This blog aims to provide awareness in regards to new types of scams. This post is part of s series that provides information and examples of Internet-related scams. Today, here it is another post which is part of an awareness campaign launched by E-Crime Expert.
How it works:
Charge-back is when someone makes a purchase with their credit card and they receive the “charge” or cost of the product back from the bank.
In the USA, any American Express card owner gets a three-chargeback option each year. Therefore, someone could cancel a payment in order to get a product for free, for example. Why? The bank will put the money back in the person’s account for the reason that buyer claims the product did not conform to the description.
Paypal chargeback scam has two modus operandi (modes of operation):
- When the scam type involves products – and please note that Paypal only covers where a material product is involved –which results in much fewer scams with material products because the sellers can always prove that they shipped the merchandise with a receipt and also by the pick-up signature from the other end, and might be able to provide pictures of the product.
- But still, the danger comes indirectly from huge financial institutions would do anything to keep their clients in today’s dry times. How? Because some people abuse this system and deliberately buy a product knowing that they will later charge-back the money they paid for it.
To watch a video of someone’s testimonial about it and how he lost his product and was charged the same amount of money he should have received, click here: PayPal Chargeback Scams.
The other method, which is much more successful from the scammers point of view, has a success rate of over 99 % (based on the Internet Crime Complaint Centre statistics), and involves being a “customer” for services such as: website design or selling a domain name, etc. PayPal’s policy is that they do not offer support regarding disputes or disagreements when services involved (Check PayPal website terms and conditions). How it works: the “client” fills a formal complaint claiming that the website design is not how it was agreed, or the domain name is not as was agreed either. Since these are not material objects no conformity could be verified regarding the initial agreement between the buyer and seller. the buyer always wins and gets the money back from the seller, based on this non-conformity matter. When you have a written (off-line) contract you have there samples of the product, website screenshots, prints, design proofs, where the buyer expressly gives his agreement by signing them and agreeing to the website design, domain name characteristics, etc. But with these types of online transactions in most cases people don’t take these steps anymore and the dispute results over an intangible object, and a legally unofficial agreement.
How you could prevent this scam?
- A service provider could send samples or a written agreement (contract) to the buyer asking him to print the documents, sign them to indicate acceptance and then send them back.
- The service provider could use different payment methods that do not have this charge-back policy as Paypal does, or use another online payment method which better protects both seller and buyer such as: Escrow
- The seller can check the buyer’s history of transactions (as on eBay) and if he has a good reputation and a significant amount of transactions completed, he might be more reliable than a brand new user with no feedback or transactions record. But still this is not enough: always ask for the phone number, address of the company and proof of legitimacy. If they refuse, there are significant chances that a scam is involved and you are the target.
Any questions can be submitted to:
Additional information can be found at: www.e-crimeexppert.com
Did this scam ever happen to you? If so, what did you do? Do you know other new types of scams that you would like to share?
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