“Return Fraud/Return Abuse” Up from Last Year, Costs Retailers Billions

Mark Mandell, Esq.

I write frequently on the penalties and costs involved with committing retail fraud. During harsh economic times, such as now as we emerge from the Great Recession, retail fraud may be a particularly tempting option. However, “return fraud,” a form of retail fraud, may be even more so, especially in the post-holiday season.

Return abuse, sometimes called “friendly fraud,” occurs when a person purchases merchandise without intending to keep it. “Returnaholics” are those who buy and return items excessively either with fraudulent or dishonest intent, or they have an inability to control their shopping habits.

A recent report shows that 5.8% of holiday returns this year were fraudulent, up from 4.6% last year, costing the retail industry $3.39 billion. Return fraud, or return abuse, costs retailers approximately $8.76 billion per year.

Those returnaholics who have fraudulent intent often deceive the retailer into giving a cash refund or credit which is illegal; or, they may not be breaking the law, but abuse retailers’ return policies and buy merchandise with the intent to return it later.

To give a typical example of return fraud, consider the Super Bowl played earlier this month. There have been reports in the past of consumers purchasing big screen TVs specifically for the game, with no intent on keeping their 50-inch flat-screens. Upon the game’s final buzzer, some fraudulent fans don’t pick up the remote again and return their purchase within days.

No matter what form it takes, this practice costs the industry billions per year, and likely contributes to rising prices each year as more and more return fraud is committed. With worsening economic times, the chance of general retail fraud and theft increase, thus compounding the problem for all consumers. The fact is, harsh economic times and increasing prices always increase the chance of theft for retailers, and in the long-run this hurts employees and consumers alike.

Retail fraud is governed by statute - MCL §750.356. MCL §750.356c provides that any person who commits retail fraud in the first degree is punishable by imprisonment for not more than 5 years or a fine of not more than $10,000.00 or 3 times the value of the difference in price, property stolen, or money or property obtained or attempted to be obtained, whichever is greater, or both imprisonment and a fine. MCL §750.356d provides that any person who commits retail fraud in the second degree is punishable by imprisonment for not more than 1 year or a fine of not more than $2,000.00 or 3 times the value of the difference in price, property stolen, or money or property obtained or attempted to be obtained, whichever is greater, or both imprisonment and a fine. MCL §750.356d provides that any person who commits retail fraud in the third degree is punishable by imprisonment for not more than 93 days or a fine of not more than $500.00 or 3 times the value of the difference in price, property stolen, or money or property obtained or attempted to be obtained, whichever is greater, or both imprisonment and a fine.

The harsh penalties of retail fraud make having experienced and knowledgeable legal counsel invaluable.  If you have been charged with retail fraud, contact attorney Mark Mandell at (248) 380-0000 or online at www.MichiganFraudLawyer.com. 

Mortgage Fraud: The Scams That Hit You Where You Live

Mark Mandell, Esq.

Mortgage fraud is one of the hardest-hitting scams in the US, and it threatens the dream of homeownership for all too many people. Michigan is among the top states for known or suspected mortgage fraud activity, based on recent law enforcement and industry data.

These scams are especially tricky to combat, as they readily adapt to economic changes and adjustments in lending practices. Mortgage fraud comes in a few forms, primarily: predatory lending, criminal mortgage fraud, and foreclosure rescue scams.

Predatory lending is essentially unfair and deceptive practices on the part of lenders during the loan application process. This can included misleading marketing tactics and incentives for selling risky loans. Recently in Michigan, Countrywide Financial and Ameriquest Mortgage Company settled cases with the state’s Attorney General’s Office worth over $130 million and $13.8 million respectively, providing restitution to consumers.

Criminal mortgage fraud involves the use of artificially inflated appraisals and straw buyers to gain mortgages greater than the property value. The criminals take the extra money from the mortgage and leave the straw buyer out to dry with a mortgage they cannot afford and property worth far less than the mortgage amount.

Lastly, foreclosure rescue scams exploit consumers at times when they are most vulnerable – when they and their families may be forced out of their homes. These “foreclosure rescue companies” take up-front payments to “work with your lender,” and most never deliver on their promise. In Michigan, the Credit Services Protection Act made it illegal, in most cases, to take money up front in exchange for negotiating with your lender. The CSPA is enforced by the Attorney General’s Office, and you can watch out for their consumer alerts on foreclosure scams here: http://www.michigan.gov/ag/0,4534,7-164-17337_20942-215058--,00.html

So how do you avoid mortgage fraud as a consumer? Some steps may require more work at the outset, but they will save you future aggravation and distress from potential fraud. First, seek out referrals for real estate and mortgage professionals when you want to buy or sell a home – and once you are referred, do your homework on them. Also, do your homework on what other homes in the area have sold for.

If it sounds too good to be true, it probably is: Beware of “no money down” loans. These loans are meant to trick people into buying homes they really can’t afford. Therefore, also know your own price range and have an idea going in of what you truly can afford both up front and in the medium and long-run. And finally, don’t let the realtor or mortgage broker force you to make false statements or sign your name to blank documents or documents with empty lines – these are sure signs of potential scams.

For more information on how to protect yourself as a consumer from mortgage fraud, check out the FBI’s website, here: http://www.fbi.gov/news/stories/2008/august/mortgagefraud_081408; and the Michigan AG’s consumer alert website: http://www.michigan.gov/ag/0,4534,7-164-17337_20942-215058--,00.html.

You can read the entire article at:

https://www.michigan.gov/documents/ag/Attorney_Generals_Office_Fights_Predatory_Lending_346680_7.pdf

If you have questions about mortgage fraud or other legal issues, please contact Mark Mandell or Tariq Hafeez at 248.380.0000 or online at www.MichiganFraudLawyer.com.