Avoiding Fraud

How Fraud Usually Works

Frauds can be grouped into two basic categories: Non-existent places steal money from travellers, or travellers use fake credit cards or checks to pay for their stays.

How can you, as a traveller, end up booking non-existent places? Here is an example: Joe, a guy in Nigeria, buys a stolen credit card number on the black market. Joe goes to an online vacation rental directory and sets up a fake listing, paying the yearly subscription fee using the stolen credit card number. Joe tells travellers that his place is very inexpensive, but can only be booked by prepaying the full stay via money order. You, the traveller, book his place and send him a wire transfer or money order, as he requested. Weeks later, the vacation rental directory learns that the credit card transaction was disputed. Or, in an even worse scenario, it's entirely possible that you could travel to your destination, get in your rental car, and drive to the nice vacation rental you booked inexpensively, only to discover that the address doesn't exist. By the time you realize you've been defrauded, Joe has been living the good life for weeks and, because it would be prohibitively difficult to prosecute him (since he lives in another country), you have lost all of your money.

The second type of fraud, in which place lose money, is more straightforward: An international traveller arrives and pays with a credit card or check. Everything appears to be normal. Days or weeks later you get a note from the bank telling your that the credit card charges have been disputed because the credit card was stolen, or that the check bounced back. Once again, the money is lost, as it is very difficult to track a person in another country. Which is not to say that tracking fraud within the same country is a picnic, either.

How Localo Addresses the Issue

We address it in several ways. Some of them we can make public, some of which must remain secret in order to retain their potency.

In order to protect the traveller, Localo only works with places that receive prepayments, when required, via credit card (or any other card that does not require a PIN number for online purchases) or PayPal. In this way, travellers will have the chance to dispute the transaction in the unlikely scenario that the place was not real. When this happens, Localo will charge the host its commission at the same time that the prepayment is made. That way, Localo increases the chances of finding out if the place is not legitimate before the check-in date. Of course, if the booking is cancelled, Localo will automatically credit the commission back to the host.

In order to protect the places, Localo will allow them, at their discretion, to require the traveller to prepay the booking in its entirety via credit card or PayPal. Additionally, hosts will be able to review the profile of any traveller before accepting a booking from him or her. If they wish, they can accept bookings only from travellers with an existing and positive record in Localo.

Your feedback is highly appreciated. If you can think of another way we can protect both travellers and places, please let us know.