Return fraud costs retailers billions

As consumers return holiday gifts and redeem gift cards, retailers will be keeping an eye out for transactions that, in all, could cost them billions.

The average person returned nearly four holiday gifts last year, according to a National Retail Federation survey. But returns are increasingly leading to losses for retailers in the form of return fraud, an $8.76 billion-a-year-problem for the industry, NRF says.

This type of fraud poses one of the most serious loss prevention issues for stores, the trade group says.

Some 5.8 percent of holiday returns are fraudulent, up from 4.6 percent last year, accounting for $3.39 billion in losses during the holiday season alone, according to an NRF 2013 survey of executives at 62 retail companies.

"Returning used or stolen items, or even using false tender to purchase items is fraud," Rich Mellor, the trade group's vice president of loss prevention, said in a statement.

He said retailers' efforts to fight back are starting to chip away at the growing problem, but "criminals are becoming more savvy and technologically advanced in their methods."

Nearly all the retailers polled said they have had stolen goods returned in the last year. Nearly three quarters said they've had returns of items bought with stolen or fraudulent gift cards, cash or credit cards. Nearly a third said they've found criminals using counterfeit receipts to return merchandise.

And nine out of 10 companies had problems with employee-related return fraud. More than half said return fraud has had connections to organized retail crime groups.

Retailers noted another growing problem: 'wardrobing,' or returning used but non-defective electronics or special occasion apparel.

To curb problems, many retailers are now requiring customers returning goods to show identification, especially when returning items without a receipt.

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