Dealing with Buyer Fraud

How to manage risk as a seller

Unfortunately, as an eBay seller there is no way for you to avoid buyer fraud entirely. It happens on eBay, and depending on the type of goods you sell, it may happen a lot. Buyer fraud, however, is not a phenomenon unique to eBay. It is also rampant in the "offline" world in similar measures by product type. Buyer fraud can include:

  • Unwarranted returns. Often these occur when a buyer purchases, then either uses an item or exchanges component(s) in it for broken components from a similar item, then attempts to make a return for a refund.

  • Service blackmail. This occurs when a buyer uses some kind of leverage to obtain better pricing, additional goods or accessories, or enhanced service from a seller. Often this takes the form of feedback or credit card (including PayPal) chargeback threats—the buyer promises that something bad will happen to the seller or the seller's ability to do business if demands are not met.

  • Payment fraud. The most common types of payment fraud are credit card fraud and PayPal payments made with stolen accounts, both of which can leave the seller holding the bag. Also common are bad checks or bad money orders.

  • Auction tampering. This less common but no less damaging type of "buyer" fraud doesn't include a real buyer at all, but rather someone who wins every one of a seller's auctions (whether using the Buy It Now button or by bidding very high amounts) with no intention of ever paying for any of them. The perpetrators of such acts are generally either former buyers who are (fairly or unfairly) disgruntled or competing sellers, sometimes acting through sham accounts so as not to be caught.

    With the exception of auction tampering, each of these types of buyer fraud are age-old problems for retail stores as well, and eBay sellers certainly aren't immune to them. Can you defend yourself? You can, to some extent. Read on to find out how.