Introduction

T’is the Season to Shop, Return and Exchange

As more New Yorkers are hitting the stores during the holiday season than any other time of the year, we face more risks as we shop, return and exchange merchandise. The purpose of this report is to inform consumers of area retail store return and exchange policies. In this report, we also look at the disclosure method of those policies. This report also includes a look at the Return Exchange, a company that tracks consumer returns and exchanges, maintains Return Activity Reports on consumers and approves or denies returns based on undisclosed criteria (1) . There is also a section in this report about Gift Cards. While Gift Cards may cut down on returns and exchanges and save consumers from some of those pitfalls, Gift Cards can be expensive to have and create headaches for some recipients. Finally, this report offers tips for consumers and recommendations for increased consumer protections.

New York Retail Store Return & Exchange Policies

Policies vary widely at stores throughout New York according to NYPIRG’s statewide survey of retail stores.

NYPIRG surveyed 219 retail outlets across New York in October-December 2006 to determine the return policies, disclosures and restrictions on returning merchandise at retail sellers in the state. Our findings include the following:

(1) Onerous restrictions and limitations were found at outlets for national chain retailers as well as single-store retailers. Some of the return limitations identified include:

• Imposing a time limit restriction on returns.
• Requiring original sales receipts.
• Requiring original packaging, tags, etc.
• No Cash Refunds.

(2) While the above restrictions may prove burdensome and inconvenient for consumers, the following restrictions on returns and exchanges stand out as particularly anti-consumer:

• Specified ID Required: restriction identified at Ann Taylor, Best Buy, Nike, Old Navy Outlet and Urban Outfitters in Long Island; The Avenue in the Bronx; Finish Line, Pay Half and Zales in Brooklyn; DSW Shoe Warehouse and H & M in Manhattan; GNC and Old Navy in Staten Island; Best Buy; H & M, Old Navy in the Albany/Capital District Area; Famous Footwear and Old Navy in Binghamton; Express, Hollister Co. and Michael’s, in Buffalo; Ann Taylor, Ann Taylor Factory Outlet, Banana Republic, Banana Republic Factory Outlet and Williams Sonoma Factory Outlet in the Hudson Valley; Dress Barn, Gap Kids, Linens ‘N Things and Limited Too in Westchester.

• Reductions on Return Amount and/or Restocking fees: restriction identified at Best Buy, Circuit City and Sears in Long Island; Blockbuster Video in the Bronx; J & R in Manhattan; Sears in Staten Island; Best Buy in the Albany/Capital District Area; Circuit City and Target in Binghamton; Comp USA in Buffalo; Apple in Westchester and Circuit City in Syracuse.

(3) Several stores surveyed had policies of “no returns, no exchanges,” including Cap City, Metro Optics and SOS/DJ Specialty in the Bronx; Creative Bedding and More, El Sport Wear , External Wedding Studio, Falak Discount Drug Store and Starside Drugs & Surgical (K & F Drugs) in Queens; and A Buck ‘n More in Staten Island.

The Disclosure Methods of Retail Store Return & Exchange Policies

From signs, to receipts, to no disclosure of return/exchange policies (2) The statewide survey also looked at retail stores’ disclosures of their return and exchange policies. Our findings included the following:

1. At many of the stores we surveyed, the policies were not clearly and/or conspicuously disclosed, requiring our surveyors to ask the store clerks or managers.
2. At many of the stores we surveyed, the policies were disclosed on the receipt.
3. At one store included in the survey, Ashley Stewart in the Bronx, our surveyor was told by a clerk that the she could not tell our surveyor the store’s return policy. At Diamond City in the Bronx, our surveyor was told by a clerk that she would have to wait for the manager to come in, in order to find out the store’s return policy. At Home Goods in Binghamton, a clerk told our surveyor that he would have to buy something at the store in order to find out the store’s return policy. At Kinney’s Drugs in Cortland, the surveyor was referred by the clerk to the store’s website in order to find out the store’s return policy.
4. Most stores had signs disclosing their return/exchange policies. However, our surveyors noted that many of the signs were small, obstructed, not at all the registers in the store, difficult to read, difficult to locate, etc.

The Return Exchange

Blacklisting Honest Shoppers

Several major national retailers such as Express, KayBee Toys, The Sports Authority, Staples, Guess stores and others are now outsourcing the collection of return and exchange data to a California-based company called The Return Exchange (3) . The Return Exchange maintains return-tracking databases for stores. The company’s system automatically instructs cashiers to reject returns when customers bring back items too often or for too much money (4) .

