Attention sellers! There is a new type of fraud emerging from fraudulent buyers on eBay. I call it "return fraud" and it involves returning a different, defective item rather than the original, functional item you sent out. I have spoken directly with PayPal to develop practical tips to proactively monitor return fraud and prevent it from taking you as a victim.

How Return Fraud Works

Let's say a buyer has a used laptop and after 2 years of faithful use, the laptop suddenly dies. The buyer will then look for laptops on eBay that are similar to the defective laptop he or she already has (model number and specifications). The buyer will purchase  a fully functional laptop from you with nearly identical specifications compared to the defective laptop he or she has. The buyer will pay 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 will of course promptly ship the laptop out to the buyer, in appreciation for the prompt payment. Once the buyer receives the package, you will get an e-mail shortly after with the buyer explaining the laptop you sent him or her is defective. The buyer will demand 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 simply by 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 of course). 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 keep detailed lists of 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, make it your first priority 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 therefore 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? After having conversations with PayPal, here is the recommended solution...

As recommended above, always take pictures of your serial numbers on the items you sell. Furthermore, 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 take the returned item to a reputable electronics store such as Circuit City, Best Buy, H.H. Greg, etc. and have their repair or support department document the item you received in return as different than the original item you sold. 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 them compare it against the actual item you received in return from the buyer. Simply have the department write up a letter stating the item originally sold and the item returned are two different items based upon the serial number and/or other evident factors. Make sure the letter is on their official store letterhead and that it includes a phone number and employee's name in case PayPal needs to speak with them directly. Then send the letter to PayPal via fax or e-mail and it will be added as evidence to the PayPal dispute.

Now you have two strong pieces of evidence to present to PayPal, making your case an easy win in your favor. PayPal still may take the maximum of 30 days to decide the case and present a verdict, but at least you don't have to worry about the fraudulent buyer getting away with return fraud.

Conclusion

Return fraud is a new type of emerging fraud taking place on eBay. With a few proactive steps you can easily prevent fraudulent buyers from committing return fraud against your eBay account. For reasons like this, I also recommend waiting to leave positive feedback on buyer's account. I used to recommend leaving feedback right after a buyer sends payment as a means of integrity to the feedback system. However, with return fraud on the rise, I now recommend waiting through the duration of your return policy before leaving feedback on the buyer's account in case an unfortunate occurrence of return fraud takes place.