Penny auction websites takes more than small change

Media release

Wednesday, 9 May 2012

Penny auction websites takes more than small change

Consumers are being warned about penny auction sites, which despite offering ‘free trials’ are quietly charging hundreds of dollars to credit cards.

The warning comes from a new cross-agency working group, made up of the Ministry of Consumer Affairs, Department of Internal Affairs and Netsafe. The group is dedicated to fighting consumer fraud.

Penny auctions are a twist on online auctions. The difference is you pay to take part either each time you bid or through a monthly membership fee – even if you don’t win the auction. Each bid increases the price by just one or two cents; so ‘in theory’ you can buy sought-after goods for a fraction of their retail price.

The working group has had dozens of complaints about penny auction sites, says Ministry of Consumer Affairs Team Leader Jarrod Rendle.

“In a number of cases, the complainants thought they’d bagged a bargain while on a seven day ‘free trial’, but by redeeming their goods they’ve unknowingly agreed to three months’ membership, at $119 a month.

“When they tried to cancel, they were told to send a $54 cancellation fee, along with photocopies of their credit card and passport. This leaves them not only out of pocket, but potentially open to identity fraud.”

NetSafe Operations Manager Lee Chisholm says: “If you’re going to spend money on a website you haven’t used before, do some research first. Google the website followed by the word ‘review’, or ‘scam’ and check what others have to say.”

Under the Fair Trading Act companies trading in New Zealand are prohibited from deceptive or misleading conduct, says Mr Rendle.

“However many of these auctions are based overseas, where different laws will apply. If something goes wrong with the goods you’ve bought, you may not have the same rights as you do in New Zealand, and New Zealand enforcement agencies may not be able to investigate your complaint.”

Background info

The cross-agency working group was formed to share resources and better identify and publicise consumer fraud and scams. It is chaired by the Ministry of Consumer Affairs and includes the Department of Internal Affairs' Anti-Spam Compliance Unit and non-government organisation Netsafe.

· For cyber safety advice visit www.netsafe.org.nz.

· For information on spam, or to report email, fax or text spam go to www.antispam.govt.nz.

· For more information on scams visit www.scamwatch.govt.nz.

ENDS

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