I'm not necessarily bashing Elation for this, but it's just a peeve of mine in this business (and other businesses as well): customer having to incur extra charges and deal with the (sometimes excessive) downtime associated with a defective product.
Requiring customers to pay for the return of defective merchandise is not a good form of customer service. I cannot stand that whatsoever. Perhaps you should send out a new one and request that the defective one be sent back in the same box with an enclosed shipping label. Fraud should be minimized because you will have the customer's address, proof of purchase, and contact information. If your still worried, hold a credit card number with a preliminary charge for the new one until the defective one is returned, then clear it.
In the event you still think you have to charge for return shipping, perhaps the customer can send it in at whatever cost/service they choose and then, as a manufacturer, send it back to them expedited/overnight as a way of saying 'thanks for your patience'.
Plus, if my brand new product is defective, I want a new one, not a fixed version of the one that I returned. Although I know, that sometimes the term 'repair' means sending out a brand new unit instead of opening the damaged one. I agree that sending a new one, regardless, is a good idea (though testing it prior to shipping is a good idea too), but then why should I have shipped it back if I could grab a new one right away at the retailer (if available/closer).
Swapping it out at the retailer works if they have a new one ready to go, and their location is convenient. It beats the heck out of the downtime associated with waiting for manufacturer turnaround (and paying additional bogus shipping charges).
I mean, seriously, what does this whole process/policy say? It says, "In the event that a new product is deemed defective and must be returned, the customer must spend even more money for the same brand new product to ship it back to the manufacturer, and incur the downtime associated with shipping and manufacturer turnaround".
Sorry for the rant, but I think it is just something that needs to be said on behalf of the customer.