Frauds and scams continue to be rampant in many online businesses, and sometimes, it's not because of sellers who provide customers with false promises. It turns out that certain organizations conduct refund schemes that have cost retailers billions of dollars.
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Refund Fraud Schemes
The scheme is made possible by middlemen in the process of the sale, wherein employees trick retailers into refunding customers and then keeping the item for themselves. They will then keep the items for themselves and can choose to sell it if they want.
An Amazon warehouse worker admitted to being involved in the fraudulent activity. The employee in question, Noah Page, would mark a customer's order as returned through the retailer's internal system, even if the product was never returned.
The employee was reportedly recruited and is working with a customer who was with a massive refund fraud organization called Rekk. In exchange for his involvement, Page was promised a cut of the profits, as per CNBC, which earned him $3,500.
Since retailers have lax policies in place for returned items, fraudsters are taking advantage of the situation. Some have even grown bold and they advertise their services and scores on social networking sites like Reddit and TikTok.
Simply searching for "refund method" or "r3fund," which is a way to avoid moderators, can yield results showing how many people participate in the scheme. Sometimes they would show off the items they managed to snag, or the money they earned from the fraud scheme.
While a refund is always the ultimate goal, there were several ways that people took advantage of the return policies. Sometimes, they would purchase clothes, wear them once, and return the item. The method, according to the National Retail Federation and Appriss Retail, is called "wardrobing."
Amazon alone lost over $700,000 last year due to the fraudulent practices. It has filed lawsuits against 48 people globally to address the matter. Since Amazon is not the only retailer that experiences this, it is estimated that the industry lost more than $100 billion last year.
A spokesperson from the retail giant said that they are already addressing the issue through specialized teams and machine learning tools to prevent it from happening, as well as "dismantling the groups that attempt to damage the integrity of our store and the stores of retailers."
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Who is Affected by the Fraud Schemes
You may not be inclined to feel bad for retail giants like Amazon, but the company is not the only one who loses revenue over cheating the return and refund system. There are a lot of smaller vendors on the platform who may fall victim to it as well.
Even people who are not part of the organization may be helping keep the practice alive. Even unknowingly, people might be buying items at a cheaper price from the fraudsters, basically encouraging them to continue with the activity. To prevent that from happening, it would be best to buy from trusted sites or directly from suppliers.
