The internet revolution has led to something that was once unthinkable: hundreds of thousands of people participating in online auctions every year. While the vast majority of these transactions – on sites like eBay – are legitimate and result in a happy outcome, some are not. One of the biggest reasons for complaints is a crime that can occur in virtually all financial transactions between two parties: fee stacking.
Fee stacking is a term of art and it is important to note that it is not strictly considered legal terminology. Instead, it refers to a general practice in which one party to a transaction changes the terms after an agreement has been reached on false pretenses and for their own financial benefit.
To understand fee stacking, a particular example of an eBay auction is worth considering. On the auction site, a seller indicates that a particular item will incur a flat shipping and transaction fee. After the auction, however, the seller informs the buyer that shipping costs have increased and additional fees are applicable to the transaction.
If those claims are false and the intent of making the false claims is to force a buyer to pay more money to a seller than the seller is legally and contractually entitled to, this transaction would be a form of fee stacking.
Whether fee stacking occurs during an online auction, after an in-person auction, or after other types of in-person, over-the-phone, or digital transactions, it is a serious crime that is typically punishable by state and federal law. The crime, however, is not actually known as fee stacking.
Instead, individuals who have participated in a fee stacking scheme typically face other charges, such as general state fraud charges or the very serious federal crimes of mail fraud, wire fraud, and computer fraud. If the scheme touched the banking system, the perpetrator can also face high penalties for defrauding a financial institution.
It is important for individuals to know that charges for fee stacking can be brought even if the target of the scheme did not ultimately pay the fraudulently sought fees. Simply seeking fees based on false representations is enough to face federal and state fraud charges in these cases.
Fee stacking related to online auctions typically involves upward revisions of small amounts of money, sometimes as little as $5. The auction site may intervene or the buyer may refuse to pay in such cases, but is exceedingly unlikely that they will contact authorities or that law enforcement will pursue a vigorous investigation of this sort of one-off incident.
Instead, federal and state authorities typically focus their law enforcement resources on cases where individuals repeatedly seek to charge fees based on fraudulent representations. In these cases, the accused individual may have earned thousands of dollars – or more – from fee stacking.
Law enforcement also looks particularly askance at auctioneers who are involved in fee stacking schemes. Auction houses that charge exorbitant fees to their customers based on false representations frequently face consumer protection investigations by state attorney general offices and criminal charges from the federal government.
The penalties for fee stacking can be very severe. If the government can prove that an individual or entity communicated their misrepresentations about fees online, over the phone, or through the mail, they can bring felony charges of mail or wire fraud – as well as additional conspiracy charges. The penalty for each of these crimes varies, but can reach as high as 30 years of imprisonment and a $1 million fine for each count. For widespread fraud, this can effectively mean a sentence of life imprisonment.
If you or a loved one are being investigated for or are facing charges of fee stacking, it is important for you to contact an experienced criminal defense attorney immediately. A competent, qualified criminal lawyer can work with you as the investigation proceeds and can deal directly with investigators and prosecutors.
Depending on the result of the investigation, you could face a variety of state or federal charges that carry stiff penalties. If prosecutors press charges, a skilled attorney can work with you to negotiate a plea deal and, if necessary, present a strong defense argument before a judge and jury.