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Online retail fraud losses approach $380M in 2022: BBB report

Experts advise shoppers this holiday season to be mindful of social media traps and research before buying.
Better Business Bureau
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The holiday shopping season is a good time to be careful when purchasing gifts online. | rupixen.com/Unsplash

With holiday shopping in full swing, many consumers are searching online and social media for the perfect gifts.

While shopping online is easy and convenient, Better Business Bureau (BBB) is warning online shoppers to do their research, be mindful of social media traps, and use credit cards to avoid scammers. This warning is an update of BBB’s in-depth study, Theft on a Massive Scale: Online Shopping Fraud and the Role of Social Media, issued in December 2021. Online shopping scam reports to BBB Scam Tracker remain just under all-time highs reached in 2021 with losses approaching $380 million across North America. According to an Octob​​er BBB Institute for Marketplace Trust report, scams being perpetrated online have risen 87 per cent since BBB Scam Tracker launched in 2015. Of those reports, a vast majority of consumers lost money, making online shopping fraud one of the most dangerous and successful, according to the BBB Institute’s research.    Nearly 36 per cent of all online retail fraud reports to BBB Scam Tracker originated through a fake website. Scammers used social media and email to initiate about 40 per cent of reported scams.  "If your gut is telling you that a deal is too good to be true, it probably is," said Simone Lis, President and CEO, BBB serving Mainland BC.

"In many cases reported to BBB’s Scam Tracker, scammers tempt shoppers with hard-to-find items, low prices, and fast or free delivery. We encourage consumers to educate themselves and watch for red flags."

Retail fraud complaints

In February, a Vancouver man was looking to buy a PlayStation 5, which normally retails for around $630, but due to high demand, were selling for as high as $900 or more.  The man found a seller on Craigslist who was offering one for $720, with shipping included from Victoria. But once $640, the first half of two payments, was sent via Interac e-transfer, the seller disappeared, stopped replying back to messages, and the phone number was promptly disconnected. In 2022, online retail scams remain one of the most reported frauds to the Canadian Anti-Fraud Centre (CAFC), mirroring the BBB’s findings.  Complaints filed with BBB on the types of businesses that comprise online shopping were 16 per cent lower in 2021 with the peak of 115,159 complaints in 2020, and appear on pace in 2022 to equal or exceed 2021 complaints.  Scammers target three key moments in the shopping process, according to BBB Scam Tracker: 

  • Before the purchase, consumers may encounter advertisements for scams on social media
  • While shopping, shoppers may be enticed by artificially low prices or fake websites
  • After the purchase, fraudsters send fake tracking information and request more money for safe delivery

These scams have three top warning signs in common: 

  • Prices that are too good to be true
  • Websites that look legitimate, but credibility falls apart after a closer look
  • Credit card payment failures lead the seller to ask for payment over peer-to-peer payment apps or with gift cards

Fraudsters use a variety of methods to collect money, including credit cards, money transfer services (Western Union, PayPal, or WealthSimple) and gift cards.

PayPal is the only cash-sharing app that offers some protections for consumers, though reports to BBB show mixed success in obtaining refunds.

BBB recommends consumers pay with a credit card when possible, as those companies have strong procedures in place for disputing fraudulent transactions. 

Tips

  • Check BBB.org for BBB Business Profiles and consumer reviews. 
  • Search for online reviews.
  • Review the website’s URL for misspellings or other errors. 
  • Examine the URL with Google's Transparency Report tool. 
  • Use a map app to verify the business’s address. 
  • Make sure you can pay by credit card, which offers the most protection against loss. 
  • Treat a social media or email ad with suspicion  until you have investigated the company behind it. 

Are you a victim? 

  • Better Business Bureau – BBB Scam Tracker to report a scam online. 
  • Canadian Anti-fraud Centre – Online or call 1-888-495-8501 for scams. 
  • Your credit card issuer – report the incident if you shared your credit card number, even if the transaction was not completed. Monitor your statements and if you suspect fraud, ask for a chargeback. It isn’t guaranteed, but many credit card companies will grant one.