 percent of the messages submitted to the center. Other types of complaints and their percentage of the total were securities and commodities complaints, 16.9 percent; credit card complaints, 4.8 percent; identity theft, 2.9 percent; business opportunities, 2.5 percent; professional services complaints, 1.2 percent; travel scams, 0.3 percent; pyramid schemes, 0.3 percent; and check fraud, 0.1 percent.

The goal of the center is to provide a one-stop shopping approach to identifying Internet fraud, including such issues as online auctions of bogus items and undelivered computer hardware and software that's ordered from a Web site, and referring such matters to the proper agency for prosecution, said U.S. Attorney General Janet Reno, announcing the center in May. The center is preparing to request $18 million in federal funds to run the center next year, more than double its current annual appropriation, according to USA Today.

Jason Epstein, a lawyer specializing in electronic business at the law firm Baker Donelson Bearman & Caldwell, said the Internet Fraud Complaint Center is looking at fraud on the Internet from a criminal angle. There's nothing new about the types of fraud being committed, especially those associated with auctions, but the fact that the crimes are carried out over the Internet is a new challenge for law enforcement and lawmakers, he said.

"The technology is changing so rapidly, the FBI is going to need a bigger budget to keep up with it in order to keep up with the criminally minded," Epstein said.

Under U.S. Federal Trade Commission rules, businesses have 30 days to deliver goods sold online unless they specify a delivery date, and, if the business believes it cannot make the delivery, it must give the customer an opportunity to cancel the order, Epstein said.

Epstein added that the challenge for lawmakers is to balance the necessary proactive policing of the Web with operations such as the Internet Fraud Complaint Center, which respond to complaints.

The Internet Fraud Complaint Center in Morgantown, W.Va., can be reached at (304) 291-2080, or on the Web at http://www.ifccfbi.gov.