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Frequently Asked Questions

What is The Retail Equation?

The Retail Equation, headquartered in Irvine, Calif., is the industry leader in retail transaction optimization solutions at the point-of-sale and point-of-return. The company’s applications use statistical modeling and analytics to predict behavior, and its software-as-a-service delivery enables retailers to achieve significant and measurable return-on-investment. The Return Rewards™ program creates significant incremental sales at the return counter, while also building customer loyalty. Both Verify-1® and Receipt Verification™ prevent fraudulent and abusive returns, reducing return rates and saving millions of dollars annually for retailers. The company has been around since 1999 to help retailers prevent retail fraud/abuse while at the same time helping consumers streamline the return process.

What is Verify-1?

TRE’s Verify-1 Return Authorization System is designed to identify the one percent of consumers whose behaviors mimic return fraud or abuse —a $15.5 billion/year problem in the United States.

As part of the Verify-1 service, TRE is contracted by retailers to gather their return information, store it securely, and analyze the data to develop and follow return policies for those retailers. TRE works as both application service provider and call center for each retailer.

Why is the Verify-1 Technology Important?

The retail industry is currently experiencing a significant fraud and abuse problem. Retailers are losing more than $15.5 billion/year due to return fraud/abuse.

Verify-1 is designed to identify the one percent of consumers whose behaviors mimic return fraud or abuse. Without this system, retailers are forced to create stricter policies such as “no receipt, no return,” or raise prices for consumers to offset the losses incurred from fraudulent returns. With TRE’s technology, retailers can extend more liberal return policies while still taking a proactive approach to curbing the problem.

How Does the System Work?

When a consumer wants to make a return, a retailer will swipe the individual’s driver’s license or government-issued ID card to make an identification of the person and his/her unique return behavior. As customers return merchandise, the system compares variables such as return frequency, dollar amounts and/or time against a set of prescribed rules that form that particular retailer’s return policy.

Verify-1 enables retailers to rely on objective, verifiable data to determine whether a return is valid rather than relying on subjective observations and guesswork by sales clerks. This objectivity ensures that only those with highly suspect return-and-exchange behavior are affected. The vast majority — approximately 99% — of returns are accepted.

Why is the System Important for Consumers?

Verify-1 has tremendous value to customers. Only one percent of all consumers are responsible for fraudulent or abusive return habits. Rather than forcing retailers to impose stricter return policies such as “no receipt, no return” or 14-day limits on returns, the system actually allows retailers to offer the other 99% of consumers more lenient/flexible return policies.

The system also benefits consumers because electronically capturing information speeds returns, ensures accurate data capture, provides for more secure data storage, enables consistent return policies, and lowers costs for consumers as well as retailers.

Wait times are shorter for consumers because store associates hand-key less information. The data is more accurate because it exactly matches the information on the consumer’s ID, and it is more secure than information recorded on paper. Return policies are more consistent because an automated system applies the same policies to all consumers.

Finally, by preventing return fraud and abuse, an automated system helps keep costs down for retailers and prices down for all consumers.

Why is the System Important for Retailers?

Verify-1 optimizes net sales, and reduces the return rate and shrink.

A certain percentage of returned merchandise must be discounted or discarded in order to sell it. For example, out-of-season clothing may go directly to the sale rack after being returned, while returned lingerie apparel may be discarded for health reasons. The retailer also loses restocking time, which is time an associate could be spending with a consumer on a new sale.

By reducing fraud and abuse, retailers will also be able to reduce internal employee theft and shoplifting.

What are the Reasons Why a Consumer Would be Denied a Return?

While rules vary from retailer to retailer, Verify-1 is designed to identify fraudulent or abusive behavior. Those behaviors are not typical of 99% of consumers.

The one percent of consumers who get denied exhibit return behaviors that mimic fraud or abuse or exhibit habits that are inconsistent with the retailer’s return policy.

Refused returns generally fall into two categories. First, returns that break the retailer’s basic return policy, such as a return without a receipt, a return after the allowed return period, or multiple returns beyond the quantity of returns allowed by the retailer within a given period. Second, returns that make your overall return behavior indicate return fraud or abuse.

What are Some Examples of the Return Fraud and Abuse Problems?

• Wardrobing or renting: Buying merchandise for short-term use with intent to return, such as video cameras for weddings, big-screen TVs for a SuperBowl game or a dress for a special occasion
• Employee fraud: Returning stolen goods assisted by employees for full retail price
• Receipt fraud: Using falsified, stolen, or reused receipts to return merchandise
• Returning stolen merchandise: Shoplifting with intent to return for full retail price
• Price switching: Putting lower priced tags on merchandise with intent to return for full retail price
• Price arbitrage: Buying differently priced, similar-looking items and returning the cheaper one as the expensive item

What Information Does Verify-1 Retrieve From Consumers’ ID?

Verify-1 captures several pieces of information from IDs to ensure accurate consumer identification, and the information captured varies from state-to-state. Typically, this includes identification number, name, address, date of birth and expiration date.

Yes. Verify-1 complies with applicable federal and state laws regarding consumer privacy.

Does the Verify-1 System Share Data Among Retailers?

No. Although sharing data among retailers is well-established for practices such as check and charge authorization, the Verify-1 system does not share data among retailers. Access to information in the returns database is limited to the consumer, TRE and the company that provided the data to TRE.

