State Bars 5 Online Escrow Companies

SACRAMENTO — California regulators on Thursday ordered five unlicensed online escrow companies to stop selling their services in the state.

The state Department of Corporations has been actively pursuing unlicensed personal property escrow sites, some of which steal the identities of licensed escrow companies and defraud customers. Since May, the agency has issued 38 cease-and-desist orders, including Thursday’s.

Web-based escrow companies are typically used by consumers who purchase expensive items such as cars or jewelry through online auction sites or classified ads. For a fee, the escrow company acts as an independent third party, holding funds in a trust account until the goods or services are delivered.

To operate in California, escrow companies must be licensed by the Department of Corporations, which subjects company executives and financial records to background checks. Just one Internet-based escrow company is among the 650 independent escrow companies licensed in California.

The problem of unlicensed sites is severe enough that the department formed an escrow fraud task force last month along with the Federal Trade Commission, the FBI, the Southern California High Tech Task Force, the Los Angeles County Sheriff’s Department and the Escrow Institute of California, a lobbying group.

The amount of alleged fraud in dollar terms has been difficult to track, but it is considered significant, the Department of Corporations said.

The five companies ordered to stop offering escrow services on the Internet are Safely-trade.net of Arizona, Express-transfers.com of New York, Escrow-tripledeals.com of Texas, Escrowac.com of London and Eurosafedeals.com of Europe.

All the websites except Escrowac.com, were inaccessible Thursday.