NEW YORK (MainStreet) -- Authorities are on high alert due to a new scam on the online auto sales front: phony cash escrow services that take your money for a new set of wheels, then disappear for good.
The questions online car buyers might want to ask themselves is, How do you know if your escrow service is safe? And how exactly does a cash escrow scam play out? Edmunds.com, a leading auto-trading website, offers this definition:
"When a buyer agrees to purchase a vehicle found online, he or she is directed by the seller to send money to a phony escrow agent, and is promised that the cash will be held until the vehicle is delivered. Once the cash is paid, the scammers cease any more contact with the buyers, never to be heard from again and the car is never delivered," according to the Edmunds website.
The car listing website also warns customers that some fraud artists use Edmunds’ name to build their own fake escrow websites, giving buyers a false sense of security that the deal is legitimate. Edmunds says that since March 2010 it has received 413 reports of escrow scams using the company’s name, and of those, about 35 consumers were victimized by escrow fraud.
Consequently, Edmunds is warning online auto buyers of the risks: “Edmunds.com does not provide ‘purchase protection’ plans or any other escrow-type services for vehicle sales,” notes Ken Levin, senior vice president and general counsel at Edmunds.com. “If you see a classified ad that references an Edmunds escrow service, please report it immediately to the website hosting the ad.”