Many of us may think that returning goods from a store is not illegal, but apparently if one returns goods one too many times then it may be considered a crime. This crime has been known as refund scam, refund theft or refund fraud. One may consider it as related to shoplifting. According to Webster’s dictionary, the word refund means “to give or put back” or “to return (money) in restitution, repayment, or balancing of accounts” whereas the word scam means “a fraudulent or deceptive act or operation” or to “deprive of by deceit”. What is refund scam and how is it committed?
The crime has been said to be committed by giving back to the retailer items or goods in exchange for money, other goods or shopping credits. It was placed in the limelight when President Bush’s own personal adviser, Claude Allen, was apprehended for stealing up to $5,000. To shed light on what exactly refund scam is, here are a few ways on how it is committed. They are sorted from most common to less common:
- 1. Returning stolen goods or merchandise for shopping credits or money. It has been reported that 92.5 % of retailers say that the goods stolen from them have been returned and refunded.
- 2. With the advent of technology and the sophistication of scanners and printers, it is no surprise that the second most common refund scam, with 69% retailers complaining to have experienced this, is the return of merchandise that has been bought using counterfeited or forged tenders.
- 3. Another method has been traditionally practiced by women in buying dresses but has lately been used by criminals in purchasing gadgets and equipment, is the so called ‘wardrobing’ or ‘renting’ method. 56% of retailers experienced this wherein the customer legitimately buys the product, for example an evening gown, use that gown for an event, and intentionally return that gown knowing that it is not defective. This especially hurts the retailers as they are forced to sell a perfectly good product at a lower price because it has been slightly used.
- 4. 52.4 % of retailers complain that products has been returned to them using counterfeited or false receipts that was scanned from original receipts, altered and reprinted again allowing any refund scammer to return as many products as he can put his hands on. ‘Price arbitrage’ is where the criminal purchases products that look similar but have different prices. He then returns the cheaper item and passes it off as the more expensive product thereby receiving more money and also keeping the more expensive products. Other scammers don’t even return the product at all. They use the box that contains the product they bought, fill this with a pile of cards and return it to the retailer making him believe it was the product he bought earlier on.
Other reported, but less common scams are when criminals buy products at a lesser price in a sale but return the item and refund for a full price from other stores or at a later date. Thieves also sometimes scavenge for broken or defective products from the garbage and return them to retailers for refund. Sometimes they intentionally look for receipts in the trash and go to the store, pick out the products listed in the receipt and return them for full refund. Other times it is the cashier that does the ‘return’. After a sale, the cashier notes the product sold. He then notes that the product was ‘returned’. He pockets the so-called refund money. The balance sheets balance out but the retailer would be missing some products. Refund scammers also target big companies such as Wal-Mart. The criminal buys an expensive product. His partner then goes back to the store with the receipt and gets another item identical to the one bought earlier. The partner leaves with the second product and tries to return it to another store thereby profiting from the scam and keeping the expensive product. Some scammers switch UPC’s (Universal Product Code). They switch the UPC of a cheap product and place it on an expensive product. They then buy the product, at a lesser cost, and return it later on for refund of its actual price.
PREVENTING REFUND FRAUD
Refund scams may be prevalent but retailers have taken measures to prevent this crime and discourage future scammers. One of the more popular prevention method used by retailers is the use of databases that records the sales and returns made by the customers. A customer that has exceeded a certain number of returns will be recorded and the past security cameras will be reviewed to determine whether that customer has committed any previous theft.
Other retailers use the Retailer Exchange. It is a program that recognizes forged receipts and asks those that return products to provide identification. This is used as a way of tracking customers. A customer is denied refund if he has exceeded the number of refunds allowed. Unique serial numbers are also embedded in the product, usually in the bar code, to monitor return. Serial numbers that do not match are refused return privileges.
Still others require their customers to show receipts to return any product. Without the receipt the product cannot be returned. Cash refunds are also sometimes limited in amount. Any amount exceeding the limit is to be refunded in check. Warnings are placed around the store to inform the consumers of these requirements. It is also advisable to refund products in cash it they are paid for in cash. Retailers should refuse to refund until the check paid for the product has been cleared.
New ways of refund scams has cropped up over the years but the continued vigilance of the retailers and the utilization of new prevention schemes have helped in curtailing the rise of refund theft.