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There is an Ugly Side to Consumers: Fraud

The following post is from Madison of My Dollar Plan and Kids and Money at

Source: erix!

According to the National Retail Federation, return fraud and return abuse cost US retailers between $13.9 and $17.7 billion in 2010, an increase of 45.4% from 2009. Ouch!

Amanda, a staff writer at My Dollar Plan, shares more about the survey and return fraud:

Return Fraud

The survey also shows that 8.12% of all merchandise purchased in 2010 was returned, and 15.7% of the returned merchandise was without a receipt (of the non-receipted returns, 12.61% were found to be fraudulent; only 3.89% of receipted returns are found to be fraudulent).

On top of the retailers losing money from the extra time and resources and possibly from being unable to resell an item, there is also a loss in sales tax revenue for states. In 2010, California, Texas, and Florida had the biggest impact on sales tax loss from return fraud and abuse, coming in at over $50 million each.

What Does Return Fraud Look Like?

  • Returning Stolen Merchandise: This is the most ubiquitous fraud with 93.5% of stores surveyed responded that they experienced this return fraud in 2010.
  • Returns Using Counterfeit Receipts: There are websites (I was appalled!) and programs out there to create counterfeit receipts to stores. Here are two men that were recently arrested for counterfeiting receipts to get over $7,500 in free merchandise (thankfully it was all retrieved during a search by police).
  • Return of Merchandise Purchased with Stolen Tender: Our credit card numbers were recently stolen (we both still had our copy of the card in our wallets, so most likely our magnetic strip was scanned), and over $900 of merchandise was charged at Macy’s in Brooklyn NY! Fortunately for us the credit card company took the charges off of our statement; however, it’s a trend in return fraud to return the merchandise purchased with a stolen credit card to get cash.
  • Wardrobing/Renting: This is when someone purchases clothing with the intention of wearing it to an occasion and then returning it, no matter if they like it or not.
  • Buying Something Cheap Online and Returning for Full Store Credit Elsewhere: Let’s say you make a purchase on eBay and find a much cheaper price for an item. Then you return it to a store for full store credit (since you don’t have the receipt). This is fraud.
  • Coupon Fraud: Another form of fraud is coupon fraud when consumers use coupons for unintended products, costing the manufacturers money.
  • Serial Returners: Perhaps from time to time you purchase something that you thought you wanted/needed, or you thought would match perfectly to your home and upon leaving the store you found that it didn’t. Occasional returns are fine, but there are people who are returnaholics (I call them serial returners—and yes, I knew a girl once who stated that she returned 60% of everything she purchased!) that are costing retailers a lot of money. Is serial returning illegal? No; however, retailers are stuck with the time and resources it takes to cater to these individuals, as well as to restock/repackage products to sell (if they can sell the item).

How Stores Fight Back

The Retail Equation is a service that many stores use in order to track down serial returners and other return abusers and blacklist them so that their returns will be denied. They do this through Verify-2, “…a real-time, consumer-based return authorization system, that uses predictive algorithms and statistical models to distinguish and deter fraudulent and abusive return behavior in-store, online, or in the call center.”

They also use a system called Receipt Verification that “compares data entered or scanned from the receipt against a chain-wide database. Using predictive analytics, the information is cross-referenced with the original purchase data and any other linked transactions, compared against your return policies, and processed through a computer model.”

What to Do If You Are Denied a Return

Of course, these verification and scanning processes can sometimes result in legitimate returns being denied.

If you find that you’ve been denied a return, the best way to figure out what happened and see which stores are tracking you is to call The Retail Equation at 1-800-652-2331 and get your Return Activity Report. This will show you how many returns you’ve made recently that were tracked by retailers.

Have you ever witnessed any consumer fraud?

Madison DuPaix is a mom to three young children with a background in finance and insurance. She loves retirement planning and taxes, and recently started her own tax business. Madison is the author of My Dollar Plan and is the guide to Kids and Money at