Directive 2011/83/EU of 25 October 2011 gives EU consumers who buy at a distance 14 days to withdraw "without giving any reason" (Article 9(1)). Since a withdrawal needs no reason, the returns investigator starts with the item.
What is return fraud?
The NRF and Happy Returns 2025 returns report defines it: "Retail return fraud occurs when a customer purposefully exploits a retailer's return process" to obtain something "without paying what is owed" (p. 18). Picture a shopper keeping a new drill and returning an old one in its box.
Refund fraud and returns fraud are synonyms. The NRF and LPRC 2026 retail theft survey includes "claiming a refund without returning the product and using fake receipts" in its definition of return fraud.
In the types table of what fraud is, return fraud has its own row, next to chargeback fraud, disputing a real purchase for a refund, with merchants as the typical victim. Return fraud reaches the refund through the store, not the card issuer.
How does a fraudulent return get paid out?
Table 1. A fraudulent return, stage by stage.
| Stage | What the fraudster does | Who can stop it |
|---|---|---|
| Obtain | Buys the item, steals it, or pays with stolen card details | Payments risk, at checkout |
| Prepare | Swaps the item, empties the box, alters a tag or fakes a receipt | No one yet |
| Claim | Returns it in store or online, often as defective | The returns desk or platform |
| Refund decision | Waits for the refund at the till or on the carrier's scan | Loss prevention, by refund rules |
| Cash out | Keeps or resells the goods; may move money into crypto | Loss prevention, with AML and police |
Refund as a service sells the claim. From 2019 to 2023, Artemis Refund Group had customers buy goods, then deceived retailers into refunds with methods tailored to each; customers "would retain possession of the item but still received a full refund", for a fee of typically 15 to 25 percent of the price. Eleven defendants were sentenced for conspiracy to commit wire fraud (USAO N.D. Okla., 29 April 2026).
How is online return fraud different from in store return fraud?
Online, the item travels unseen. Happy Returns chief executive David Sobie warned: "If you're refunding at the time the item is scanned by the carrier, but you have no idea what's in the box, you've left yourself very susceptible to fraud" (NRF, 10 June 2025). In store, the item is in hand first; the weak points are the receipt and the tag.
What types of return fraud do retailers report?
Table 2. Types of return fraud and return scams, with a source for each.
| Type | How it works | Source |
|---|---|---|
| Wardrobing | Using an item, then returning it for a full refund | NRF 2025 (abuse, not fraud) |
| Receipt fraud | Returning with a counterfeit, fake or reused receipt | NRF 2024; NRF and LPRC 2026 |
| Price tag switching | Altering or removing a label, product code or price tag | Fla. Stat. 812.015(1)(i); NRF 2025 |
| Stolen goods | Returning shoplifted or stolen merchandise | NRF 2024 |
| Counterfeit or decoy return | A fake or different item sent back instead | NRF 2025; Riaz |
| Empty box | A box with nothing, or rocks, inside | NRF 2025; Riaz |
| Label tampering | A falsified label or tracking ID that triggers the refund | NRF 2025; Sobie |
| Overstated quantity | Claiming more items than were sent back | NRF 2025 |
| Stolen tender | Returning goods bought with stolen payment details, as in credit card fraud | NRF 2024 |
| Staff refunds | Employee return fraud or collusion with outsiders, a form of employee fraud | NRF 2024 |
| Refund as a service | A paid service files the false claim for the buyer | Artemis |
One scheme can mix types. Mubasher Riaz and his brother bought goods from hundreds of online vendors, falsely claimed they were defective and shipped back "an empty box, a counterfeit item, or alternative item such as a book". He moved proceeds into cryptocurrency and got 50 months for conspiracy to commit wire fraud (USAO E.D. Mich., 17 November 2025).
Is wardrobing return fraud?
Not by NRF's definitions: wardrobing, returning an item "in used condition looking for a full refund", is returns abuse, outside its 9 percent (pp. 18 to 19). In EU consumer law, a consumer "should only try on a garment", and one who goes further "should not lose the right to withdraw but should be liable for any diminished value" (Directive 2011/83/EU, recital 47; Article 14(2)). A UK trader may recover that value for handling beyond what "might reasonably be allowed in a shop" (Consumer Contracts Regulations 2013, regulation 34).
From Ufuk Gürdaş, reviewer of this entry: "Under EU and UK distance selling rules a dress worn once and sent back inside 14 days is still a valid withdrawal: the retailer may recover the lost value but cannot refuse the refund, and in England, Wales and Northern Ireland it becomes fraud by false representation only when the customer dishonestly lies about the item."
What does return fraud cost retailers, and is it rising?
Darwin Alberto Corea Calderon's refund scheme took more than $464,000 from Home Depot stores in the Carolinas between 2022 and 2025 (USAO W.D.N.C., 8 July 2026).
Table 3. Return fraud survey figures and their base.
| Figure | Survey and base |
|---|---|
| Fraudulent returns, excluding wardrobing and bracketing, averaged an estimated 9% of returns in 2025 among merchants that track them | NRF 2025: 358 professionals at US merchants with revenue of $500 million or more |
| 26% say return fraud has a high impact on their return policy | NRF 2025, same base |
| 93% of merchants call retail fraud and other exploitive behavior a significant issue for their business | NRF and Happy Returns 2024 consumer returns report: 249 professionals at large US retailers |
| 35% see external return or refund fraud trending higher in 2026, 18% lower (events recorded so far) | NRF and LPRC 2026: 66 companies |
Which signs at the returns desk point to return fraud?
