Friendly Fraud

There is a new buzz word making the rounds – Friendly Fraud. It is the online term for the old practise of returning goods after you have used them. For the online merchant, this type of fraud now includes the customer saying they never received an item, stopping the credit card payment, and even returning empty boxes.

While the practice is probably as old as merchandising – it seems to be on the increase, due, in large part, to the declining economy. Some business blogs are reporting a 50% increase in this type of fraud.

This fraud not only causes losses of a sale but also the cost of bank chargebacks and handling costs. In many cases the items are, if they are returned, are too badly damaged to be resold even as used material.

While nothing you can do will eliminate this practise, there are somethings you can do to discourge the less aggressive fraudster.

  • Have a clear return policy. Have it online and as part of you packaging.
  • Limit the time period when returns will be accepted
  • Require a RMA (Return Merchandise Authorization) for all returns
  • Use a shipping method that requires the customer sign for the product.

These methods won’t deter the most aggressive fraudster. They will help deter those that may be looking quick way to get out of paying. And, in most cases, seeing a well defined returns policy will be appreciated by legitimate customers

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