Would this be fraud?
 

Would it even work?

I'm new to this game, so please excuse me if this is a dumb question.

Suppose I were to make a purchase of $5k for furniture at a local store, and paid for it with my xxx airlines credit card, therefore earning 7500 miles. Then a few days later I changed my mind about the purchase, but had the refund credited to a different credit card (one that is with my primary bank). I could then just do an on-line transfer of the positive balance on my credit card to my checking account, and pay the xxx airlines credit card balance off.

Net result...no money spent, no interest paid, 7500 more miles.

FWIW, I work for a retailer of high ticket items, and we NEVER check to make sure the refund is going onto the same card that was originally charged...we only verify that's it is the same person.

So, what do you think?

I would think so - perhaps not under criminal codes but certainly against the T & C that your airline issues

If you have to ask........................... :D

why don't you do it at your own workplace then?

some merchants have the CC information stored on their terminals where they don't need to swiped the card to issue a refund. they just look at it to verify it is the same card, and some don't (like the company you work for).

as for fraud, dictionary.com reads:

A deception deliberately practiced in order to secure unfair or unlawful gain.

take it for what its worth

It is, in my opinion, certainly not illegal. Whether it is morally acceptable, only you can say.

btw, it isn't fraud, because you aren't decieving anybody (unless their is a rule that the refund must be made to the credit card used for the purchase. If there were such a rule, you may be defrauding the business, but you are certainly not defrauding either credit card company or the airline.... at least not directly. Credit card company a still gets the money for the purchase and for the miles that the airline bought, credit card b gets the credit refund. The only problem would be the fees, which would still be carged to the merchant by credit card company a. I also have a feeling that the credit card company might not accept a refund credit from a store that never made a charge to the card.)

Go for it. Just make sure you post your results here. Never mind the things that could go wrong like:

It's not that easy to get your balance refunded from some credit card issuers. It might not be as easy as you make it sound, particularly if they think you are playing games with them. Which, of course, you would be. It may be your bank, but it's funny how banks get when it comes to their money.

I know if I were a furniture store (or whatever kind of big-ticket retailer you want to use) and had someone come in and want a large refund just like that, I might not make it that easy for you. Your company might not either if the sales guy - whose pay is based on commissions from sales like these - had some say in this.

There might be some fine print that people may resort to when they feel they are getting screwed.

Just keep us posted so we can all get a good laugh.

I'll go with legally permissible, but morally dubious. Being able to do an act legally doesn't justify it morally. That said, I'd consider it on the minor side of immoral.

From a practical standpoint, how will you get the furniture store (or whatever) to refund the $ on a different card? Most vendors won't do this, precisely to prevent scams like this one. (Believe me, there'd be a million people trying this if it'd work.) tls

I'd have thought that the processing fee the retailer has to pay the credit card company when you make the initial purchase is not properly refunded if the credit is applied to a different credit card so someone is loosing out somewhere.

More importantly though, do you earn the FF miles as per each transaction or as per each months total balance? If you earn per monthly balance the total miles earned might make this process futile as when the balance transfer occurs you'll surly be loosing the same amount of miles? Maybe your CC doesn't allow subtraction of your FF miles though?
for example, when I had a refund placed onto a credit card which earnt me points the negative value of the transaction meant I lost those points - they actually subtracted them off my loyalty account - this was despite never even earning points on the original purchase as the points scheme hadn't begun at that time!

Secondly,
although you'll have a different credit card, there was a situation on my card once where the card company ran a double miles promotion during a set month. This was based on the total balance at the end of the month. When I had an item refunded the next month (after the promotion ended) I only lost points at the normal rate. So, If I'd thought about it earlier, I could have bought many things and refunded them after the promotion to earn miles for nothing - so look out for promotions like these.

Two words. "Money Laundering". What you are proposing is against the law. Merchants are not allowed to process refunds on Credit Cards to a different Credit Card or to give the Refund in Cash or even a check. If you can find a Merchant that will allow it, be prepared for the consequences.

