What is Return Fraud?Returns Are Bad. Abusive Returns Are Worse.
What is Return Fraud? The Basics of Return Abuse, Explained
Getting a buyer who visits your store or website to leave with an item or two in hand can be tough, so it’s understandably frustrating when a customer asks for a refund. What’s far worse, though, is when seemingly legitimate customers — or even dedicated, professional criminals in some cases — try to circumvent your store’s return policy in an attempt to get things for free.
This practice, known as return fraud, can leave you saddled with higher overhead, inventory that’s difficult to resell, and unanticipated logistical costs. In this article, we take a closer look at what return fraud is and why it happens.
A Primer on Return Fraud
- Return Fraud
Return fraud refers to the act of returning merchandise to a retailer for a refund in violation of the merchant’s stated return policy. The merchandise may be ineligible for a refund because it was purchased from another retailer, because the item is used, or was marked as otherwise ineligible for a refund before purchase.
[noun]/rə • tərn • frôd/
Return fraud happens when consumers bring an item (or items) back to you to request a refund in the form of store credit or cash. However, the return request is invalid, as the customer does not have a legitimate right to a refund for one reason or another.
The attacker plan out their scheme, launch it, then cash out and disappear until they’re ready to pull off the same scam (or a variation on the same scam) again.
Why Do Scammers Gets Away With Return Fraud so Easily?
There are several reasons why many merchants turn a blind eye to suspected return fraud. For instance, there’s the fact that a claim can often be your word against the cardholder's. Customers can use a lot of different excuses to claim a return. You have no definitive way of verifying their claim, though.
Even if you suspect fraud, you don’t want to risk alienating customers by making unprovable accusations. Angering customers can lead to reputational damage. Even worse, a buyer may file a chargeback to get their refund from the bank, rather than through the proper channels.
According to the 2024 Chargeback Field Report, 43% of surveyed merchants said they viewed both threats with equal concern. Among the sellers who felt that one was worse than the other, however, chargebacks were viewed as the bigger threat by a margin of more than two to one.
