Around 15% of all merchandise purchased from retailers ends up being returned, according to the National Retail Federation (NRF). While businesses may be willing to accommodate unhappy consumers returning low-quality items or ill-fitting clothing, few are prepared for the rising amount of return fraud. In fact, in 2008, the NRF estimated 8% of returns were fraudulent, and by 2023, that number rose above 13%.
When people dishonestly return items, it hurts consumers by forcing businesses to raise prices to maintain their bottom line. While it takes many different forms, attorney Peter M. Liss says return fraud is almost always a crime under state law. In fact, “The San Diego County District Attorney has recently created a retail fraud unit including a prosecutor specifically assigned to these crimes in the Vista Court,” he says. As a result, “we should expect an increase in prosecutions of major retail store crimes.”
What is Return Fraud?
Return fraud is a crime that involves intentionally returning something for a profit. It can be committed in many different ways. Some examples of the most common forms include:
Returning Stolen Items:
A thief takes an item back to the store after purchasing it. In some forms of this crime, individuals avoid even taking the merchandise out of the store. Instead, they take an item off the shelves and do a receiptless return. Or they may use another shopper’s discarded receipt to get a refund or store credit.
Cross-Retail Return:
Someone buys something at a low price from one store and then returns it to another retailer that charges more. Sometimes, the individual may return an item in-store after an online retailer refunds their purchase without making them return the physical goods. Returning an item at a different store than it was purchased is not a crime unless there is an intention to profit.
Refund fraud:
A person receives a refund for perfectly merchandise without bringing it back to the store to return.
Price Switching:
An individual buys merchandise, takes it home, and replaces the tag for the tag of a more expensive item.
Wardrobing:
A person wears or uses merchandise and returns it once it is no longer needed. “While a significant problem for retailers,” notes Liss, “wardrobing is not always a crime unless the individual falsely attests the goods were not worn or used.” Alternatively, the individual fraudulently damages the goods to claim they are defective.
Bricking:
An individual buys something, strips out the valuable parts, and returns it. For example, someone may pull the hard drive and ram from a laptop and return it. Sometimes people will even return a resealed box with rocks in it, hoping the cashier doesn’t check.
Open Box Fraud:
A person buys something at full price and then returns it so they can later repurchase it with an “open box” discount.
Defective Return:
Someone buys a new, undamaged item from the store and replaces it with defective or broken merchandise the individual already owned.
Chargeback fraud:
While not technically a “return,” chargeback fraud is similarly against the law. It is sometimes instituted by those unable to make a fraudulent return to a store. It involves initiating a chargeback through a credit card company despite being satisfied with a purchase.
Employee fraud:
An employee breaks company policy and processes a refund for themselves or an associate without actually accepting the item back.
Is Return Fraud Illegal in California?
In most cases, yes. “There are some forms that may technically be unethical, like open box fraud, that aren’t crimes,” explains Liss, “but most types of return fraud are illegal.” Most instances are charged as petty or grand theft, depending on the amount of returned merchandise. In price-switching cases, the value will be based on the difference between the actual merchandise cost and the price on the tag.
- When the merchandise is valued at under $950, the crime is charged as petty theft. This misdemeanor is punishable by up to 6 months in jail. If the individual already has two prior theft convictions though, they can face felony charges, punishable by up to 3 years in prison.
- If the goods are valued at over $950, the offense becomes grand theft, a wobbler, meaning it can be charged as a misdemeanor or felony. As a misdemeanor, this crime is punishable by up to 1 year in jail, and as a felony, it carries a maximum of 3 years prison time.
Defenses to Return Fraud Allegations
You can fight these charges, but sometimes, it is best to see if you qualify for a diversion program. These programs allow you to keep the offense off your record and avoid jail time.
If a diversion isn’t a good option based on your circumstances, you can still fight the charges. One of the best defenses to this crime is to claim that you made a mistake or lacked criminal intent. For example, if you didn’t remember what retailer you purchased something from and did a receiptless return, you didn’t mean to do wrong, even if it cost drastically more at the store where you returned it. Alternatively, if you brought a dress back with a loose tag you cut off, and the tag ended up being for a more expensive dress, it could be a harmless mistake.
Sometimes, you can challenge the charges by showing the accusers made a mistake of fact. For example, an employee accused of fraud could claim they didn’t defraud their company but simply misplaced the returned item.
Another good defense is to claim that you were the victim of mistaken identity. For example, suppose you happened to do a receiptless return, and the store says they have video footage of you shoplifting that item. If the footage is grainy, you could reasonably claim you did not shoplift the item but simply bear a resemblance to the thief.
Regardless of your case’s specifics, please speak with a defense attorney before attempting to defend yourself against this crime. Remember that what you say can be used against you.
Related Offenses
Many people accused of return fraud are also charged with stealing goods before returning them, doubling the theft allegations they face.
Additionally, some people face additional charges after being accused of returning the merchandise as part of an organized retail theft ring. This crime may be charged as a misdemeanor or felony. Those that face misdemeanor charges, can be punished by up to 1 year in jail. If it is charged as a felony, they may face up to 3 years in prison.
If you have been accused of return fraud, please call attorney Peter M. Liss. You can schedule a free initial consultation by calling (760) 643-4050.