(Of course if you can find a Lawyer to defend you that takes Credit Cards and/or Gives Miles???) :)

Completely agree. To the OP: If this was feasible, it wouldn't be illegal. But processing refunds where they are not due is not legal. For example, if your company bought a chair and you paid for it on your companies credit card, but you decided you didn't like the chair and want to pocket the cash. You can then refund the money to your own credit card. This is just 1 example of why money has to be refunded in the original form of payment not to mention the 1,000 other logistical issues.

Cheers

Coming from your American view point this is probably correct. However, the OP never posted where they live or where the local store is.

So in your city or maybe even in the US it could be considered "money laundering", however, each merchant can give the refund in any form they want. It is the merchant that has come up with the policy to only refund it to the original form of payment, this reduces the losses to the merchant. There is no goverment interference dictating how a merchant can process refunds. I have paid with a CC in several locations and when there was a guarantee or an overcharge had the difference refunded in Cash. I think it would be a stretch to say that the USPS or a major grocery store chain was laundering money because I made a purchase with a CC and got a refund in cash.

Are there costs to others, most definitly. The store has to pay the CC fee, the CC has to buy the miles from the airline. But is it illegal or fraudelent, NO! Immoral, could be . Money Laundering, definitly not! A very difficult and time consuming way to earn miles that could have a "catch" to it, most definitly.

Money laundering?! The OP is talking about making a charge on one card and receiving a credit on another -- each card is his personally. Money laundering is about cloaking the source of ill-gotten funds. The OP is talking about buying and returning some fricken furniture.

How do you refund to a different credit card? I was always told that it'll be credited back to the card you used to purchase, even if you don't have the card with you. ??

Right. I don't see how you could call it "money laundering" unless I'm missing something.

As to whether "Merchants are not allowed to process refunds on Credit Cards to a different Credit Card," I'd like to see the authority for that statement. I know most *won't* but I'm not sure that means they can't.

(A while back I had a refund coming on a charge that was made quite a while earlier to a card I had cancelled in the interim, and the merchant said it was no problem, that he could refund the credit to any card in the same name as the charge. I gave the merchant the number of one of my current credit cards and the refund posted without problem. And the card the refund came on was a different brand of card than the one I had made the charge on.)

Although I have worked for the better part of the decade providing credit card payment processing and fraud screening services to major retailers, take this for what it's worth (i.e. free advice worth every penny).

If your employer does not verify that refunds are made to the same card, they're certainly in violation of their merchant acquiring agreement with the bank providing the processing services to them, and will be subject to action ranging from warning to penalty fees to ultimately the loss of their credit card accepting privileges in extreme cases.

If an employee at any of the major retailers I know was doing what you described for personal gain and their employer found out, they'd be reprimanded and/or terminated.

Sure, if you have the necessary 'moral flexibility', your employer has failed to put controls around this process, and you're doing it just once or twice, you can get away with it. If someone working for me was doing this and I found out, they'd be on the street within the hour. Well, maybe not on the street if it was the first instance, but certainly it would be a career-ending moment for them at my organization.

Sami

I have returned several items to Wal-Mart and every time at different stores in different states I am given the option of having the refund returned to my card or get cash. I usually choose the cash option. I doubt they'd give me a $7,500 return in cash, though. I'll ask. :rolleyes:

[QUOTE=sany2]It is, in my opinion, certainly not illegal. Whether it is morally acceptable, only you can say.

btw, it isn't fraud,... ...at least not directly.QUOTE]


So is it fraud? Whether directly or indirectly fraud is fraud.
I'm no lawyer, but frankly the OPs scheme is certain to be classified as fraud or a derivative thereof. (period)

more than likely because those were debit transactions (enter pin #) rather than credit card transactions (where you sign). you can do both with debit cards with mc or visa logo.

