Beware: Boat Consignment Fraud [With Examples]

Fictitious boats are available for sale! – Dark Underbelly of Boat Consignment Scams

Watch Out for Boat Consignment Fraud

Recently, our office has observed an increasing number of boat consignment sale fraud. These fraudulent practices are prevalent in the boating industry and can cause significant financial losses for unsuspecting buyers and sellers. It is crucial for consumers to exercise extra caution when engaging in boat purchase transactions.

How do consignment sales work?

Consignment sales have been covered in detail in our other article but in short, it involves an agreement with a dealer to sell your boat on your behalf.

Buying a Consignment Vessel

When a buyer purchases your boat, the dealer retains a portion of the sale as a commission and handles the necessary paperwork, such as transferring the title to the new owner. This arrangement is appealing to both the dealer and the seller, as it minimizes risk for the dealer and offers the potential for a higher selling price for the seller.

While consignment sales themselves are not illegal, some unscrupulous dealers exploit this process to commit fraudulent activities. Some might sell you a boat that does not exist. They claim not to own the title because it is on consignment.

How do dealers commit consignment fraud?

Boat consignment fraud is typically straightforward. The dealer sells the boat to the buyer and receives payment. However, under the law, the dealer is required to possess the physical title or an equivalent document at the time of sale. Additionally, the dealer must pay the seller within a specified timeframe, usually within 10 days of the sale.

Unfortunately, many dealers fail to obtain the title from the seller and neglect to make the necessary payment. This leaves the sellers unpaid and the buyers without the proper documentation for their purchased boats.

Instances of boat consignment fraud have occurred, where unscrupulous dealers have disappeared after selling multiple boats worth substantial amounts, leaving both the buyers and sellers in a difficult situation.

Sellers are left without payment for their boats, leading them to refuse to transfer the title to the buyers who have already paid. Meanwhile, buyers rightfully demand the titles for their purchased boats.

Who has the right to the title?

While both the sellers and buyers become victims of the dealer’s fraudulent activities, the legal framework tends to favor the buyers in these circumstances.

According to Oregon law, a bona fide purchaser of goods “acquires all title which the transferor had or had power to transfer” at the time of sale. By entrusting their boat to a merchant who deals in such goods, the seller grants the merchant the power to transfer all rights to a buyer in the ordinary course of business.

Consequently, buyers in these situations generally receive the title free and clear. This legal approach assumes that, although both parties suffer from the fraud, the seller bears a slightly greater responsibility due to their closer relationship with the dealer compared to the buyer.

How to avoid being defrauded when buying a consignment boat

The best defense against boat consignment fraud is to exercise caution and take preventative measures.

To protect yourself from falling victim to boat consignment fraud, it’s important to take proactive steps and be vigilant throughout the transaction process. Here are some crucial measures to consider:

How to Avoid Boat Consignment Fraud

1. Research the Dealer: Before entering into any consignment agreement, thoroughly research the reputation and credibility of the dealer. Look for customer reviews, ratings, and any complaints filed against them. This information will give you insights into their trustworthiness and reliability.
2. Verify Dealer Credentials: Ensure that the dealer is licensed and registered to operate in the boating industry. Contact local authorities or relevant regulatory bodies to confirm their legitimacy. Request references from previous clients and reach out to them for feedback on their experiences.
3. Inspect the Consignment Agreement: Carefully review and understand all the terms and conditions outlined in the consignment agreement. Pay close attention to the payment terms, commission fees, and the dealer’s responsibilities. Seek legal advice if needed to ensure the agreement is fair and transparent.
4. Demand Transparency: Ask the dealer specific questions about their consignment process, such as how they handle title transfers and payment disbursement. A reputable dealer will provide clear and detailed explanations, addressing any concerns or doubts you may have.
5. Never Rush: Take your time during the transaction. Avoid being pressured into making quick decisions or signing agreements without thoroughly evaluating the terms. Fraudsters often rely on urgency and impulsive actions to exploit unsuspecting individuals.
6. Request Documentation: Before finalizing any payment or transaction, insist on receiving and examining all relevant documentation. This includes verifying the boat’s ownership, ensuring the dealer has the necessary title documents, and obtaining a detailed bill of sale.
7. Use Escrow Services: Consider using a reputable escrow service that can hold funds until all aspects of the transaction are completed satisfactorily. This provides an added layer of security for both the buyer and the seller.
8. Trust Your Instincts: If something feels off or suspicious during the consignment process, trust your gut instinct. If necessary, seek advice from professionals or consult with legal experts to protect your interests.

Remember, prevention is key when it comes to avoiding boat consignment fraud. By being cautious, conducting thorough research, and maintaining open communication with all parties involved, you can significantly reduce the risk of falling victim to fraudulent activities in the boat consignment market.

Beware of this Consignment Boat Scam

In addition to general boat consignment fraud, it is important to be aware of a specific scam currently being perpetrated by individuals operating under an ever changing name.

What is the Suspected Consignment Scam?

Boat Consignment on Craigslist “by owner”:

The scammers behind this scheme post boats for sale on platforms like Craigslist and BoatTrader, advertising them at surprisingly low but somewhat believable prices. These listings often include only a few photos.

