There is a new type of fraud emerging from fraudulent buyers on eBay. "Return fraud" involves returning a different, defective item rather than the original, functional item you sent out. After falling victim to this fraud myself and successfully combating it, I have summarized the key steps to help you proactively monitor return fraud and prevent it from taking you as a victim.
How Return Fraud Works
A fraudulent buyer has a used laptop and after 2 years of faithful use, the laptop suddenly dies. The buyer then looks for laptops on eBay that are similar to the defective laptop he or she already has (model number and specifications). The buyer purchases a fully functional laptop from you with nearly identical specifications compared to the defective laptop he or she has. The buyer pays for the item with a legitimate payment using a verified PayPal account and a confirmed U.S. address. No obvious warning signs are observed upfront. You promptly ship the laptop out to the buyer, in appreciation for the prompt payment. Once the buyer receives the package, you get an e-mail shortly after with the buyer explaining the laptop you sent him or her is defective. The buyer demands a refund or else negative feedback and/or a PayPal dispute. As a reputable seller, you are puzzled, but you still offer the buyer a refund upon returning the laptop he or she purchased. The buyer promptly returns the laptop to you, except the buyer switches the defective laptop he or she already has with the fully functional laptop you sent him or her (without telling you). You receive the returned laptop back and because the units were both nearly identical, you may not notice a difference between the two items. You go ahead and issue a full refund to the buyer, only to discover weeks later the buyer switched laptops on you, sending a different and defective laptop in return. You are able to verify this by looking at the serial number (or service tag) on the laptop. Unfortunately it is too late and the buyer has succeeded in pulling the scam. You are out the cost of the laptop and now you are stuck with a defective item in return. Fraudulent buyers can attempt this scam with any type of item. It could be a cell phone, handheld/PDA, computer, laptop, LCD display, or other item. There is no limit to the extent of items this new fraud can take place.
How to Detect Return Fraud
The best way to proactively detect return fraud is to properly document the serial numbers or other unique identifiers on the items you sell. I recommend taking a picture of the serial number or other unique identifier (e.g. service tag, ESN#, COA, etc.) so that you have physical evidence of all the items you sell. This way, if a buyer attempts return fraud, you can easily compare the serial number on the returned item to the original item. When you receive a returned item, don't forget to compare the serial numbers.
The Solution to Stop to Return Fraud
Just because you catch a buyer attempting return fraud, does not mean the buyer will not still attempt to get a refund. If you explain to the buyer he or she returned a different item and you are denying a refund, the buyer can simply go to PayPal and open a PayPal dispute, stating he or she returned a product and you never issued a refund in return. How can you prove to PayPal the item you received is different?
Always take pictures of your serial numbers on the items you sell and include the picture of the serial number in the actual auction listing when you sell the item. This way it is clear that you recorded the serial number with the item before the item was sold and falsely returned (the eBay auction listing will serve as historical evidence). Your first step of evidence is to show PayPal you recorded the serial number before selling the item and the item you received in return from the buyer contains a different serial number. You can take a picture of the returned item's serial number, and present both pictures to PayPal as evidence.
The next step is to have a police report filed with law enforcement. You can simply present a print out of the original auction listing with the pictures (including the picture of the serial number) and then have law enforcement compare it against the actual item you received in return from the buyer. Law enforcement will write up a police report documenting the evidence and provide you with a copy a few days later. Then send the police report to PayPal via fax or e-mail and it will be added as evidence to the PayPal dispute. PayPal still may take 30 days or more to decide the case and present a verdict, but at least you will eventually get your money back. As for the fraudulent buyer who committed return fraud, he or she may or may not suffer any repercussions, depending on whether PayPal or law enforcements seeks action. However, you can report your evidence to eBay so that they can suspend the fraudulent buyer's account in order to prevent future harm to other sellers.
Return fraud is a new type of emerging fraud taking place on eBay. With a few proactive steps you can prevent fraudulent buyers from committing return fraud. Always document serial numbers with pictures, and consider filing a police report with law enforcement to serve as official evidence.