[QUOTE=psyflyer]oddly enough, that is not my quote.

It was as follows:

It is, in my opinion, certainly not illegal. Whether it is morally acceptable, only you can say.

btw, it isn't fraud, because you aren't deceiving anybody (unless their is a rule that the refund must be made to the credit card used for the purchase. If there were such a rule, you may be defrauding the business, but you are certainly not defrauding either credit card company or the airline.... at least not directly. Credit card company a still gets the money for the purchase and for the miles that the airline bought, credit card b gets the credit refund. The only problem would be the fees, which would still be charged to the merchant by credit card company a. I also have a feeling that the credit card company might not accept a refund credit from a store that never made a charge to the card.)
Don't know how that happened.

When quoting someone, if you want to skip something that is irrelevant or not needed, you use "..." I have done that above as an example :)

When you said:

btw, it isn't fraud, because you aren't deceiving anybody (unless their is a rule that the refund must be made to the credit card used for the purchase. If there were such a rule, you may be defrauding the business, but you are certainly not defrauding either credit card company or the airline.... at least not directly.

psyflyer was (I assume - please correct me if I am wrong) basically summarizing your quote - "you are not defrauding either the credit card company or the airline... at least not directly. "

Cheers

I would have to wonder if the credit card company that gets a $7500 credit without any corresponding purchase will think. Large, unconnected refunds are usually signs of merchant fraud.

Old discussions of similar, but not identical, ethical and legal issues:

http://www.flyertalk.com/forum/showthread.php?t=474613

http://www.flyertalk.com/forum/showthread.php?t=7798

No offense, but a person who "work(s) for a retailer of high ticket items" will not know everything about what gets flagged as possible fraud. This is 2006. There are various scams related to high-ticket returns (and no, I am not going to say what those scams are) and there are things that can get a person flagged as a possible thief. If a person established a pattern of doing this, imagine that person trying to justify to someone why he was doing it, and what his real purpose was, and why he was just a goober and not a thief.

Even if a person's moral compass is off-kilter and the person doesn't see anything wrong with doing this, it's an absurdly silly thing to do.

you are wrong, except for the part about not being a lawyer. (period)

the specific scenario described by the OP is not fraud. And I'm not sure what derivatives you are speaking about, but it is interesting you make an absolute statement like "is certain to be classified as fraud" but leave yourself a very vague escape like "or a derivative thereof". Are you certain or not?

That's right. I am a lawyer, and this is not fraud (as that term is used legally). I agree with dhuey, its morally dubious, but not illegal.

You have a point there, but I know of at least one return where the original purchase was with my AMEX. I still got the cash option.

To further explain my money laundering comment. Located deep within the T and C for merchants from the Credit Card Companies, are descriptions of prohibited acts such as the crediting to another account of a refund. (many people do not read all the small print in these T and C's because it usually is 30 to 60 pages of "Lawyer-speak") Also included is a statement about the the signing officer of the company not be able to use his own credit card thru his own company's processor. These are all to prohibit money laundering and "Instant loans" from the Credit Card Processor to the merchant. (Discover/Novus agreement specifically mentions money laundering) The Money Laundering would occur when someone pays a merchant money for a supposed transaction and the merchant refunds the money thru the Credit Card Company. When you transfer money thru a Credit Card Processor that does not have a legitimate basis, then that can be called money laundering. The refund to a different card is not a legitimate Credit Card Transaction. (Similar to me giving myself a Credit Card Refund to my own card, or another, without actually making a sale.)

Is it fraud?
 

Of course its fraud - against bank number 2. They will end up eating the interchange rate (e.g., if the store pays 3% for the card and you charge $1,000 on card 1 but return it to card 2, the supplier is whole but bank 2 will only get back $970 and have to pay you $1,000). Sounds like theft to me. Let alone the cost of the item that you have to return if the seller has to resell it as used.

as far as I understand, money laundering (as an offence) is the act of taking illegal proceeds and making it appear as legitimate income. You can move money back and forth all day, but it is not money laundering unless the source of the funds was illegal. It may be a violation the T&Cs of the agreement with the credit card company (and other financial institions involved) but it is not money laundering.

