One of the newest eCommerce threats are ”refund service” scams, in which fraudsters solicit otherwise legitimate consumers as accomplices. But, what exactly are refund services? How do they work, and are all of them bad news?
What are Refund Services?
Refund services are organized scams targeting merchants on behalf of consumers. In other words, a refund scam is both a form of return fraud and also an example of “fraud as a service” (or “FaaS”). These services are promoted to consumers through a variety of online channels.
These services are advertised and transacted online between a consumer and a fraudster (or FaaS service) in pursuit of illegitimate refunds. Basically, the service provider will promise to secure “refunds” for customers in exchange for a service fee. They promote their services on the internet (both light and dark net), and through social media channels.
Are Refund Services Legitimate?
As a general rule, no.
There are a few legitimate refund service providers that aim to help customers secure refunds. Happy Returns, for instance, are a legitimate service owned by PayPal that help facilitate easier returns. However, the vast majority of refund services are fraudsters posing as legitimate service providers.
To be clear: in 99% of cases, consumers do not need a service to obtain a refund. Customers can easily obtain one for themselves simply by contacting the merchant within the timeline and terms of their return policy. When consumers do run across these illicit refund service providers, it is generally online in a forum in which the consumer is searching for ways to get their money back outside of the merchant’s return policy terms.
Once a consumer has expressed interest in the promoted service, the fraudster will reach out to the consumer to make arrangements and secure the refund. Typical refund service fees are roughly 25% of the original purchase price.
Refund Service Scams Hurt Businesses
Using a combination of tactics, including social engineering methods, the fraudster will harass the merchant for a full refund, regardless if the purchase was eligible for one or not. The buyer gets to keep the goods, and the scammer gets paid. Merchandise is rarely, if ever, actually returned to the merchant.
According to the National Retail Federation, customers returned about 21% of all their online purchases from 2022. Of these return requests, nearly 11% were fraudulent. These statistics place annual eCommerce losses due to return fraud in the $20-25 billion range. They also suggest that merchants lost around $10 to refund fraud for every $100 in refunds processed.
Aside from the general revenue loss due to fraud services like this, merchants also suffer reputational damage. It also increases their chances for a higher chargeback ratio when the scam is unsuccessful, as buyers may then turn to a chargeback to get their money.
Proper Protocol for Securing a Refund
Firstly, most merchants have zero problems refunding legitimate purchases. Happy customers become return customers, so it’s in the merchant’s best interest to give consumers what they want whenever possible.
If the customer has a legitimate reason to return an item, it’s easier, faster, and less of a headache to simply contact the merchant for one. Getting a refund is actually quite simple. Consumers need to:
Most retailers have strict return policies limiting the time customers have to return a purchase. This helps the business manage inventory and track sales data rather than impose any hassles. The faster you contact the merchant for a return, the better.
Respect Your Terms
Remember: when you make a purchase, you’re making a technically legally binding agreement. When you make that purchase, you’ve already agreed to the merchant’s return policy by default. That said, so long as you return the items according to the pre-agreed terms… you’re golden. There’s almost no reason at all to pay some fraudster to handle such a simple process for you.
Explain the Problem
Was the product damaged or faulty in some way? Did it fail to live up to advertised expectations? These are legitimate concerns that retailers need to know so they can provide consumers with better products and services in the future.
Have your Receipt Ready
Hang on to your receipts! Not every merchant will reject a return outright if you don’t have your receipt. But, you should expect to be asked for one, regardless.
If you show up late for a return and the store is willing to exchange the item for you (in place of a cash refund), why quibble? The merchant is clearly trying to work with you. Shouldn’t you do the same? 99% of the time, an agreeable solution for both parties is just a quick phone call away.
The Bottom Line
Whatever you might have heard about return services, they are most often a scam.
Pay particular attention to listings that encourage you to purchase larger, expensive items that you’ll get to keep after the refund. This is outright fraud, and the fraudster will charge you 25% of that purchase price only to disappear into the dark web, leaving you holding the bag… and a possible lawsuit.
It’s just not worth it to take the risk.