The Return Exchange maintains Return Activity Reports on consumers. These reports can be requested via mail or e-mail:
Mailing Address: PO Box 51373 Irvine, CA 92619-1373
Email: returnactivityreport@TheReturnExchange.com
A Return Activity Report is a history of a consumer’s return transactions posted in stores operating with The Return Exchange. The report lists return activity information including the stores a shopper has returned to and, for each return, the date and time, whether it was receipted or non-receipted, and the dollar amount. To initiate a transaction that will then be included on the consumers’ Return Activity Report, a user of The Return Exchange’s service (a participating retailer) swipes a driver's license or state I.D. card through these devices, and similar to credit card or check verification, the data is transmitted to The Return Exchange's host server for an approval for return or exchange authorization. The Return Exchange detects fraud through utilization of deterministic rules and statistical models (5) .
In our return/exchange policy survey, which was conducted in October-December 2006, we found that the following stores require valid ID upon making returns and thus may participate in the Return/Exchange: Ann Taylor, Best Buy, Nike, Old Navy Outlet and Urban Outfitters in Long Island; The Avenue in the Bronx; Finish Line, Pay Half and Zales in Brooklyn; DSW Shoe Warehouse and H & M in Manhattan; GNC and Old Navy in Staten Island; Best Buy; H & M, Old Navy in the Albany/Capital District Area; Famous Footwear and Old Navy in Binghamton; Express, Hollister Co. and Michael’s in Buffalo; Ann Taylor, Ann Taylor Factory Outlet, Banana Republic, Banana Republic Factory Outlet and Williams Sonoma Factory Outlet in the Hudson Valley; Dress Barn, Gap Kids, Linens ‘N Things and Limited Too in Westchester.

The retail stores that use centralized return databases and the companies that help them do it claim it is an effort to cut down on shoplifters and those who purchase an item, use it once, and then return it. Retail experts also say that some people regularly purchase two similar items, switch the contents, and return the lower-priced item in the higher-price-marked boxes.

However, not all of these explanations make sense — for instance, shoplifters don’t typically have receipts for their purchases — and don’t account for not uncommon consumer behavior. For example, New York City commuters might purchase clothing items after work, catch a train home, try them on and match them to other garments, and return the unsuitable items the next day. And perhaps most important, these policies actually punish many honest, repeat-shoppers who give these stores a high volume of business, which is usually the real reason behind a high return rate (6) .

In November 2005, the New York City Department of Consumer Affairs (DCA) announced that three retailers — Express LLC, Staples and the Sports Authority — paid the city a total of $95,000 to settle charges that they refused customer returns without disclosing conditions of their return policies. All three companies used the return-tracking company, the Return Exchange, but did not clearly post why returns may be denied, as required by the City’s Consumer Protection Law. The DCA, however, stated that the practice of hiring companies to track repeat-returners is legal as long as it is disclosed to customers.

Gift Cards

Givers and Receivers Beware!

Marketed as the answer to giving unwanted gifts that could result in returns and exchanges, gift cards have their own consumer pitfalls. There are two types of stored value gift cards -- store-specific gift cards and general-purpose gift cards. You can use a store-specific gift card to buy merchandise from a particular store or through a store's website (7) . A general-purpose gift card from Visa, MasterCard or American Express may be used almost anywhere those cards are accepted (8) .

Americans spent more than $18 billion on gift cards last year. (9) The National Retail Federation estimates that consumers will spend nearly $25 billion on gift cards this holiday season. (10) Gift cards, which are modeled after pre-paid calling cards, are based on existing plastic card magnetic stripe technology. This means all credit and debit card acceptance points have the ability to redeem stored value cards (11) . This is just one of the many reasons retailers prefer gift cards over their paper predecessor, the certificate. Additionally:

• Many retailers do not count gift cards as a sale, but instead wait until they are redeemed. This helps prolong the “holiday season” and boost sales in January or February.
• Cards have no value and are invalid until activated, so retailers can carry cards at the register.
• Gift cards cut down on returns.
• About two-thirds of recipients spend more than the value of the cards.
• Shoppers using gift cards are less interested in getting a discount, so the cards increase the sale of full-priced items.
(12)

Bank-issued gift cards are quickly growing in popularity. They are prepaid cards issued by banks, malls or credit card companies that carry the logo of a major credit card company and can be used anywhere the brand is accepted. Bank-issued gift cards can come with fees that don’t apply to debit cards, and though they look like credit cards, stored value cards are not protected by the laws that apply to credit and debit cards (13) . Since these cards are purchased for the amount stored in the card, the primary source of revenue of bank-issued gift cards is generated from interchange and service fees assessed for card activation, reloading value, ATM transactions and other miscellaneous fees. According to the American Bankers Association Banking Journal, multi-use, reloadable stored value cards provide the greatest opportunity for interchange fee revenue.

This report contains a gift card fee survey for store-issued and bank-issued gift cards. The biggest issue for store-issued gift cards is that, after a period of 12-24 months of non-usage, some stores assess a monthly fee of $1-$2. Shoppers may find, therefore, that if they do not use their gift card in a timely manner, it may diminish in value or even have no value when they do go to use it. Bank-issued gift cards have many different fees including processing fees, replacement fees, ATM fees, balance inquiry fees and monthly maintenance fees.

Consumer Tips

(14) Many consumers believe that retailers are legally required to offer refunds. They aren't. Retail stores set their own policies which may include cash refunds, exchanges, credits or perhaps nothing at all. But don't despair, here are several simple steps for hassle-free returns:

Keep your receipts
Receipts are the key to hassle-free returns and cash refunds. Many retailers will allow consumers to exchange merchandise without a receipt. However, without a receipt, a retailer may not accept the return or may only provide a merchandise credit for the lowest sale or clearance price. Distinguish between original receipt and other proof of purchase, e.g., cancelled check, debit statement or credit card receipt/statement.

