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Apple Reportedly Cracking Down on Third-Party Service Center Fraud

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Several outlets have been reporting on a couple of Hardmac articles which asserts that Apple is working to curtail fraud perpetrated against them by third-party service centers. The first article from Hardmac claims that repair centers were charging customers for out-of-warranty repairs while reporting to Apple that the machines were still under warranty. That of course means, these repair centers were receiving free parts from Apple while raking in sums of money from customers.

Thus, certain After-Sales Service Centres could pass under guarantee of repairs, machine that were not covered, and also invoiced these repairs to the customer thus ensuring a healthy profit to them.

Hardmac’s second article explains in detail how the fraud was conducted. The repair facilities used a method known as “stitching” wherein the facility uses a serial number from a product still under warranty when they report problems to Apple for a product that is actually no longer under warranty.

Stitching is the process by which an Apple Service Provider (ASP) technically defrauds Apple. This happens by a customer coming in for an out-of-warranty repair (as an example lets use a macbook top case). The customer’s macbook top case is no longer working and they are happy to pay to get it fixed. Instead of the ASP ordering the part from apple as out-of-warranty and making around 15% gross profit margin, the ASP would find a serial number in their database of previous repairs (of an identical model) and order the part as a warranty part from a serial number they have found. This technically allows the ASP to pay nothing for the part, but then make 100% margin.

Apple finally wised up to this fraud only after they had been conducting repairs through their in-store Genius Bar repair centers where they were seeing far fewer under-warranty repairs as were being reported by third-party retailers.

The report also claims that a large service center in the UK has been shut down in the wake of this investigation, with investigations ongoing into several “far East” service centers.

In the wake of this mess, Apple has reportedly introduced better tracking for part numbers in their repair ordering systems along with software to ensure the correct parts are being put into the correct computers.

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