I've actually heard this is common practice for people trying to max miles/rewards using Costco as an example. One can purchase a very expensive item online at costco.com as they sell items up to $100,000+ there, and then return at any costco warehouse. At the return point they will not refund onto credit card and will only refund cash/check. So I'd guess many people use something like this loophope rather often.

Illegal, probably not, unethical tougher to say...

What this question does lead to is this:

Would it be fraud/illegal/worth it to open a paypal business account, and bill your own credit card x amount of money for x miles, paying the 2.9% rate plus the per transaction rate?

I can't find anywhere in their terms and conditions, after briefly reading them, that would say you couldn't.

I would go with no to fraud, and no to illegal, unless it is against the T&C, although even then it wouldn't be illegal.

Wow! You would need to be pretty rich to have a credit card limit of 100,000$ :eek:

Cheers

Searching Costco.com, I came across a $329,999 yellow diamond piece. Of course, it had to be purchased over the phone. I assume this would require a money transfer, and not a credit card purchase. No one will sell you something that expensive with a credit card.

I would assume that the same thing goes for anything over $100,000 (they will allow you to purchase a 99,999 diamond online, but not a $119,000).

If you have no legal expertise, why do you opine that the OP's potential actions would certainly be fraud -- a crime and a tort? In my view, it is highly likely that it is not fraud of either sort, and would be at most a breach of contract.

As I mentioned, though, I do think this conduct is morally dubious.

You might save the "of course"s for more certain issues. Fraud is a crime with federal and state variations. It is also a tort, subjecting those who commit it to civil liability. Either way, fraud is a legal term with certain requirements. I would be very surprised if what the OP is proposing satisfies those requirements for any federal or state definition of fraud.

That doesn't mean I approve of the OP's proposed conduct.

Would agree with others who've said you'd have a tough time getting a refund made to a different card.

Costco
 

I have have often had them credit my Amex card for refunds.Occassionally they have given me cash back for small $ transactions if I ask, but otherwise it goes back to the amex card.

A side comment to this, as a merchant who takes all major credit cards, I am not sure if I am legally or contractually required to only credit back to the form of card originally used, but as a practical matter we only credit back the exact same card. But can you guys believe as many as 2, or even 3 years ago, AMEX issued a T&C change that informed us that they would not longer refund discount fees w/ a refund or reversed charge ?

So, if I run an AMEX credit card for $1000 lets say...and I as the accepting merchant absorb the typical 3.00% discount, which I do ($30)....if the customer than changes their mind and returns product, and I refund the $1000 back to the creddit card...AMEX keeps the $30. How about this reprehensible practice ?

Anyone wonder why merchants don't like to accept AMEX products ?

Besides the extraordinarily-high discount fees compared to V and MC, AMEX's T&Cs are always onerous and one-sided.

Logically, this is why, from a reverse perspective, AMEX's affinity products *seem* to have much greater value than a given V and MC affinity product. If anyone ever studies the value of an AMEX-derived starpoint or an AMEX-derived HH point (earned at this ratio of 3:1 BTW), versus a visa or mc-derived affinity point or mile...no wonder AMEX inherently has the upper hand these days in terms of "VALUE", earned from such schemes as this one where they will not refund discount fees once they collect them, even if the charge is refunded.

Fraud by AMEX ? You be the judge.

Amen!

tried it.
well not exactly with bad intent.

Was at a Tiffany's this past weekend to return a piece of jewelry. Went back to return the goods. I didn't have my Amex that it was charged to. Since my wife is under my account, I thought they would credit her Amex(which she had). They said they needed the same card it was charged to. Maybe some mom and pop shops will let you do it but I doubt larger stores will.