Holiday return fraud: Common schemes and prevention strategies

Your customer buys a pair of headphones on Cyber Monday and returns them in January. Your system issues a refund as soon as the carrier scans the package. A few days later, your warehouse opens the box and finds an older model instead of the one the customer purchased.

It’s a potential case of holiday return fraud. Holding every refund until inspection could prevent this kind of loss, but it could also frustrate legitimate customers and discourage them from shopping with you again.

So how do you protect your ecommerce business from return fraud and abuse without making returns harder for honest shoppers? By understanding common schemes, recognizing suspicious activity and knowing when to apply additional safeguards.

What’s the difference between holiday return fraud and return abuse in ecommerce?

Return fraud involves deliberately deceiving an online retailer to get an undeserved refund, store credit or replacement. Return abuse, on the other hand, involves exploiting or violating a brand’s ecommerce return policy for personal benefit, sometimes with outright deception.

Why do return fraud and abuse spike around the holidays?

Holiday conditions make fraud easier to attempt and harder to catch.

• High volume puts pressure on verification. When order and claim volumes outpace staffing, agents may rush investigations or make inconsistent exceptions, allowing suspicious returns to slip through.
• Longer return windows create more room for wardrobing. A November purchase may remain eligible for return through January, allowing a shopper to wear clothing or accessories to holiday events before returning them as unused.
• Gift returns complicate purchase verification. Without a gift receipt or order reference, agents may struggle to verify the original purchase and return eligibility, creating opportunities for fraudulent refunds or store-credit claims.
• Delivery issues make false claims harder to identify. Porch theft and shipping delays can make it more difficult for teams to distinguish genuine delivery problems from fraudulent “item not received” (INR) claims.

According to Signifyd data, return volumes usually increase by 10% to 15% during the year-end holiday season, with claims peaking in January. Signifyd also found that fraudulent and abusive returns accounted for 12% of all returns between Jan. 1 and 26, 2026.

Common holiday return fraud and abuse schemes in ecommerce

Holiday return fraud and abuse can take several forms, from item swapping to false refund claims. Here are eight schemes to watch for.

Some of these schemes — particularly receipt, INAD and SNAD disputes — have become harder to detect as fraudsters use AI-generated evidence to support false claims. 

For example, Signifyd’s 2026 State of Fraud report found a 49% increase in INAD claims in the first four months of the year, with AI-doctored images emerging as a main tactic used to make fraudulent claims appear genuine.

Six strategies to prevent ecommerce holiday return fraud

To protect profits against return fraud during the holiday rush, look beyond individual claims to assess customer behavior, verify return details and determine when additional safeguards are necessary.

1. Make your holiday return terms specific

Before holiday sales begin, clarify which purchases qualify for your extended return window and whether customers must request, ship or complete the return by the deadline. Spell out condition requirements, required accessories and how you handle gifts, bundles and excluded products.

Make sure your website, return portal and support guidance use the same terms. Also give agents clear instructions for exceptions so customers receive consistent answers across channels.

2. Review customer behavior beyond return frequency

Use your historical return and claim data to identify patterns worth investigating. A customer who orders the same sweater in three colors and returns two in their original condition needs a different response from someone whose returns repeatedly contain worn or substituted merchandise.

To distinguish those behaviors, look at:

• Return reasons and inspection findings
• Repeated missing-item, damage or delivery claims
• Previous refund disputes and their outcomes
• Connections between accounts, such as shared devices or payment methods
• The value of merchandise returned compared with purchases kept

Remember: No single signal tells the whole story. Family members may share an address or device, and frequent returns don’t necessarily indicate abuse. During the holidays, customers may also place more orders than usual or return several gifts at once. Consider that context before treating unusual activity as suspicious.

3. Set refund timing according to risk

Use that customer history alongside product value and susceptibility to substitution to decide when to release a refund. Some returns may qualify for an instant refund, while others need a review of the claim or merchandise first.

