My BidSafe account was recently canceled because apparently there is some problems with insuring California residents. I was wondering if anybody can clarify as
to actually what the problem is and also if Auctions.com had a timeframe as to when the problem might be resolved.
posted on November 21, 1999 02:49:24 PM
Firstquest:
My understanding is that the issue with BidSafe in California will be resolved by the first of the year.
So, what is the problem?
The issue is a state law. California authorities have decided to enforce regulations involving formal escrow services and apply them to auctions.com BidSafe service.
The state law, like many that establish licensing for various groups/professions, has specific criteria regarding the activities anyone offering "escrow" services in California must do. Among them is a requirement that you have an office in California. We don't
In general Escrow services were regulated because of their role in the real estate and mortgage lending business. The funds your mortgage company holds to pay your taxes and insurance are one example of an escrow account or service. The rules required for escrow agents are generally intended to eliminate known abuses that used to plague that system.
Still it is a known fact that at least one of the online escrow-only services sought out and became registered to do escrow services of all kinds in California. This makes sense as their business is based in California and their intention is to offer all types and kinds of escrow services online. Considering also that they are otherwise not well known, I personally though that a wise move on their part.
For our part, we offered BidSafe services specifically as a way to address the growing problem of fraudulent dealings in online auctions, launching the service in October 1998.
Indeed, we are proud of BidSafe. For instance, a FTC staff attorney, upon reviewing the BidSafe program last year, called it the most innovative program yet to protect both buyers and sellers and encouraged others online auctions to follow our lead.
What I find personally remarkable about BidSafe is that it provides protection for virtually all transactions from $1.00 to $1,000 and more at a cost less than the typical add-on service other auctions charge for credit card services.
Regardless, I have no doubt that consumer protection is the original intent of California's state law regulating escrow services.
So why did the state regulators come down on BidSafe in California?
Well, I don't think the regulators had any choice. If government in California is anything like it is here in Georgia (or most every other state) I would guess that someone, somehow raised the issue and asserted that BidSafe is an escrow service. I can hear them arguing now, "If it walks like a duck and quacks like a duck; it is a duck." We do play the role of a third party intermediary in BidSafe transactions.
In any case auctions.com management chose not to fight the regulators, but chose to seek compliance with the state law as expeditiously as possible. In the meantime, we did have to prohibit use of BidSafe Gold and BidSafe Buyer protections to persons living in California.
I should add, other than the time required, compliance with California's regulations is really no big deal for a company with our resources. Further, it is certainly a lot quicker way to reinstate service to California members than any alternative approach we could have taken.
It is a amazing though, don't you think, that the issue was raised just in time to block this service in California during the major selling season of the year.
Hey, what else would you expect in an intensely competitive industry like this
Wow, thanks for the detailed explanation. It's very interesting. As a seller on Auctions.com, I look forward to having my BidSafe account reinstated as sales have
decline somewhat since the cancellation. In the meantime, I guess I'll have to suggest Iescrow and TradeSafe to bidders. Once again, thank for the reply.
