I recently did a post wondering if sites reselling gift cards would create an additional avenue for dishonest people to commit fraud. After all – gift card fraud – isn’t new and eBay limits the sales of them on their sites because of the criminal activity associated with them.

The main reason eBay limited the sales on their site was pressure from the retail industry, or so I’ve read.

Fraud committed against retailers costs billions, and it’s added into the “cost of goods sold,” which means we are all paying higher prices because of it. There is a limit to being able to add the price of fraud into the cost of an item (competition) and when this happens, businesses fail.

A lot of people have lost their jobs when retail fraud couldn’t be controlled.

In response to my original post, Joe LaRocca, Vice President of Loss Prevention for the National Retail Federation was kind enough to send me some links illustrating how big a problem this has become.

In November, the NRF released information that estimates retailers will lose $3.5 billion during the holiday (Christmas) season – link here.

Many retailers issue gift cards versus cash for refunds (especially when no receipt is present) and fraudsters sell them for cash. Joe provided me with an interesting link on this (story and video clip) from NBC4.com, here.

Refund fraud normally is a result of shoplifting, but when dealing with gift card fraud, we also need to include credit/debit card and check fraud. Retail fraudsters buy gift cards with their “bogus financial instruments” and then sell the cards for cash. Of course – they could be refunding merchandise bought with their bogus instruments – but it’s easier (less work) for them to simply buy the “gift cards” and resell (fence) them.

Credit/debit card and check fraud are two activities that directly tie into “identity theft,” which victimizes 9 million people a year in the United States, alone.

Besides the “indirect costs” we all pay – a lot of ordinary people become fraud victims after an encounter with a fraudster on an auction site. The Internet Crime Complaint Center cites auction fraud as their number one complaint and it keeps growing every year.

Besides placing yourself at risk – buying gift cards over the Internet – might be supporting the victimization of ordinary people and businesses alike!

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