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Price tag for holiday fraud: $3.7 billion

Retailers are reporting a higher incidence of product returns with either fraudulent or stolen receipts and returns of used merchandise.

NEW YORK (CNNMoney.com) -- Fraudulent returns are expected to total a hefty $3.7 billion this holiday season, according to new retail industry estimates.

According to the National Retail Federation's second annual Return Fraud survey, 9 percent of all holiday returns will be fraudulent, up from 8.6 percent last year.

The trade group estimates that return fraud will cost retailers $3.7 billion just in the fourth quarter, compared to $3.5 billion for the same period last year. For the year, retailers will lose about $10.8 billion to return fraud.

The NRF said retailers have reported being victimized by returns of products originally purchased with with either stolen or counterfeit receipts. The unethical practice of "wardrobing," or returning used merchandise, has also escalating, the report said.

Despite the prevalence of fraud, the survey showed that more than a third of retailers will make their return policies more lenient during the holidays to accommodate holiday shoppers such as extending the period for returns to be made and accepting returns without a receipt.

"Retailers must constantly balance the desire to take care of their customers with the undisputed fact that criminals are constantly looking to take advantage of return policies," Joseph LaRocca, NRF vice president of loss prevention, said in the report.

The NRF's survey polled 60 retail loss prevention executives during the month of October.

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