- The weight matches, the contents do not. Riaz shipped books that matched the expected weight of the return.
- "Defective" claims on goods never sent back. Riaz claimed defects and kept the goods.
- Fewer items than claimed. Overstated quantity rose for 71 percent of merchants tracking it (NRF 2025).
- Many identities or devices behind one buyer. Riaz used both, plus VPNs.
- A refund to another card, or in cash. EU and UK distance sales rules require the original means of payment unless agreed otherwise (Article 13(1); regulation 34(7)).
- A receipt that does not match the sale. Counterfeit receipts are on NRF's 2024 list.
Is return fraud illegal? What US, UK and EU law says
Yes, it is a crime when the return rests on a deliberate lie or on stolen goods. Rules on worn goods are civil, and none of the statutes below names wardrobing.
Table 4. Return fraud law in the US, UK and EU.
| Jurisdiction | Rule | What it covers | Maximum or remedy |
|---|---|---|---|
| United States (federal) | 18 U.S.C. 1343, wire fraud | A wire in interstate or foreign commerce, sent to carry out a scheme to defraud by one "having devised or intending to devise" it | A fine, prison up to 20 years, or both; up to $1,000,000 and 30 years where it affects a financial institution (18 U.S.C. 1343) |
| California | Penal Code 484(a), theft | Theft, including defrauding "knowingly and designedly, by any false or fraudulent representation or pretense" | Most grand theft: county jail up to one year or under section 1170(h) (section 489(c)(1)) |
| Florida | Fla. Stat. 812.015, retail theft | Taking merchandise or altering a price tag "with intent to deprive the merchant" | Third degree felony in the cases 812.015(8) lists: prison up to 5 years (Fla. Stat. 775.082(3)(e)) |
| England and Wales | Theft Act 1968, section 1 | Dishonestly appropriating another's property "with the intention of permanently depriving the other of it" | Up to seven years on indictment (section 7) |
| Northern Ireland | Theft Act (Northern Ireland) 1969, section 1 | The same definition of theft | Up to ten years on indictment (section 7) |
| England, Wales and Northern Ireland | Fraud Act 2006, section 2 (extent: section 15, these nations only) | A dishonest false representation, which can be made to "any system or device", that the maker knows is or might be untrue or misleading, made to gain or to cause a loss or risk of loss | Up to 10 years on indictment, a fine, or both (section 1(3)(b)) |
| Scotland | Crime classifications (Scottish Government) | Recorded as shoplifting, or as fraud (common law and statutory) | Not stated in the source opened |
| EU and UK (civil) | Directive 2011/83/EU, Articles 9, 13, 14; Consumer Contracts Regulations 2013, regulations 30 and 34 (regulation 30) | 14 days to withdraw without a reason; refund by the same means of payment | Consumer liable for diminished value from handling beyond what is needed, up to the price in the UK |
Victims in England, Wales and Northern Ireland report fraud to Report Fraud (0300 123 2040); those in Scotland call Police Scotland on 101 (NCSC).
When is return fraud a felony?
California makes theft above $950 grand theft (section 487(a)) and $950 or less petty theft, a misdemeanor with exceptions for some prior convictions (section 490.2(a)). Florida makes retail theft a third degree felony in listed cases worth $750 or more, such as buying a box packed with other merchandise or stealing from more than one location within 120 days.
The three federal cases here ended in sentences for conspiracy to commit wire fraud, which 18 U.S.C. 1349 punishes like the offense. The FBI or Homeland Security Investigations led each case.
Where does return fraud end and refund abuse or chargeback fraud begin?
Refund abuse, which NRF calls returns abuse, exploits the return policy, as wardrobing does (p. 18). Chargeback fraud skips the store: the customer keeps the goods and disputes the charge with the card issuer. Returning a box of rocks is return fraud; wearing a coat once and returning it is abuse; keeping the coat and telling the bank it never arrived is chargeback fraud (illustrative).
Table 5. Return fraud, refund abuse and chargeback fraud compared.
| Term | Where the claim goes | Rule that applies | Who loses first |
|---|---|---|---|
| Return fraud | The store's returns desk or online returns | Criminal law: theft or fraud | The retailer |
| Refund abuse (wardrobing) | The store, inside its return policy | The policy; civil rules on diminished value | The retailer, which may recover the lost value |
| Chargeback fraud | The card issuer | Card scheme dispute rules | The merchant, once the issuer reverses the payment |
What strategies work for preventing return fraud?
Understanding when a refund pays out comes first.
- Return policies and item verification. Decide whether refunds pay on the carrier scan or after inspection; 56 percent of large US retailers require item verification before a refund (NRF 2024).
- Client services and employee training. Teach staff the six signs above, and give their own refunds a second check.
- Technical options. 85 percent of large US merchants say they use AI or machine learning in returns to fight fraud; 45 percent call it effective, 40 percent mixed (NRF 2025).
- AML review. Resale and crypto proceeds, as in Riaz's case, raise the questions in fraud and money laundering.
complead, formerly Sanction Scanner, offers payment fraud detection that scores each payment at authorization against the cards and devices behind it and returns approve, decline, review or step up with the reason. Fraud and AML run on one engine and one customer record.
What if the customer keeps the goods and asks the bank, not the store, for the money back?
Related terms
- Chargeback fraud. Disputing a real purchase with the card issuer.
- Ecommerce fraud. Fraud against an online store or its customers.
- Credit card fraud. Spending with stolen card data.
- Account takeover fraud. A criminal controls a real customer's account.