For returns that require inspection, make sure your refund trigger reflects the completed check. A carrier scan shows that a package entered the shipping network, and a warehouse intake scan records its arrival — but neither confirms what’s inside.

If a return requires inspection, tell the customer when to expect their refund or an update. This is especially important during the January return rush, when backlogs can extend processing times.

4. Verify claims against order, delivery and payment records

When a return or refund claim needs additional review, your team should have the relevant order, fulfillment, payment and customer communication records in one place.

What you check next depends on the claim. For example:

• Order not received: Review delivery records and carrier investigation findings. A delivery scan alone doesn’t rule out porch theft.
• Item missing from an order: Check packing records, split shipments and any available package-weight information.
• Item damaged or not as described: Compare customer-submitted photos with the product listing, fulfillment records and any available inspection evidence, and look out for AI-doctored images.
• Wrong item received: Compare the reported product with fulfillment records and investigate possible picking errors.
• Refund requested or disputed: Check for an existing refund, replacement or open bank dispute before issuing another credit.

An unusual claim doesn’t always indicate fraud. A customer may dispute a charge while waiting for a refund, or several shoppers may report damaged merchandise because of a packaging problem. Reconcile the relevant records and investigate possible operational issues before assuming the behavior is deliberate.

5. Give inspection teams specific checks and escalation rules

Some claims can be resolved through order and delivery records. Others require physical inspection. During the post-holiday return rush, a consistent checklist helps warehouse teams and seasonal staff catch discrepancies faster.

Beyond the checklist, set clear escalation rules so staff know when to flag a return and what additional information is needed to resolve the claim.

6. Monitor fraud and abuse patterns through the post-holiday rush

Fraud and abuse patterns may change as holiday purchases move into the return window. Track suspicious claims and confirmed losses throughout the season, especially as January return volumes increase.

Pay attention to:

• Confirmed fraudulent refunds and return policy violations
• Increases in missing-item, damage and delivery claims relative to order or return volume
• Repeated item swapping or empty-box returns
• Refunds issued before inspection that later reveal discrepancies
• Legitimate claims delayed or incorrectly denied

Use these findings to adjust your controls. If certain products are repeatedly targeted for substitution, consider requiring inspection before refunding those items. If too many legitimate shoppers are getting caught in additional reviews, revisit your risk thresholds.

Get ahead of holiday return fraud and abuse

Holiday return fraud and abuse can follow ecommerce merchants well into January, long after the shopping rush ends. Managing that risk means knowing which returns warrant additional scrutiny and which customers can be refunded without delay.

Signifyd’s Returns Assurance helps you make those decisions using machine learning and intelligence from thousands of merchants to evaluate returns and post-purchase claims, identify potential abuse and reduce unnecessary delays for legitimate customers.

Want to learn how merchants are tackling other forms of holiday fraud? Join Signifyd at 12 p.m. ET on Wednesday, November 4 for Crimes & Cocktails: Holiday Fraud Edition. During the live webinar, our fraud experts will examine four real cases from the Signifyd merchant network and share practical prevention tactics for the holiday season.

FAQs

How can ecommerce brands detect return fraud during the holidays?

Review return history, claim patterns, order and delivery records and inspection findings for inconsistencies. Repeated missing-item claims, item swapping and unusual refund activity may warrant closer investigation. AI-powered solutions like Signifyd’s Returns Assurance can help identify potential abuse using customer behavior, purchase history and cross-merchant intelligence.

When does the holiday return season peak?

The holiday return season typically peaks in January. That’s when shoppers return gifts and purchases made during Black Friday, Cyber Monday and December holiday sales.

Is return fraud hard to prove?

It can be. Proving ecommerce return fraud can be difficult because it involves establishing deliberate deception rather than an honest mistake or legitimate return. Merchants can build a stronger case using purchase records, tracking data, inspection findings and patterns across a customer’s return history.