Upon reaching out to the seller, they will provide you with an inventory number and direct you to a different website. They claim that the boat is being sold through consignment and disclose that it is located in a different state than advertised.

If you express interest in viewing the boat in person, the scammers will schedule showings several weeks in the future but warn you that the boat might be sold before then. To secure the boat, they insist that you immediately send a wire transfer, offering a 7-day money-back guarantee. However, once they receive your payment, they disappear entirely. The website they operate on typically vanishes within 30 days, with a new website already up and running.

The Scammers’ Tactics

To further deceive potential buyers, the suspected scammers purchase similar URLs to well-known websites and create replicas of the legitimate sites.

They go as far as posting fake reviews to mislead visitors into believing that their website is genuine. Clicking on any links on the page will redirect users to the authentic version of the website, adding an illusion of credibility.

Here are a few examples of common boat consignment scams:

1. Fake Consignment Company: Scammers may pose as legitimate boat consignment companies, often with professional-looking websites and convincing marketing materials. They attract boat owners by offering to sell their boats on consignment, promising a quick sale and a high selling price. However, once the boat owner signs an agreement and hands over the boat, the scammer disappears, leaving the owner without their boat or any proceeds from the sale.
2. Overvaluation Scheme: In this scam, the fraudster consignment company intentionally overvalues the boat to entice the owner into signing a consignment agreement. They claim they can sell the boat for a significantly higher price than its actual value. However, the scammer never intends to sell the boat at that inflated price. Instead, they may keep the boat listed for an extended period, making excuses for the lack of interest or offers, while continuing to charge the boat owner for storage fees and other expenses.
3. Identity Theft: Some scammers may target boat owners by pretending to be interested buyers. They may contact the owner, expressing a strong desire to purchase the boat but requesting detailed information such as the owner’s Social Security number, driver’s license, or financial information for a credit check. With this personal information, the scammer can commit identity theft or engage in other fraudulent activities.
4. Payment Fraud: This type of scam involves a fake buyer who pretends to be interested in purchasing the boat. They may negotiate the price with the boat owner and agree to pay a significant amount. However, when it comes time to make the payment, the scammer sends a fake cashier’s check, money order, or a fraudulent online payment. The boat owner deposits the payment, believes it has cleared, and releases the boat to the scammer. Only later do they discover that the payment was fake or fraudulent, and they are left without the boat or any payment.
5. Middleman Scam: In this scam, a fraudster poses as a reputable boat consignment agent or broker. They approach boat owners, claiming they have a buyer interested in purchasing their boat but need a fee upfront to initiate the sale or cover marketing expenses. Once the owner pays the fee, the scammer disappears without finding a buyer or providing any services.

Fraudulent Boat Dealers

The owner of Breakwater Marine, a Surrey boat dealer, is facing 33 charges following a $1.8 million fraud investigation. Surrey RCMP launched the investigation in June 2019 after receiving numerous reports of fraudulent business practices at the dealership located on Fraser Highway. Aaron Fell, the owner, is now facing three charges of theft of property and 30 charges related to fraud. It is alleged that Fell defrauded over 100 victims out of $1.8 million.

During the investigation, police conducted a search of the dealership property in August 2019 and seized multiple boats and documents. Customers of Breakwater Marine shared their experiences with Global News, revealing lengthy delays in boat and trailer registrations, as well as issues with faulty equipment. Some customers expressed concerns about the legal ownership of their purchased boats, while others mentioned that police had recovered stolen items, such as a Sea-Doo trailer that had been stolen 17 years earlier.

To avoid falling victim to similar scams, it is crucial to exercise caution and take certain precautions when dealing with boat dealerships. Here are some steps to consider:

1. Research the Dealership: Prior to engaging with any boat dealer, thoroughly research their reputation and credibility. Look for customer reviews, ratings, and any complaints filed against them. This information can provide valuable insights into their trustworthiness.
2. Verify Credentials: Ensure that the dealer is properly licensed and registered to operate in the boat industry. Contact local authorities or relevant regulatory bodies to confirm their legitimacy. Request references from previous clients and reach out to them for feedback on their experiences.
3. Inspect Contracts and Agreements: Carefully review and understand all terms and conditions outlined in the sales or consignment agreements. Pay close attention to payment terms, warranty details, and any other provisions that may affect your rights and protections as a buyer.
4. Request Documentation: Before making any payment or finalizing a purchase, insist on receiving and examining all relevant documentation. This includes verifying the boat’s ownership, checking for liens or encumbrances, and obtaining a detailed bill of sale.
5. Visit the Dealership: Whenever possible, visit the dealership in person to inspect the boat and evaluate its condition firsthand. This will help ensure that the boat matches the description and meets your expectations.
6. Use Secure Payment Methods: Opt for secure payment methods such as credit cards or escrow services when making payments. Avoid wire transfers or cash transactions, as they can be more susceptible to fraud.
7. Trust Your gut: If something feels suspicious or too good to be true, trust your gut instinct. If necessary, seek advice from professionals or consult with legal experts to protect your interests.

By following these guidelines, you can minimize the risk of falling victim to boat consignment scams and ensure a safer and more reliable boat-buying experience.

Finally, read about hin cloning and title washing.

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