Retailer Beware: Refund and Exchange Scams

What every retail manager and security director needs to know about common refunds and exchange scams and how to prevent them

The good news is that for many retailers, the 2004 holiday shopping season turned out better than expected. The bad news is that with all that purchasing going on, there will be a commensurate number of post-holiday returns and refunds requested. While no retailer is thrilled about taking back merchandise, the chaos of the after-Christmas store scene makes returns and exchanges an even more bitter pill to swallow because of the very real possibility that all those transactions just might not be legitimate.

Thieves and fraudsters play their con games all year long, but the end of the year is an ideal time to hide in the crowd of legitimate shoppers who really don't like the scarf from Aunt Mary or who won't use the tennis racquet from Uncle Fred in a million years. People who return items they don't like or that don't fit aren't going to cost the store much more than a small amount of aggravation and a little of the cashier's time. And a store with well-trained employees has an opportunity to convert that returner into a customer by offering them additional merchandise while they're standing inside the store. But those who are running a game can gouge the retailer in several ways.


Some thieves attempt to return merchandise that was stolen from the same store or another store in the hopes that they will receive cash back or a store credit that they can use to make a legitimate purchase, which they then try to convert to cash.

Others attempt to "launder" money by paying for merchandise with a bad check, then attempting to return the item for cash before the store finds out that the check has bounced.

Computer-savvy swindlers electronically dummy up a real-looking store receipt using a scanner, computer and printer. They present this seemingly legitimate piece of paper along with a stolen item at the counter, looking to get cash back. The less technologically inclined will comb the trash near the store entrance, looking for discarded receipts they can use to make "returns" of matching items they pull off the shelves.

The more brazen -- or desperate -- ones simply pick up merchandise inside the store, walk it over to the customer service desk, and request money "back" in exchange.

Sometimes, instead of asking for a full "refund," con men (and women) will bring in merchandise that they purchased at less than full price, or at a discount elsewhere, and try to return it for full price, thus pocketing the difference.

Another trick is to bring in a higher-priced item and request an exchange for lower-cost merchandise, with cash back for the difference. The advantage is that the fraudster not only receives money, but also walks away with a legitimate receipt for the new item -- which he can later return for a full refund.

Some thieves engage in a variation of distraction theft, which occurs during a return or exchange. Usually, the bad guys work in pairs to pull this con. They bring in an item, ostensibly to return it or exchange it for another piece of merchandise. One member of the pair engages the employee's attention or distracts the employee. Meanwhile, the other thief replaces the genuine item that was brought in for return or exchange with a counterfeit one. When the employee turns his or her attention back to the item, he or she doesn't realize that it is not the original one that was presented. Employees who work with small, expensive items, such as jewelry, are most vulnerable to this scam.

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