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Internet Fraud: The Sequel

April 2003

Yesterday I was looking forward to writing this column: Jim gets defrauded of $8,000 on the Internet--Jim gets all his money back. Sadly, after five weeks it's not quite over yet.

I did get my $8,000 back. But I awoke this morning to find that as a result of this mess I had a $5,000 credit on my credit card account--and was overdrawn by $2,000 on my checking account.

To recap: somehow someone broke into PayPal and charged the max on my credit card and looted my checking account. I found out because I have an automated alert that lets me know when the balance on my credit card exceeds a specified amount.

I logged into my online account and found that there had been thousands of dollars of fraudulent transactions. It was a shock, as was the realization that suddenly I didn't have any cash.

The confusing thing was where to begin, because it involved my credit card company, PayPal, and my bank. I quickly found out that they all had safeguards in place and that it was just a matter of doing paperwork.

It turned out that I only needed to follow up with PayPal. I went to their web site, filled out an online form that had me identify the fraudulent transactions, printed it, had it notarized, and mailed it in. They have some solid guarantees in place for "verified users" of their service, including a guarantee that if you are defrauded you'll get your money back in 10 days.

They said that nothing would happen until they received the notarized affidavit, at which time I'd be contacted by an investigator.

A few days after mailing it in, I began waiting for the phone to ring, eager to talk to an investigator and resolve the situation. My phone never rang.

A week after sending in the affidavit, I called PayPal (one of many calls). They said yes, the affidavit was received and an investigation had been opened. And they reassured me that by the end of the week I'd have my money.

I never did receive a call from an investigator, but the money did indeed show up in my PayPal account. Apparently the transactions were so obviously fraudulent that they didn't need to talk to me. Or perhaps they were aware that their system had been breached. Yesterday and this morning I left messages for a company spokesperson, wanting to ask about how it might have happened, but my calls weren't returned.

Once the money was in PayPal, there was still more frustration ahead. Just as they did when the fraud happened in the first place, PayPal restricted access to my account because of "unusual activity."

So there the reimbursement sat in my account but I couldn't get at it. After going through the required steps (setting a new password, etc.), I still couldn't get at the money and had to call them one more time. It took several days, but finally the money was posted to both of my accounts.

I thought I was set. But no, that wasn't the end of it. I have my credit card set up to automatically deduct the balance from my checking account. The credit to my account was made AFTER my credit card statement was sent. I called Universal Card and was assured by a representative that the current balance would be deducted, not the amount on my statement. She was wrong. Hence, I have the $5,000 credit on my credit card and a $2,000 overdraft at my bank.

There must be a lesson in this for my dear readers. The most important one is that it could happen to you. Don't panic. There are procedures in place. For the credit card companies and PayPal, it's just part of doing business. They seem to expect a certain amount of fraud and have procedures set up to resolve it.

A second lesson is that it's a real value to set up online access to your accounts. This helped alert me to the fraud in the first place, and made it much easier to track the progress toward getting it resolved.

A final lesson for me is that I'm going to be wary of giving companies automatic access to a bank account. I'm intending to remove that feature from my credit card and will instead use their Click Pay service to pay my balance online, giving me control of how much gets paid and when.

Thus ends our series on Internet fraud. I hope.

Part 3. My account gets broken into a second time.

© 2003 by Jim Karpen, Ph.D

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