Does TRE Set Retailer Return Policies?

TRE does not set the return policies for retailers. The company gathers and supplies the data that retailers use to make return authorization decisions, and help them determine their optimal return policies.

Where is Consumer Information Kept?

Data collected by Verify-1 is stored within a state-of-the art, secure data center. To safeguard consumers’ personal information, TRE takes security measures including maintaining physical, electronic and procedural safeguards. Verify-1 provides far greater security than practices that are common in some retail stores, such as collecting consumer information on hardcopy return slips or saving consumer information on paper logs. Verify-1 complies with all local, state and federal laws regarding the security of the information.

What Factors Does Verify-1 Use to Determine if a Retailer Should Accept a Customer’s Return?

This varies from retailer to retailer. The factors that Verify-1 may use for a given retailer include:

  • The frequency of your returns
  • Return dollar amounts
  • Whether your return is receipted or non-receipted

Verify-1 does NOT use any of the following factors in authorizing returns:

  • Age
  • Gender
  • Race
  • Nationality
  • Physical characteristics
  • Marital status

What Stores are Contracted to Utilize Verify-1 for Return Authorizations?

TRE upholds the privacy of its clients and therefore is unable to name them. Retailers that use the Verify-1 service post signs to inform consumers of their use of the Verify-1 technology.

Virtually any retail establishment that accepts returns and/or exchanges is a potential client. To give an idea of the scope of stores, it’s likely that every mall in the United States has at least one store utilizing the Verify-1 software.

No, returning merchandise is a privilege granted by each retailer to its customers, and it differs according to each retailer’s approach to the market. Depending on state law, retailers are required to post their return policies, but they are not required to accept merchandise returns.

How Can I Learn More About a Retailer’s Return Policy?

Retailers post their return policies in their stores. Some retailers also post their return policies on their Web sites or receipts.

Will my Return Activity Affect My Credit Report?

No, TRE does not share data with any credit reporting agencies.

Is my Information Sold or Used for any Other Purpose?

No, TRE does not sell consumer information for marketing or other purposes.

If a Consumer’s Return is Denied, Does That Mean He or She is Committing Fraud?

The vast majority of consumers are neither fraudulent nor abusive. Being denied a return does not imply that the consumer has committed fraud or is habitually abusive; it merely means that the consumer has requested what that specific retailer considers excessive returns.

If a Consumer’s Return is Denied, Does that Mean He/She is “Blacklisted” From Making Future Returns?

Verify-1 does not blacklist consumers in the sense that they are prohibited from ever making returns at all retailers. The system may prevent a consumer from returning for a period of time at a particular retailer, but if that consumer reduces his or her return activity the system then allows the consumer to make returns at that retailer.

Some retailers have lists of consumers who have abused the retailer’s return policies or committed fraud. If a retailer does not wish to do business with a consumer that the retailer has identified as abusive or fraudulent, TRE will help the retailer, at its request, to implement its policy by denying returns by that consumer at that retailer.

Are Retailers Required to Disclose What They Consider Return Fraud and Abuse?

TRE works with each of our retail customers to ensure they have disclosure practices that comply with all state and other laws. This includes emphasizing return policy disclosure signage in a conspicuous place, visible to the public in the premises where the goods are sold, and by printing the return policy on the sales receipt.
Verify-1’s technology uses a complex set of mathematical algorithms to analyze return patterns and flag for retailers those returns considered suspicious. While signage varies from retailer to retailer, someone who is denied usually returns in a manner which exceeds 99% of typical shoppers. In addition, retailers can use Verify-1 to issue warnings to consumers before issuing a return denial; therefore, warnings can be a visible indicator of the rules in action well before a denial might occur.

To reduce your likelihood of being warned or denied on a return, a consumer should consider the factors listed in question #14 above and reduce their frequency of returns, reduce their return dollar amounts, return within the store’s return time limits, and retain their original sales transaction receipts.

What Constitutes Fraud? What Constitutes Abuse?

In general, return fraud involves stealing or forgery. For example, a person might return stolen merchandise to make money; steal or falsify receipts to enable excessive returns; or use merchandise returns to convert bad checks to cash.

Abuse occurs when a person purchases merchandise without intending to keep it. An example of abuse is renting (also known as “wardrobing” when it involved clothing). Renting occurs when someone purchases merchandise without intending to keep it, uses the item and then returns it.

How Can Consumers Find Out if the Verify-1 System has Information on Them?

Consumers can contact TRE by sending an e-mail to ReturnActivityReport@TheRetailEquation.com. Requests should include the consumer’s name and a phone number where he/she can be contacted. When TRE calls, the company will ask for the consumer’s driver’s license number and state, to enable a database search. TRE representatives prefer to call consumers to avoid sending personal information via e-mail.

What is a Return Activity Report?

A Return Activity Report is a history of consumer return transactions posted in stores using Verify-1. The report lists return activity information including the stores the consumer has returned to and, for each return, the date and time, whether it was receipted or non-receipted, and the dollar amount.

Note that while a Return Activity Report shows all of a consumer’s return transactions at participating retailers, Verify-1 uses only the transactions for the retailer where a consumer is making a return to authorize the return.


This list of frequently asked questions was last updated on 5/21/2008.

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