Many Unhappy Returns: Retailers Stay Vigilant To Combat Refund Fraud

Sydney Morning Herald

Monday January 9, 2006

Kirsty Needham Consumer Reporter

WHEN a customer requested a refund for a laptop computer bought 80 minutes earlier, the discount retailer Aldi called the police.

Despite a "no-quibbles money-back guarantee", staff at Aldi's Miranda store disputed the shopper's claim that the contents were different to the computer depicted on the box.

The computer the shopper presented was five years old and had two missing keys. It was also the second day in a row he had returned a laptop.

The previous day he had been given $2299 by Aldi's Menai store after claiming a computer was missing several items within 45 minutes of purchase.

But this time, Miranda police seized the returned computer.

As retailers experience a post-Christmas rush of unwanted gifts, most must balance customer service with an alertness to "refund fraud". Criminologists have described it as an aggressive attack on retailer margins, and estimate it now accounts for half of all retail fraud in the US.

Tactics include "wardrobing" (using an item once before returning it), receipt fraud, returning stolen merchandise and swapping similar items with different prices.

Dennis Challinger worked for eight years as the head of loss prevention for Coles Myer, and is a former assistant director of the Australian Institute of Criminology. He said most refund fraud occurred when retailers gave refunds beyond the requirements of the law, for example, if customers change their minds or do not like the colour, as a gesture of good service.

To prevent professional thieves returning stolen goods, retailers used "colour-coded receipts, chemically treated receipts and uniquely numbered receipts to guard against forgeries". Some retailers require those seeking refunds to give a name and address.

Wardrobing has spread beyond clothing to include power tools, photographic gear and DVDs that are used once, or copied, and returned, Mr Challinger said.

US retailers have started using a central computer system to track returns made by shoppers, and recording their driver's licences.

Privacy groups have protested that consumers have been blocked from making legitimate returns if the computer system deems they have made "excessive returns".

An Aldi Australia spokesman said that refund fraud "is not a big issue for us, but at the same time it could become a problem in the future".

© 2006 Sydney Morning Herald

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