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Vol. 37 No. 3 — April 2020

Almost every seller has a return policy. While some are stricter than others (lululemon with the 30-day turnaround time, we’re looking at you), most of us tend to believe that as long as we are within the letter of the retailer/etailer law, we can get a refund—or at least store credit. But what if you followed the tenets of the policy exactly and were told that you—and I mean the singular you, as in you and only you—were not allowed to return anything? And I mean anything—not just the purchase you are trying to return—because of your return history and other data on your shopping habits that were collected by the store?

Furthermore, what if your shopping and return habits were used to compile a secretive customer lifetime value (CLV) score that was sold to companies and used to evaluate your chances at getting a mortgage, future employment opportunities, and more? A service called Retail Equation scores consumer behavior and uses proprietary algorithms to assist retailers in imposing limits on returns by certain shoppers, with some individuals precluded from making any returns at all. In March 2018, Khadeeja Safdar at The Wall Street Journal detailed the experience of Jake Zakhar, who tried to return three cellphone cases to a Best Buy in Mission Viejo, Calif. He was told that he was banned from making returns and exchanges for a year and that he should contact Retail Equation for a copy of his “return activity report” for an explanation. His report listed only the return for the three cellphone cases, but Retail Equation was unwilling to lift the ban. A subsequent appeal to Best Buy ended with the big-box giant referring him back to Retail Equation.

Retail Equation told Safdar that its algorithms are designed to “identify 1% of shoppers whose behaviors mimic return fraud or abuse.” It assigns consumers “risk scores” based on their shopping activities, with scores above a certain level being flagged for its customers (i.e., the 34,000-plus stores that contract with Retail Equation). Following the return and exchange rules is not enough to merit a reputable score; shoppers who used several items that they then returned, and had too many returns within a short period of time or returns of high-theft items, receive bad scores. When shoppers with high-risk scores attempt to make a return, salespeople inform them that any future returns will be denied, directing them to Retail Equation to request their report or file a dispute.

Obviously, the best way to avoid this embarrassing scenario at the checkout counter is to obtain one’s report in advance. However, these reports don’t include purchase history, actual scores, or the number or types of returns that the store considers problematic enough to cause a ban on any future returns by a customer. Safdar notes that Dave Payne of Orlando, Fla., received a warning at a Best Buy when returning a digital scale and a router extender, with receipts and within the 15-day return window. Apparently, that 15-day return window no longer applies “when you’ve crossed an arbitrary line.”

COMPANIES’ JUSTIFICATIONS

In addition to Best Buy, Business Insider’s Hayley Peterson identified other retailers that “are discreetly tracking shoppers’ returns and punishing people who are suspected of abusing their return policies” as of May 2018: Amazon, The Home Depot, CVS Pharmacy, Sephora, Dick’s Sporting Goods, JCPenney, Victoria’s Secret, and Toys “R” Us. When contacted by Business Insider, these retailers attempted to justify the policies; almost all of them cited fraud. Home Depot had an additional reason, possibly leveraging the heightened concerns of the public regarding the opioid epidemic. A spokesperson stated that the company believes that return fraud is “feeding” the epidemic.

Interestingly, Home Depot is not alone in this belief. Westmoreland County, Pa., judge Meagan Bilik-DeFazio calls Wednesdays, the day on which she hears drug pleas, “Walmart court,” claiming that 80% of the cases involve Walmart prosecuting retail theft, fraudulent return, and defiant trespass. In 2017, Stephen Huba reported for TribLIVE,“The chief culprit, she said, is the chain’s non-receipted return policy, which allows drug users to exchange stolen merchandise for cash or a gift card. They then trade the card for drugs or redeem the card for cash. …” In this situation, data from Retail Equation is not very helpful, since the gift cards are often sold illegally for “pennies on the dollar. …” Richard Hollinger, a professor emeritus at the University of Florida, is an expert on shoplifting and retail shrink, and while he has studied these issues for years, he concedes that there is “a paucity of research on the more recent problem of drug addicts who support their habits through chronic illegal refunding.”

SIFTING THROUGH DATA

In June 2019, the Consumer Education Foundation (CEF) issued a report about consumer scores with the hopes of prompting the Federal Trade Commission (FTC) to investigate the firms that generate them. The CEF report names 11 firms that rate “shoppers, potential renters, and prospective employees.” The New York Times’ Kashmir Hill identified five whose official policies state that they will share the data they have on individuals with that individual, and then attempted to get the data. Hill obtained a report from Sift, a company that “determines consumer trustworthiness”; it was 400-plus pages and contained every message ever sent to Airbnb hosts, years of Indian food delivery orders from Yelp (and it knew that an iPhone was used to place the orders), and dates of password changes on Coinbase, with the added information that they were conducted on an Apple laptop. Most of these entries were marked as either “abuse,” “not abuse,” “normal,” “fraud,” “account takeover,” or “not account takeover.” When Hill contacted Sift to discuss, the company attempted to assuage concerns by stating that it doesn’t “sell or share any of the data” with third parties and that its motivation is to verify that accounts belong to real people and not hackers or impersonators. Sift also stated that it attempts to link activity across platforms in order to snuff out fraud; for example, if a stolen credit card is used to order food on Yelp, the device on which the transaction occurred is logged so that it can be flagged if it is used again on a different service (Airbnb, for example).

Ironically, the process to acquire your data from Sift requires you to provide the company with even more data. In order to verify your identity, you have to upload a photo of a government ID and then take a selfie. After the selfie is submitted, you are given instructions to take an additional selfie, along with a randomly generated directive for a specific facial expression such as making sure you look “happy or joyful.” While this can seem burdensome and intrusive, it is actually a safeguard to ensure that the owner of the data is the individual who is making the request. The first selfie is used to match to the government ID, and the second—with the directive for a specific facial expression—is used to ensure that someone isn’t just holding a photo up to the camera.

The official party line from retailers seems to be that they are acting in consumers’ best interests, trying to protect them from fraudulent transactions and even drug addiction. However, that is of little consolation to shoppers who have been unwittingly blacklisted, even when they followed official policies and did nothing wrong. Reading about these situations, which have seemingly spiraled out of control, makes me long for the days of our little card table at the shopping mall in Peru, Ill.