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Internet Fraud


With more and more consumers making online purchases, investments and banking transactions, the incentive for Internet-based fraud and theft is growing. Reported incidents of Internet fraud are on the rise. Internet Fraud Watch, an online consumer watchdog group, has reported a 600 percent increase in reported fraud since 1997. Online crooks and cons are as prevalent as their street corner counterparts. They may use a computer instead of a gun or Three Card Monty game, but the goal is the same. Be a smart online shopper, that's just one area where unscrupulous individuals seek to separate you from your hard-earned money.

In this guide, we'll cover:

  • The top 10 fraud complaints of the last year,
  • The rules for avoiding Internet fraud,
  • Who to contact if you want to report Internet fraud.
Web Auctions
Internet Services
General Merchandise
Computer Equipment/Software
Pyramid Schemes
Business Opportunities
Work-at-Home Plans
Credit Card Issuing
Prizes/Sweepstakes
Book Sales
Money for Nothing
Buy from reputable companies
Online auctions are dangerous places
Nobody does business through e-mail
Blow the whistle


In a report to the Senate Permanent Committee on Investigations, The National Fraud Information Center provided the following list of the Top 10 Subjects of Reports to Internet Fraud Watch:


1. Web Auctions - The incredible popularity of eBay and similar auction sites has brought out the creativity in cons and common crooks. Some of the common dirty dealings include: Accepting bids on items and not delivering; Inflating the value of items with false claims of collectibility; Hiking up the price AFTER a top bid is accepted (gouging); and Using an accomplice to drive up the price for an item with fake bids.


2. Internet Services - So many people want to get connected to the Internet for the first time. Phony Internet service providers will offer sweetheart deals on access (usually through online ads) and then never provide the service. Others may suggest that they can "speed up" your connection with some mysterious piece of technology which proves to be junk. Finally, some providers will tack on extra fees for services that the customer never requested.


3. General Merchandise - This complaint covers the wide variety of online sales. Everything from clothes to cellular phones, toys to trinkets. The seller fails to deliver the goods.


4. Computer Equipment/Software - So much hardware and software is bought online that this particular scam has earned its own category. Equipment or software never arrives on your doorstep and the "low low prices" you paid now have you feeling very low indeed.


5. Pyramid Schemes - Ugh. Any business that works by signing up new members rather than actually selling a good or service should always raise red flags with consumers. Again, the new recruit is asked to pay up front for big payoffs down the line.


6. Business Opportunities - "Learn our foolproof system and make a million dollars in three weeks!" Offered through spam e-mail, these offers ask the consumer to buy into a prepackaged business and use the techniques to sell real estate, long distance phone service, or any other "guaranteed money maker". Big profits from little work is promised, but you know what that promise is worth.


7. Work-at-Home Plans - A classic scam. "You can make $100 a day while working from the comfort of your home!" The materials and equipment are sold with the promise of payment for piecework performed by the buyer. These payments are never made.


8. Credit Card Issuing - After accepting a security deposit from a consumer with a bad credit history, the issuing company will fold up shop and clean out the security deposits.


9. Prizes/Sweepstakes - You know the pitch: "YOU COULD ALREADY HAVE WON $10,000,000! Just send $24.95 to secure your prize...". Instead of calling you on the phone or using snail mail, the offer is made through spam e-mail. The sweepstakes sponsor will make a request for upfront fees to claim winnings that are never awarded.


10. Book Sales - Mostly comprised of companies that sell "personalized family histories" or self-help books, these shady publishers will either not deliver the goods, send you a pamphlet of hastily compiled junk, or sell you material that is available for free to anyone.


Money for Nothing...


Here are the basic guidelines for avoiding these and other shady deals:


1) Buy from reputable companies. If you and your friends have never heard of ACME Widgets, don't take a chance. Find out if anyone you know and trust has done business with the company. Legitimate online businesses have their own web sites and secure online ordering processes. They will also provide you with a purchase receipt that can be printed out or will be sent to you in an e-mail.


2) Online auctions are dangerous places. Don't get swept away with the need to "win" the auctioned item no matter what. You'll soon be bidding beyond your means. Consider using an escrow service while making your transaction. These neutral parties will hold your money, for a small fee, and only release the funds to the seller when the item is received and deemed to be acceptable.


3) Nobody does business through e-mail! If the company doesn't provide phone numbers, a mailing address, and a web site, dump that e-mail in the trash and move on. And Nerver buy anything from a company that only has a PO Box number, this is a shure sign that they have something to hide.


4) Blow the whistle. If you are a victim of fraud, don't be embarrassed into silence. If you were caught by a scam, the chances are you're not alone. Contact the Office of Fair Trading and help make sure no one else is deceived. Check and see if any legal action is being taken against the crooked company or individual. You can aid the investigation that nails one of these fly-by-night operations.


Spread the Word


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