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Business owners: Prevent merchandise return fraud

Nearly every business has some form of a return policy. This has opened a window for fraud. One of the hardest to prevent and most pervasive types of fraud, return fraud, has plagued the retail industry in recent years.

The Better Business Bureau of the Southwest (BBBSW) informs business owners of the various forms of return fraud and the preventive steps they can take to reduce it.

Some of the more common return frauds include:

“Renting,” that involves the purchase and short-term use of a non-defective product with the intention of returning it later for a full refund. This is costly because once an item has been returned, it usually must be sold at a discounted price.

“Price manipulation,” that involves switching the price tag, altering the price, or switching out one item for another before making a return.

“Altering receipts” or creating fabricated receipts — this is becoming easier to do because of the increased capability of technology.

“Check fraud” or the fraudulent use of gift cards to perpetrate return fraud.

While retailers may be more relaxed in their return policies in response to the economy, there are steps you can take to prevent and reduce return fraud. The BBBSW offers some red flags of return fraud:

• The return rate has increased.

• The average markdown rates following a return are increasing.

• The percentage of returned merchandise a company is able to sell has declined.

The BBBSW advice on how to prevent return fraud:

• Retailers need to train their employees, who are handling returns, what to look for and how to handle returns.

• Establish clear procedures for handling returns.

• Employees should always check the returned item in its container, making sure it is the right product and that it has all the parts.

One of the most important steps the retail industry can make to prevent return fraud is to develop a shared database or network of returned information. A shared database would help identify the return abusers. One company may have developed a profile on a fraud return, at which point, the fraudster will move and target a different company. A shared database would help identify the return abusers. The BBBSW recommends a range of variables that should be included:

• Type of product returned and the store location.

• Giving the customer’s information, such as his/her name and driver’s license number.

• Names of the employees involved in the transaction.

• Dollar amount of the transaction.

• The serial number of the bar code.

Retail fraud is not easy to combat, and it is not a battle that can be won in a day. However, commitment to fraud prevention may pay off now, and long after the economy bounces back.