Refund Fraud Is Costing Retailers Hundreds of Billions

What Is Refund Fraud?

We’ve all shopped online and returned goods after realizing they’re not quite right. Maybe the size was wrong, maybe the color looked different in real life. As e-commerce grew, many companies made it easier to return items, but the tides could be turning.

Refund fraud, which refers to a customer tricking a company into sending them a refund for a product without actually sending the return, is soaring.

Organized Fraud

As far as fraud can go, refund fraud might sound like a relatively minor offense. But it’s not just a handful of customers driving this trend. Some of these scams are organized by groups, costing retailers $100 billion last year, according to the National Retail Federation .

The internet has contributed to the trend, as fraudsters are connecting on social media platforms like Reddit, and TikTok, as well as Telegram to share successes and tips.

Who Bears the Cost?

Companies are fighting back with lawyers. Amazon (AMZN) filed a lawsuit against individuals behind an alleged scheme that resulted in a $700,000 loss for the company.

But ultimately, regular consumers could bear the brunt of the consequences as companies change their return policies, implementing measures like restock fees more widely, or delay returning funds to customers.

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