Ask for gift receipts
Gift receipts make gift returns easier for you and the recipient. Most major retailers can issue gift receipts, but you may need to ask. Gift receipts contain all the necessary information to prove the items were purchased, but exclude the price so that the recipient doesn't know how much you paid unless they need to return it.

Know the retailer's return policy
Most retailers have return policies prominently displayed. New York State law doesn’t protect consumers when it comes to returns or exchanges. Check with your city or county consumer affairs office to see if there are local consumer protections. In New York City, merchants are required to disclose their policies and, if they do not, the retailer must give consumers 20 days to get a refund in the manner in which the purchase was paid (15) . Gift-givers should read the return policy before making the purchase. Don't assume that the retailer will ease up on restrictions after the winter holidays, either. If you're at all concerned about a strict policy, consider making your purchase at a less restrictive store. Check the back of your receipts for a retailer's return policy before you head to the store for returns or exchanges.

The bottom line is it’s best to avoid frequent returns, especially at stores that use a tracking system. To find out whether a store uses the Return Exchange you can look for signs near the register announcing the service or ask a salesperson. Stores that use the system scan your driver’s license or other photo ID when you return an item. If you don’t comply, your return may get rejected (16) .

Keep everything
Provide all the original packaging and parts, including the tags, when giving a gift. Some retailers won’t accept returns unless the item is in its original package. You can remove tear-away price sections of tags, but if the tag isn't designed to be torn away, use a black marker to hide the price instead of removing the entire tag. Keep the packing list and return labels from mail order and Internet purchases.

Don't open it
If the gift isn't wanted, don't open the package. Open boxes may be subject to a restocking fee. Open movies, music and computer software packages usually cannot be returned or exchanged at all except for an exact exchange for a working copy if the original is damaged.

Don't delay
Plan to make returns as soon as possible. This is true any time of year, but especially after the holidays when you can take advantage of extended hours and extra help. You'll also have the best selection of merchandise for exchanges. Don't allow the store's return period to pass you by or you may not be able to return the item at all.

Relax
Finally, the most important thing to bring with you when you want to return or exchange merchandise is patience. If you take a deep breath and relax you'll find the process will go much smoother.

Gift Cards
Before purchasing and/or upon receipt of one, be sure to check of expiration dates and fees.

Recommendations

Return Policies
Currently in New York State, businesses can set their own return polices and deny a return, assess a restocking fee, and even hire companies to track customers who make returns at their store. The only consumer protection is that, in New York City, retailers must prominently disclose their return policies. New York should do more to protect shoppers from the anti-consumer practices described in this report.

Gift Cards
New York should follow Connecticut and outlaw expiration dates and dormancy fees for retail gift cards

(17) . Congress should pass similar legislation to sharply curtail bank gift card fees and expiration dates. New York currently has legislation, passed in 2004, that requires gift card issuers to disclose expiration dates and dormancy fees (and prohibits the imposition of such fees prior to 13 months of non-usage) but this legislation does not go far enough to protect consumers; it should prohibit such fees altogether. The following pieces of legislation would protect shoppers from some of the anti-consumer practices described in this report and should be passed into law:

A6681Ortiz (MS) -- Requires that gift certificates or store credits have no expiration or diminution in value over time

A6776Hayes (MS) -- Prohibits the sale of gift certificates that diminish in value due to dormancy; and prohibits surcharges and fees on gift certificates

A6549BPerry -- Requires stores to publicly display their return and refund policies, including tracking of returns

A9318ARivera N -- Requires retail mercantile establishments to post notice of their use of electronic tracking of a buyer's returns or exchanges of goods, wares, or merchandise

Methodology

Return/Exchange Survey During the months of October — November 2006, a team of field study participants surveyed 219 retail stores across the state of New York. The purpose of the survey was, in part, to identify the stores’ return and exchange policies. Click here to see the table.

Gift Card Survey The Gift Card survey included in this report is from “The Fine Print on Giftcards” by RON LIEBER, Wall Street Journal, November 25, 2006. The source for the survey of 50 retail store and bank-issued gift cards was the companies, banks and their websites. Click here to see the table.

For Additional Information Contact:
NYPIRG
9 Murray Street, 3rd Floor
New York, NY 10007
(212) 349-6460
www.nypirg.org

The New York Public Interest Research Group (NYPIRG) is a not-for-profit, non-partisan research and advocacy organization established, directed and supported by New York State college and university students. NYPIRG’s staff of lawyers, researchers and organizers work with students and other citizens to develop citizenship skills and shape public policy. Consumer protection, environmental preservation, fiscal responsibility, political reform and social justice are NYPIRG’s principal areas of concern.

News Release | Introduction | New York Retail Store Return and Exchange Policies
The Disclosure Methods of Retail Store Return & Exchange Policies | The Return Exchange
Gift Cards | Consumer Tips | Recommendations | Methodology | Exchange Survey Results
Gift Card Survey | NYPIRG Consumer Protection Pages | www.nypirg.org