Consumer Alert Roundup: Penny Auction Sites, Advance Fee Loans and Automotive Service Scams

Bidrack warningThe Better Business Bureau has issued a slew of consumer warnings recently, so to make it easier for you to keep on top of them all, Consumer Ally decided to condense and combine a few below for your convenience.

Dicey Penny Auction Sites

Penny auction sites may be popular, but many are decidedly below board, and the BBB cautions consumers to research these sites carefully before making any bids.

Penny auction users typically set up an account and purchase bids with debit or credit cards. Bids may cost less than a dollar and are often sold in bundles of 100 or more. Every item auctioned is subject to a countdown clock, and as more people bid, the cost of the item rises while more time is added to the clock. But unlike regular auctions, even losing bidders are forced to pay up.The BBB of Delaware is warning consumers about a penny auction site known as Bidrack.com, which allows consumers to bid on such items as iPods, Kindles, computers and designer fashion items.

The Delaware office says it's received 222 complaints about Bidrack.com from consumers who say the site's claims about being a "free" site (the home page invites users to "Register Free!") are a lie. Once they registered for the "free" site, consumers said their credit cards were charged $99.

The Delaware BBB contacted Bidrack.com about the complaints but has yet to receive a response.

Advance Fee Loan Scams

Con artists preying on cash-strapped consumers with advance fee mortgage-relief and debt-relief services have proliferated like fungus during the seemingly endless recession, and the BBB of western Michigan is warning consumers about a local advance fee loan scam that's fleecing consumers nationwide.

The BBB office says it's been "bombarded" with phone calls, inquiries and complaints about fake loan offers from Ameristate United Financial, which claims to do business at 99 Monroe Avenue NW, Grand Rapids, Mich., 49503, with a toll-free phone number of (866) 981-7999.

According to the BBB, Ameristate United Financial offers personal, business and home loans for which it requires consumers to wire an advanced fee of between $820 and $2900 in order to qualify for the purported loan. As Consumer Ally has repeatedly warned, consumers should never wire money to anyone you don't know. Unsurprisingly, consumers who wired the money told the BBB they never received the loan.

Ameristate earned an "F" rating with the BBB, since it's a completely fictitious company and no such tenant does business form the reported street address. In addition, the BBB noted, Ameristate never answers the advertised phone nunmber, and its fax number has a Detroit area code.

The BBB of Minnesota and North Dakota recently issued a scam alert about another phony advance fee loan company, Wakefield Financial, supposedly operating out of Fargo, North Dakota. Consumers should beware of doing business with this firm.

Automotive Service Contract Scams

Scammers have fleeced consumers nationwide out of millions of dollars by getting them to pony up for what the consumers believed was an authorized vehicle service contract -- but in reality turned out to be a worthless piece of paper.

After receiving a number of complaints about auto service contract scams, the St. Louis BBB studied the problem and surveyed 660 complainants across the country. The study found the multilayered nature of the industry -- sellers, providers, administrators, insurers and financers -- create a good deal of confusion among consumers.

The survey found 64% of respondents didn't know the name of the service contract provider, and 16% thought it was the insurance company. Fully 92% of respondents complained of misleading or improper sales tactics.

Once a contract was signed, 93% of consumers surveyed said the companies refused to allow claims the consumers believed were covered by the contract. The average amount consumers spent for those "uncovered" repairs was $1,480, the study noted.

Before purchasing a service contract, the BBB warns consumers to:

  • Read the contract carefully. Know what is covered and not covered and under what conditions. If the seller won't provide a contract, don't buy it.
  • Do the math. The cost of a contract can be more than the car's value.
  • Ask the seller for the names and locations of the providers, administrators and insurers. Find out how claims are processed.
  • Check all companies involved in the contract with the BBB at http://www.bbb.org.

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