When the Middleman is a Sham.
While escrow has become a popular way to improve trust and transparency online, usually for car or high-ticket jewelry purchases, many fraudulent escrow scams have put a spotlight on this type of service. An escrow transaction occurs when money or other financial assets are held by a third party during the transaction process.
An escrow agent functions as a trustworthy middleman with no connection to either party.
In a typical escrow service scam, the seller will recommend an escrow service of their choice to handle the transaction. While this service may have an official-sounding name and a professional-looking website, the service may have been designed for fraudulent purposes.
Once you’ve sent money to a scam escrow service, it’s unlikely that you’ll see it again or ever receive the item you thought you were buying.
Escrow fraud is usually perpetrated through private sales on online auctions and classified sites.
How to identify escrow scams
Identifying an escrow scam may seem tricky, but it’s entirely possible to recognize fraudulent activity if you know what to look for. The sale price of the item is the first clue, with products that seem too cheap.
These scams typically involve big-ticket items for seemingly bargain prices.
You should also be extremely wary if a seller has ended an auction early but still contacts you via email or other means. Once you’re outside the internal escrow and protection of large websites such as eBay, you’re much more likely to get scammed.
How to identify a legitimate escrow company
To avoid escrow scams, it’s important to identify legitimate escrow companies. If a seller or buyer is insistent on using a particular service, you should always be skeptical. Make sure to research escrow services themselves, including their website and online reputation.
Watch out for escrow sites that don’t have an address and phone number listed. Always check to see if an escrow service is registered and regulated.
Sometimes, it’s even possible to identify a phony escrow company by its sloppy content, including spelling and grammar errors. Legitimate escrow sites will have a solid reputation in the online community and are unlikely to use domain names ending in .org, .biz, .cc, .info., or .US.
Have fun shopping and be safe!
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This information is provided for general consumer educational purposes only and is not intended to provide legal, tax or investment advice.