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The Biggest Crime You've Never Heard of -- Return Fraud -- and How the Criminals Do It

By Chris V. Thangham     Jan 18, 2007 in Business
National Retail Federation (NRF) says return fraud costs 3.5 Billion Dollars to businesses.
While returning the bright pink sweater your aunt gave you for the holidays may hurt her feelings, it's certainly not unusual. Retailers expect that nearly 9 percent of gifts will be returned from the holiday season -- a disappointment to sales? Yes. Illegal? No.
There is, however, an immoral and often illegal phenomenon that's costing retailers billions of dollars and, in turn, making shopping more expensive and inconvenient for all of us: return fraud. According to the National Retail Federation (NRF), "Criminals commonly take advantage of companies' return policies to receive cash for stolen merchandise, launder money or return an item after it has been used."
This return fraud cost retailers an estimated $3.5 billion during the 2006 holiday season, and a full $9.6 billion for the entire year, according to NRF. Some estimates even say return fraud amounts to $16 billion in losses to retailers each year.
The National Retail Federation says, that return policy was set up primarily to promote good business practice with shoppers, so they come back and do more business and also feel satisfied with their purchases. But the amount of products returned nearly 9% of the total sales is costing the business quite a large sum, nearly $3.5 Billion Dollars. Here are some fraud practices used by buyers:
* Buying a product, taking advantage of the product rebate, then returning the product for a refund.
* Buying clothing or another item (like a Prom Dress), wearing it (or using it) once, then returning it (they call this wardrobing).
* Buying an item and returning it with the intent of buying it at the reduced "open-box" price
* Finding rock-bottom prices on Web sites, then challenging stores to pay up on their lowest price guarantees.
They say that people steal products and try to come back and ask for a refund, but without the Sales receipt the Sellers don't consider a refund, so I don't know how they monitor this type of stealing. I hate product returns, but I never realized people would do such things it puts a damper on the good intentions of the Seller. In the end, the Sellers will increase the prices and is going to affect the good customers more, so I hope they find some means to control this return fraud. Do you encounter such buyers when shopping?
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