What Are Professional Refunding Services?
In many ways, the growth of e-commerce owes a lot to the promise of easy returns. It can be a leap of faith to purchase goods sight unseen over the internet, but when consumers know they can send them back for a refund if they aren’t fully satisfied, there’s less to worry about.
Unfortunately, easy returns can be easy to exploit, and scammers who call themselves “professional refunders” are taking advantage of consumers and merchants alike by obtaining fraudulent refunds for pay. What do merchants need to know about so-called professional refunding services?
Consumers love to order products online, and they love to return them, too. In 2020, the most recent year for which data is available, approximately $428 billion worth of purchased merchandise was returned to retailers.
Of that total, nearly six percent of it—amounting to more than $25 billion—was returned fraudulently, causing significant financial harm to the merchants involved.
What’s really alarming is that it isn’t just unethical consumers who engage in return fraud. Many of these refunds were obtained by fraudsters posing as legitimate service providers, labeling themselves as “professional refund services” and using their social engineering skills (and outright fakery) to swindle merchants into bending their return policies and giving out undeserved refunds.
Easy return policies can be risky for merchants in and of themselves, given that you’re likely to lose money on shipping, restocking, and other activities in the course of providing a hassle-free, no-questions-asked refund. Add refunding services into the mix and you may soon find that your generous return policy is fast becoming a major liability.
What is a Professional Refunding Service?
A professional refunding service is a type of scam in which a third party offers to obtain a refund from a merchant in exchange for a cut of the money the customer gets back—either a percentage or a flat rate.
Professional refunders will do the work of contacting the merchant and asking for a refund, and they will typically resort to any means necessary in order to convince the merchant to pay up.
While there may not be anything illegal about the basic concept, in practice refunding services are usually a form of fraud-as-a-service.
Refunding services often solicit clients on social media, promising to obtain refunds from merchants even if the customer no longer has a valid claim (or never had one to begin with). Some of them are good at what they do, in the sense that they know how to push the right buttons and manipulate merchants into giving out refunds.
Why Do Consumers Hire Refunding Services?
Consumers may hire refunding services because they feel reluctant to approach the merchant themselves. This might be due to an aversion to confrontation and conflict, or because they know that they don’t have a valid claim per the merchant’s return policy.
Not all merchants behave ethically, and there are cases where merchants stonewall their customers and refuse to accept returns even though they are in the wrong. However, situations where professional refunders are coming to the rescue of mistreated consumers are rare.
The majority of the time, these services are just helping consumers engage in a new form of cyber-shoplifting, obtaining refunds for goods that they actually received and kept.
What Tactics Do Professional Refunders Use to Obtain Refunds?
Professional refunders will do whatever it takes to persuade a merchant to pay out a refund. Their process typically involves persistence and social engineering.
Simple deception is often the first method refunding services will use. They’ll claim that an item was never received, or arrived in damaged condition, and demand a refund on those grounds.
If the merchant pushes back and asks for proof, the refunder may escalate to more aggressive or manipulative tactics. They might call customer service incessantly, or make up an emotional sob story.
The most effective professional refunders are the ones who know their targets well. They will learn about all the loopholes in a merchant’s return policy, and choose their methods carefully based on past experience. Some refunding services even specialize in particular retail sectors or stores.
How Can Merchants Protect Themselves from Refunding Services?
Offering refunds is an important part of providing good customer service. Without a flexible return and refund policy, customers will fall back on the chargeback process to resolve their issues. These tips can help you prevent return fraud without scrapping your entire refund policy.
- Track your returns and refunds, then analyze the data to see if any patterns emerge. Professional refunders may reveal themselves by using predictable claims and call times.
- Search online for refunders advertising their services. You might find your own business listed as a potential target, along with information that can help you identify that refunder when they contact you.
- Stay in close communication with your customer service team. If they’re feeling pressured, emotionally manipulated, or harassed by repeated calls, give them the support and resources they need in order to hold firm on your refund policies.
- Review your return and refund policies to see if there are any loopholes that can be closed. For example, you might have a policy that states that orders under a certain dollar amount can be refunded without a return. If this rule is being exploited, you can change it.
Identifying professional refunders—and the customers who hire them—is key to defending yourself. When you know you’re on the line with a professional refunder, you can scrutinize their claims more closely and feel more confident about enforcing your policies.
If you know that a particular customer is making false claims to obtain refunds, either on their own or through a refunding service, you can block that customer from making future purchases.
We often say that a refund is always preferable to a chargeback, and it’s true—refunds don’t include added fees, and card networks won’t cut off your access to affordable payment processing if you give too many refunds out. However, there can be real drawbacks to giving out refunds too freely. It can make you a ripe target for professional refunders and other fraudsters.
The best way to protect your revenue from these attacks is to track and analyze your data, and use those insights to adjust your policies with respect not only to refunds in general, but toward specific customers who abuse the return process.