Aggressive Advocates For Your Rights

Stores keep track of your returns, database flags them for fraud

Consumers and consumer advocates have been stunned to learn of a database that tracks shoppers' returns and flags people as potential fraudsters. The Retail Equation's database, which is used by stores such as Best Buy, The Home Depot and Victoria's Secret, claims to predict who is making fraudulent or abusive returns. Unfortunately, there appears to be no mechanism for appeal.

Jake Z. told the Wall Street Journal that he was flagged when he returned three cellphone cases to a Best Buy store. They were gifts for his sons, so he had bought a variety of colors and planned to return the colors his sons didn't pick. The return totaled $87.43.

Was that an abuse of Best Buy's return policy? According to The Retail Equation, yes. Jake was banned from making exchanges or returns for a year. He tried to appeal to both Best Buy and the database operator, but they would not lift the ban.

"We use it to prevent retail crime," said a representative of Home Depot of the database. "There were organized retail crime rings, and those crimes negatively affect the entire community." He added that Home Depot only adds returns to The Retail Equation's website when they're made without receipts.

The Retail Equation's files are an example of the growing use of "Big Data." Increasingly, companies are collecting and organizing consumer data into digestible pieces for other companies. The Retail Equation collects "consumer behavior metrics" such as return frequency and dollar amount and then uses an algorithm to estimate which consumers' returns are fraudulent or abusive.

There could be a number of problems with this. First, these algorithms are typically proprietary, so those flagged by the program may not know precisely why. Furthermore, the database may not be accurate. Best Buy admits that it only reports non-receipt returns and exchanges to the database. That could mean that only those transactions already considered potentially problematic are being included, skewing the results.

Further, as we mentioned, people can have damaging conclusions made about them with no opportunity to appeal. Moreover, The Retail Equation may be sharing its red flags with all of its client retailers, so shoppers may be banned from making returns or exchanges at multiple retailers due to conclusions drawn from behavior at a single store.

Will the database's red flags be shared with law enforcement? If so, how strong would this evidence be considered?

Being flagged and banned from making returns or exchanges is embarrassing and inconvenient and could easily be unfair. If a database has identified you as a potential fraudster, you may be able to challenge that designation in court. Consider contacting a consumer law attorney.

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