Rule Setting

Refund Fraud in Retail Stores - Dennis Challinger

Allowing customers to return merchandise for a refund is an essential part of running a business, but it also presents the opportunity for fraud. This study looked at Australia's leading retail company, Coles Myer Ltd.

First, different types of offenders and how they committed fraud were identified:

• Professional Thieves - steal from the store so that merchandise can be returned for a cash refund.
• Staff Thieves - employees that process fraudulent refunds for their own benefit.
• Check Fraudsters - pass stolen or forged checks to purchase merchandise and may return the merchandise for a cash refund later.
• Opportunistic Fraudster - buy goods on sale and return them later at full price.
• Temporary Thieves - buy and use the goods and return them when they are done.

After figuring out how the refund policy was being taken advantage of to commit fraud, new refund policies were developed to combat refund fraud. The new policy would provide exchanges or credit vouchers for returned merchandise, and if customers had receipts they could receive a cash refund. After implementing the new policy, refund fraud was reduced. By simply setting new rules, this company was able to reduce its losses from refund fraud.