Policy abuse glossary

Policy Abuse

Policy abuse refers to a customer not using a merchant’s policy for what was intended and even deliberately manipulating a merchant’s policy for personal gain. Policy abuse is a unique problem for merchants to tackle because, unlike traditional fraud, it can be committed by people who are otherwise good customers, and in most cases, it requires no special skills or access to stolen credentials or accounts. (Source – Dark Web Refund Abuse Report) However, sophisticated serial abusers may be career criminals who specialize in refund-related fraud, carrying out item-not received (INR), empty box, and other shipping-related scams, and resellers circumventing merchants’ product-limit policies.

Policy abuse can be defined on a merchant-by-merchant basis, particularly once policy abusers cross a certain threshold. Examples of policy abuse can be a customer submitting a fraudulent claim, return, multi-item purchase (exceeding a store limit), or even coupon reuse.

Refund fraud

Refund fraud is a type of payment fraud in which an individual falsely claims a refund from a merchant while still enjoying the original product (in full or partially). This often happens by way of a customer or fraudster receiving an item from the merchant, and then making the false claim that the item was not received which prevents them from sending the item back to the merchant. As a result, the individual keeps both the item received and the reimbursement. There are multiple false claims that the fraudster can claim to get a refund. These may include falsified post-fulfillment claims (Item-not-received), defective, wrong item, or “not as described”)

Return fraud

Return fraud refers to any scam method that abuses a business’s return policy process. While merchants put return policies in place to make the customer happy; bad actors manipulate merchant return policies to gain a product or service for free. This can be carried out in a multitude of ways, from wardrobing – a customer purchases an item, uses it once, and then returns it – to repeatedly returning items for reasons that are not legitimate, or by returning used or damaged items as if they were new. Return fraud from both honest customer mistakes to deceitful customers and fraud rings. More sophisticated fraudsters might carry out return fraud scams using fake tracking IDs, or through empty box fraud.

Fake Tracking ID (FTID):

FTID fraud involves altering the return postage label and then returning an empty or junk-filled package instead of the item for which the refund was requested. The common denominator to all FTID methods: tracking systems must show the package as delivered to the returns center. To accomplish this, fraudsters typically alter the label on the junk package to remove any information linking the package to the customer. This causes the return center to throw out the junk package, prevents them from tying it to the bad actor, and ensures delivery tracking shows the package was delivered, entitling the customer to a refund.

Empty Box Fraud (EB):

Returning empty boxes or boxes filled with paper, rocks, or similar but cheaper items instead of the original merchandise. Policy abusers have a variety of methods to get around the merchant, including claiming they were not responsible for the switch or deliberately messing with the shipping address so the package will be hard to identify or will not reach the correct warehouse

Promotion abuse:

Promotion abuse or coupon fraud is the act in which a fraudster or customer takes advantage of a business’s promotional offer, exploiting glitches in online systems, or returning items after receiving rewards.  Even though a merchant may limit coupons per customer or link coupon codes to new account creation, coupon abusers find ways to workaround the merchant’s rules.  Examples of promotional abuse include using multiple coupon codes for a single purchase. The most common method of promo abuse is the creation of multiple accounts or fake emails to use a “new customer” promo code, exploiting glitches in online systems, or returning items after receiving rewards.  Promo abuse most commonly impacts merchants running promotional campaigns including first-time discounts or sign-up bonuses and referral bonuses.