NAM to CPSC: Take Action on Recall Fraud
Manufacturers encourage efforts by the U.S. Consumer Product Safety Commission to combat recall fraud—fraudulent redemption of consumer-product recall fixes—without limiting consumer choice, the NAM said this month.
What’s going on: “Recall fraud poses a severe risk to manufacturers, creating the potential for significant and lasting consequences,” the NAM told the CPSC last week in response to a request for information from the agency for public input on the matter.
- Bad actors use various methods to participate in recall fraud. This may include the use of artificial intelligence to create fake photo images of defective goods to file fraudulent claims. A.I. tools are increasingly capable of producing fraudulent images difficult to distinguish from authentic photos.
Why it’s important: A single product recall notice can mean millions of dollars in direct recall costs, “including costs for product retrieval, supply chain notification, customer reimbursement and emergency labor and overtime fees,” the NAM said.
- In addition, companies also face reputational harm from recall fraud, as “high volumes of recall claims, containing numerous fraudulent cases, cause public notice periods to last longer than necessary opening a window for public uncertainty as the manufacturer works to address these false claims.” This uncertainty period can sway consumers to switch brands before manufacturers have the opportunity to invalidate claims.”
What should be done: The CPSC can take several actions to address and manage this fraud, the NAM said, such as the following:
- Putting in place “advanced image verification technologies to detect duplicate, manipulated, or previously submitted photos”
- Requiring that products returned following a recall arrive “with all critical pieces in order to ensure the product qualifies for remediation”
- Collaborating with manufacturers experiencing “fraudulent or excessive recall registrations long after the initial recall announcement so as to prevent malicious attempts to exploit the recall system”
- Establishing an “industry working group to combat recall fraud, or other response mechanism or formal line of communication, that would bring together key stakeholders, including manufacturers, to continue communication and collaboration”
The final say: “For the CPSC’s recall system to work as effectively as possible, it is vital that bad actors not be allowed to fraudulently harm manufacturers and undermine consumer confidence,” NAM Vice President of Domestic Policy Jake Kuhns and NAM Manager of Domestic Policy Parvathy Haridas told the agency.
