Office of the Attorney General
Attorney General Greg Stumbo Issues Consumer Alert Regarding Bogus Car Ads Offering Bad Deal to Consumers Biting the “Low Price” Bait

Press Release Date:  Thursday, July 12, 2007  
Contact Information:  Vicki Glass, 502-696-5643 Office  

Attorney General Greg Stumbo today issued a Consumer Alert to Kentucky consumers warning them of a scam involving late model automobiles being advertised in newspapers at suspiciously low prices.

The ads are located in the classified section of newspapers, not the more prominent ads run by dealerships.  Consumer Protection investigators have determined that the advertisements are a scam involving foreign scam artists attempting to lure consumers with a promise of a high quality automobile at a deeply discounted price.  In the end though, consumers responding to the advertisements are asked to send large deposits to a bogus escrow company before they can examine the vehicles.  Once the “deposit” is sent, consumers never get the automobile or their deposit returned.

“The cars in these classified ads may look like a great deal, but in the end, the old saying holds true, ‘If it sounds to good to be true, it probably is,’” said Attorney General Greg Stumbo.

Once advertisement in the Louisville Courier-Journal listed a 2003 Honda Accord priced at $9,000.  The listed suggested retail value for that auto is more than $16,000 according to one online valuation service.   The Attorney General’s office advises consumers to beware of suspiciously priced automobiles and to never send large deposits to escrow services without thoroughly investigating the escrow company.

Escrow fraud continues to plague Internet auction and Internet sales transactions.  Some scam artists have set up professional-looking web sites, others may use telemarketers to contact consumers hooked by the deceptive ads.  Whenever consumers use an escrow service they’ve never used before, they should exercise caution and do their homework to make sure the service is legitimate.  Some helpful tips for avoiding escrow fraud are provided below.

Consumers with questions are encouraged to contact the Attorney General’s Office of Consumer Protection at 888-432-9257.

How the scam works:

An advertisement of a late model vehicle is placed in the individually listed classified ads of the newspaper advertising a vehicle at well below the market value.  The advertisement lists an e-mail address for interested buyers to send a response. The “seller” of the vehicle states that they have moved out of the country – in one case to the United Kingdom – and that is the only reason they are selling the vehicle.  They offer to fly to the buyer’s location if the buyer is serious.  The “seller” is unable to give a phone number saying that they have just moved and don’t have a phone yet.  The “seller” indicates that the car is in excellent mechanical condition and requests a $1,500 down payment  which is to be paid to an escrow company and which is “100% refundable” if the buyer doesn’t like the car or it fails a mechanical test.

The “seller” then asks for the buyer’s contact information so the escrow company (in one case it was identified as  “Car Trader”) can contact them to make arrangements for the escrow.  Ultimately the buyer is asked to send a cashier’s check or wire funds to the bogus “escrow service.”  That’s the last the consumer will hear from the scammer, unless it is to ask for more money.

Red flags to watch for:

  • Vehicle advertised at price well below true market value.
  • “Seller” is selling vehicle because they’ve relocated to location outside the country.
  • “Seller” may not have phone because of recent move and communicates only by e-mail.
  • Guaranteed, 100% refundable escrow service offered  - but will not be legitimate.
  • “Seller” will be unable to provide verifiable title, but will offer excuses about paperwork problems at the DMV that will be taken care of after the consumer completes the transaction.
  • Poor grammar and misspellings in the e-mails or websites used by the “sellers.”

Tips for Avoiding Escrow Fraud:

  • Be wary of a seemingly terrific deal. Scammers post online classified ads and offer items via online auction with very low prices. Remember, these so-called "deals" are just the hook to get you to use a phony escrow company site.
  • Never disclose financial or personal information like your Social Security number, credit card number, or bank account information until you have verified that the online escrow company you are using is properly licensed.
  • A buyer or seller who insists on using a particular online escrow company is probably trying to steer you towards a fraudulent escrow services site.
  • Watch out for escrow company sites that don't have an address and phone number listed. If the site does list a phone number, call the number and be sure you speak to a live person. A generic voice mail is a sign that the company may be fraudulent.
  • Send the escrow company an e-mail question. If you don't receive a response, don't do business with them.
  • Sometimes a phony escrow company Web site can be detected by its sloppy content, with spelling and grammar errors and inconsistent information. Other times, the site's information may have been copied from legitimate escrow company sites.
  • Find out how the online escrow service processes transactions. Steer clear of sites that don't process their own, but require users to set up accounts with online payment services instead. Legitimate escrow companies don't use person-to-person money transfers like Western Union or MoneyGram or direct you to send your payment to an individual rather than a corporate entity.
  • Fake escrow company sites often display logos from the Better Business Bureau, VeriSign Secure, TRUSTe, and even the Internet Fraud Complaint Center. Check to make sure the escrow company really is endorsed by these organizations.
  • Avoid escrow company sites with domain names ending in: .org, .biz, .cc, .info, or .us

(source: California Department of Corporations)