’Tis the season for widespread holiday return fraud

Bah humbug.
Bah humbug.
Image: Reuters/Eric Thayer
We may earn a commission from links on this page.

The holidays are a time of good will and gift giving, which makes them an ideal moment for scammers to take advantage of others.

This year, the dollar value of holiday return fraud in the US will hit an estimated $2.2 billion, up from $1.9 billion last year, according to a recently released survey by the National Retail Federation. And the biggest problem that retailers reported for the year was people returning stolen merchandise: Shoplifting an item, and then bringing it back for cash or credit.

Winter holidays create a prime moment for such phony returns, because the return rate during the holidays is 2% higher than the annual rate, according to the NRF.

Receipts are also harder to come by in the gift-giving season. The retailers the NRF surveyed estimated that 10% of all returns made without a receipt are fraudulent, throughout the year. Meanwhile, a separate survey of consumers by the NRF shows that 38% of people had returned at least one item last holiday season, but that 32% of people didn’t include a receipt when offering a gift, whether the original or a gift receipt.

“Retailers have the difficult task of providing superior customer service by always giving the benefit of the doubt to their shoppers when it comes to returns, while simultaneously working to make sure they protect their business assets,” said Bob Moraca, NRF’s vice president of loss prevention, in a statement.

But even returns with receipts can be fraudulent. A sales associate who has worked in high-end clothing retail in New York for five years and asked that his name not be used tells Quartz that he’s seen sophisticated rings involving multiple people: One shopper would come into the store and buy expensive items, such as Moncler jackets, caring nothing about the size, with a card that seemed fraudulent but could not be called out. The next day, someone different would come in and do the same on a different card. Finally, a third person would come in, return all the jackets, and collect a refund, often in the form of a gift card that could be sold.

The results reported by the NRF come from its Return Fraud Survey, which it conducted between October and November of this year by polling senior loss prevention executives at 62 retail companies. The respondents represented all varieties of retail, including discount stores, department stores, drug stores, supermarkets, and specialty stores, such as clothing retailers.

Not all the results were bad. Certain types of return fraud declined, including the organized-crime variety and returns of goods bought with stolen tender, which is the catch-all to describe cash, credit, and anything else you can buy with.

Returns involving fraudulent gift cards or merchandise credit were actually up nearly 61%, the highest of any type of tender. The sales associate also told Quartz he had often seen people pay for big purchases using shopping bags suspiciously full of $100 gift cards.