The internet is wonderful. How did we ever function without it? You can “google” virtually anything. You can pay your bills online, or send your friends money. And of course you can buy just about anything online. The problem is that the internet is kind of like the wild west in many ways. While the vast majority of businesses selling online are honest and try their best to comply with legal requirements, a substantial number of sites are just plain fraudulent. They use all sorts of gimmicks to separate you from your money without delivering anything meaningful in return. A recent FTC settlement with a nutritional supplement company highlights some of the things you should look out for.
First, are you buying a legitimate product? In this settlement, a company called Nobetes was hawking a supplements that purportedly reduced blood sugar and the need for diabetics to take insulin. Their product did not work, but their marketing techniques show things that you need to be on the lookout for.
First, the product was endorsed by a “doctor”. Of course they failed to mention that the “doctor” was a paid actor. The product was endorsed by “happy users”. Likewise, they neglected to mention that the “happy couple” had been compensated for their glowing review.
But more troublesome was their billing technique. They touted a “special”. You could purchase a two month supply for their product just be paying (with a credit card of course) shipping and handling of $6.95. Sounds great right??
Problem was that when you accepted the $6.95 charge on your credit card, their system set up a recurring $29.95 charge.
So what does this example teach us? It highlights common scams.
First, the single biggest thing that scammers love is the recurring charge. They use processors (often offshore) that will set up these charges. The hope is (and it works so much more often than you think) that with a small enough charge, the customer will not notice, and they can collect this amount month after month.
What this case shows again is the need to be vigilant…which with the entire internet at your fingertips is not hard.
Doctor endorsement? Great….who is the doctor? What are his credentials? Where does he practice? This is all easily discoverable, so the first big red flag for you is if they don’t give the doctor’s correct name. Of course you can’t research someone that doesn’t exist, so if you can’t get info on the endorser, that’s an automatic “go no further” alarm.
The next thing you can do is via your browser look at the source of the web page. Take thirty seconds and do a simple “whois” search. Where are these guys coming from? Cincinnati? No red flags there. The site is in Nairobi? Probably ought to be cautious.
To follow that up, who is the credit card processor? Same issues. A reputable domestic credit card processor will not allow recurring credit card charges without full and conspicuous disclosure. Sadly there are hundreds of offshore processors that happily bend the rules.
Whenever you make on online purchase you should carefully check your card statement, or better yet, monitor the transaction online. Especially monitor it during the following thirty days to see what pops up. Remember, consumer law in the U.S. gives you the right to contest any card transaction within thirty days of receiving the statement.
Caveat Emptor is an old legal term that means let the buyer beware. With all the potential fraud and scamming going on, that is even more true today than ever. Fortunately with a little diligence you can protect yourself.