This holiday season, many of you sold lots of goods and services via your merchant services processing account, Paypal, cash or otherwise. With Christma day and Chanukah
behind us, many of you will be faced with customers requesting refunds and exchanges–some legitimate and some not. By some estimates, upwards of 10% of all holiday
purchases will be ‘brought back’, and merchants are projected to lose millions in ‘return fraud’ according to the National Retail Association.
How do you walk the fine line between keeping customers happy and protecting yourself against fraud? The following information might help:
For starters, you need to familiarize yourself with laws, regulations, and other requirements regarding returns and credits. Some states have laws that deal with issues
such as consumer rights, posting of sales and return policies, and the like. Know what they are in your state, and comply with them. There is nothing more frustrating
by getting ripped by a dishonest consumer because YOU didn’t follow the rules.
Sales processed via credit card merchant accounts have unique requirements, in that sales and return policies MUST be shown on the footer of the signed credit card receipt.
This means that even if the merchant posts polices on a sign on the wall, if it’s not also on the FOOTER of the credit card receipt, very often the merchant will lose the
dispute and suffer a chargeback if it goes that far. In other words, no matter what else you do or where you post your sales policy, if it’s not on the footer
of the credit card receipt, it’s not there if the customer wants a refund on something purchased by credit card.
Internet sales are yet another challenge. If you have a policy regarding return and exchange privileges, or if all sales are final, you need to prominently post
that policy on your site. Hiding it in small font at the bottom of a page, or failing to disclose it at all, may easily cost you a chargeback.
Having said all the above, refund fraud is another matter. I know of no law that forces a merchant to voluntarily submit to being ripped off. Assuming you as a merchant
have complied with all of the above mentioned requirements (if you haven’t, most of the following is a mute point), you need to defend yourself against ‘return fraud’
which comes in many forms. The practice of ‘wardrobing’ or ‘borrowing’–buying clothing, fancy camera or similar for a special occasion, using it, then bring it
back–is very common. Requesting full refunds on stolen, shoplifted, or discounted merchandise also happens. I even know of a case in which a merchant gave a full refund
on what he thought was a fax machine neatly repacked in it’s box, only to find weeks later the box contained only a rock!
Moral of story: Know your merchandise. Be diligent. And comply with rules and regs concerning refunds and credits. Spell your polices out clearly and in detail
so you are able to defend yourself when appropriate.
