Mark Hammond, co-founder and chief executive of Return Exchange, says the software looks at a variety of factors when determining denials, but he declined to give specifics of the process. He says he doesn't want to give "the bad guys" clues on beating the system.

Concern that honest customers might be hurt by the technology was an issue for Joseph Toth, senior vice president of Los Angeles-based specialty apparel retailer Guess. Since Aug. 30, the Return Exchange has been monitoring — but not enforcing — returns at 16 of its stores in an effort to glean information about its return rate. Toth won't see the data until the pilot program is finished at the end of the year, but he says Guess hasn't received any official complaints when customers were asked to swipe their driver's license.

"There have been some conversations at the register, but no incident where someone went nuts and said 'I won't give my driver's license,' " he says. However, about 10 customers didn't go through with the return once they were informed of the policy, Toth says, evidence that Verify-1 may work as a deterrent.

Using the technology means store employees, many of whom are in their late teens and early 20s, are not deciding whether to permit returns. "There is no arguing with this," he says. Toth says Guess will decide early next year if it will use the software full time.

Return Exchange executives say they decline about 1 percent of returns for each retail client, a much smaller percentage than what retailers reject on their own. Still, two out of every 100,000 transactions have been challenged this year, and 10 percent to 15 percent of those challenges resulted in the Return Exchange changing the information in a customer's report. Retailers then decide whether to refund the item.

The more frequent occurrence may be from customers unaware of the ID requirement. Carmen Wolf says she refused to hand over her driver's license when she tried to return pants and shirts from the Express store in the Glendale Galleria mall in California. Wolf says no signs about the policy were posted at the store or detailed on her receipt. An Express employee "made me feel like some sort of criminal," she says. She was denied the return even though she had her receipt and the tags were still on the clothes. Express couldn't be reached to comment.

With help from the Better Business Bureau, Wolf six weeks later received a refund for $267. "It just seemed so wrong to impose on me something that I never agreed to and was never informed about," she says. "I will never shop there again."