4 Easy Steps to Avoid Return Fraud This Holiday Season

There are several types of return fraud. The most common is a customer who returns an item that they have paid for with a check, but for the return they want cash. Another common return fraud occurs with clothing; the returner has, in fact, worn the item being returned, and they are now returning it for no good reason.

This is also called "renting", and it can mean a big loss for your business as the item may not be available for re-sale (actually this is the biggest problem with returns after the holidays, as retail sales tend to take a massive plunge).

So how can your business avoid return fraud this holiday season? We’ve compiled a list that will help, whether your business is an online one or brick and mortar.

* Conceive and stick to a return policy. Make sure you have a good return policy and that you stick to it. In particular, you may want to limit holiday returns (those purchased before December 25) to a week after the big date; that way you won’t have anyone renting out clothes for the New Year’s parties!

* Use credit – not cash – for returns. The big point of return fraud is for the "customer" to get cash back. Most stores will have some merchandise that will interest a legitimate returner, and store credit should be sufficient recompense for a gift that they don’t need.

* Customer tracking. Creating some sort of system which allows you to track customers, their purchases, and their returns will help in smelling out and avoiding fraud.

Online businesses have an advantage here, as most purchases will be done through credit card or a third party such as PayPal. It’s easy to see what customers are buying and who is doing it, and who is making too many returns.

* Require a receipt. Holiday retail means good bargains, and a good fraud artist will try and receive a present cash price on a holiday sale item. It’s important to know what date you sold the item on, and for how much, in order to avoid losing extra cash.

A few simple procedures can help you maximize the profitability of your business during the holidays and avoid return fraud. Remember, while most people will play Santa during the season, some will play the Grinch and take advantage of unprepared retailers!

If there is no swipe of the card, it’s very easy for someone to order something and then say they did not get it. By using their credit card company’s chargeback feature, many of these dishonest customers get away with it too. There are a few things you can do to make sure this is not happening in your business. First of all, watch for warning signs, or have your staff watch for warning signs. Some of these might include:

* Orders that are larger than normal. If you notice an abnormally large order, be suspicious. While most of the time, it will be normal orders and not fraudulent ones, it’s better to be safe than sorry.

* Orders containing several units of the same type. This is one of the most common credit card fraud scams there is. Make sure to check for these types of orders, and if you have a staff to do this sort of thing for you, make sure that they are aware that you are watching for this sort of thing.

* Orders shipped overnight. Now, many people have their items shipped overnight, and most of them are decent and honest people. However, people who use fraudulent means of payment almost always have items shipped overnight. This means that you are out the cost of the items, plus the cost of an expensive shipping means.

* Orders shipped to an address other than the billing address. This is almost always the case with fraudulent orders. How are they going to get the things that they are stealing if they send it to the real cardholder’s address? Red flag orders like this.

* Multiple card numbers from one IP address. These types of orders need to be red flagged immediately as well. Normally, an honest person only uses one credit card to make orders, sometimes two. If you are seeing three, four or five different credit card numbers from the same IP address, you need to check that out right away.

The first thing you should do if you suspect fraud is to call the customer at the billing phone number. Call the merchant services and ask for the card holder’s phone number, or at least ask to match the one you have with the one in their files. At the very least, if the card company won’t give you the correct phone number (which they should), you can have them call the customer to verify the recent charge.

There are even a few preventative measures you can take before the order is placed. First of all, take the time to get your website secured so all credit card and customer information is encrypted and sent over secure channels. Secondly, you can require that the customer enter their birth date or other piece of information that the credit card company can verify against the card holder’s information. You may even require that customers register or sign in to place an order. If a new account is created with credit card information that is already in your system for a different customer account, you’ll be able to tell right away that something is amiss

By working with merchant services and implementing some simple and effective measures to secure your site and orders, you can save yourself a lot of money and a lot of headaches.