The ‘white lie’ fraud epidemic fuelled by Britain’s middle class
Chris Stokel-Walker
6 min read
white lie fraud
While most of us have muddled through the cost of living crisis, and the associated squeeze on personal finances, headlines of gangbuster results for big businesses may have proved particularly galling. Take Tesco, whose profits surged so much its boss’s pay packet doubled to £10m.
Individual instances of this kind of fraud are pretty small scale. It might be buying clothes from online retailers, wearing them once then returning them, or weighing cheap bananas on the self-checkout while putting costlier produce into your shopping basket – but if enough people join in the effects can soon add up.
One in eight British adults has admitted to committing “first party” fraud in the last year, according to fraud prevention service Cifas.
That could range from overstating your salary on a mortgage application (a trick deployed by 16pc of us) to reclaiming money on a losing bet through your card provider (something 21pc of people have done), or claiming losses on insurance that don’t exist. Aviva announced it discovered a 39pc rise in insurance fraud over a single year, costing the provider £318,000 a day.
“We’ve seen [fraud] increasing because of the digital age,” said Miya Knights, a retail consultant and expert. “When you think about the way we transact online, you’re having to rely a lot on the consumer being honest.
“In the past, it might have been a small percentage of customers looking to do this on a large scale, but the fact we’re doing so much shopping and transacting online makes it easier for this kind of ‘white lie’ fraud to proliferate.”
Feeling the pinch
Each example of white lie fraud is a further indication of how tough finances are out there – and a shift in anti-business sentiment. For companies that make billions, the impact is, at an individual level, negligible. But it can have a huge effect on smaller firms struggling to survive.
Up against fast delivery and low-quibble returns from the likes of Amazon, many customers now have an expectation that they can easily get away with practices such as asking for refunds for undelivered packages – even if they’ve received them via tracked delivery.
Such evidence isn’t always enough to put some customers off lobbying for unwarranted refunds, with the threat of negative online reviews or invoking chargeback processes often proving successful.
“There’s a tolerance – or failure, really, to get the message over that fraud is a bad thing,” said Peter Taylor, a fraud investigator and consultant.
Getting away with such actions only emboldens people more.
Jenny – not her real name – is a soon-to-graduate student who has bought a dress from a large online retailer for her upcoming university graduation day and evening. She plans to return it once the event is over. “I was never going to spend nearly £200 on a dress to wear for one night,” she said.
This kind of fraud is known as “wardrobing”, describing the practice of buying clothes for a special occasion, wearing them once or twice, then returning them for a refund. The retailer in question, which Jenny asked not to be identified, charges a small fee to process returns (around half of UK fashion retailers now charge customers to send items back).
Wardrobing is a common problem for the clothing industry: a fifth of shoppers admit to trying the con, with 43pc of those aged 16 to 24 returning worn clothing – with the average person returning four items a year, each one costing £40.95.
The vicious circle of fraud
Is this a case of consumers unduly weaponising a right to recourse if retailers don’t live up to their side of the bargain, or exercising their rights against firms refusing to take action? It will always depend on the individual circumstances of each transaction, said Knights.
I’ve personally used the threat of chargebacks to compel a retailer to refund an item when it was trying desperately to keep the sale. In September last year I spent several hundred pounds on a made-to-measure suit from an online start-up specialising in custom tailoring. On top of the hefty fee for the suit itself, I paid an extra £50 for express delivery within three weeks to guarantee it arrived in time for a wedding I was attending abroad.
The wedding approached without a suit in the post and I had to rush to Marks & Spencer for a last-minute replacement. After the event, I emailed the company to ask where it was. Over several phone calls and emails, the company founder explained my order had been delayed as the fabric they had received for the suit was not up to their usual standards, and my suit would be delivered six weeks after it was ordered – a week longer than its so-called “standard” delivery timeframe.
The suit eventually arrived directly from the Chinese factory in which it was made, creased and in a cardboard box. Stitches were missing from the garments, while the cut and measurements were not as depicted on the website.
After some arguing, and the threat of a reputationally costly chargeback, the company refunded the total amount paid.
It’s understandable why the small fashion business fought so keenly against me returning the item. Until I sent pictures of the issues with the suit, they may well have thought I was a “wardrobing” fraudster.
The company only caved when the threat of chargebacks was raised because of how harmful the process can be to small retailers. If a business is hit with enough chargebacks, it can be “debanked” because it can be seen as a risky or unreliable business to serve.
Nearly 650,000 transactions a day across the globe are charged back to the merchant, according to Mastercard Ethoca. And more broadly, fraud is expected to cost online merchants $362bn (£281bn) between 2023 and 2028, according to Juniper Research.
We’ve entered a vicious circle when it comes to white lie fraud, suggests Taylor, the fraud consultant. “What fraudsters say to me is everybody’s at it,” he said. “You create this illusion that everyone’s committing fraud all the time.”
And if everyone’s doing it, ordinary, law-abiding folk begin to think they’re the fools for not taking part, too.
‘Fraud has to be paid by somebody’
It’s not just in retail that white lie fraud is happening. The idea of nibbling away at the heels of big business is even pervading the workplace, where job applicants are hyping up claims in CVs, just to get through the filtering process.
“What happens is that it changes the price that we all end up having to pay for goods,” said Taylor. “Or there becomes a lot more friction on refunds.”
We’re already seeing the impact of fraud on the way we receive online deliveries. The fact the person delivering your latest clothes haul often has to take a photograph of you holding the package is because it creates irrefutable proof that you received the items. Similarly, the need to quote a code to your Deliveroo driver is because too many people have been claiming food that wasn’t theirs, or lied about their meal never arriving.
“Any type of fraud has to be paid by somebody,” said Taylor. “And it isn’t paid by the Government. It isn’t paid by the insurance company. It isn’t paid by the retailer. It’s paid by the public, and the customers. We pay for fraud.”
