Customers want the person in front of them to have the authority to solve their problem. If front line staff can't solve a customer's problem, it is either a training issue or you have not empowered them to solve problems. 
Reputation and customer service are linked together. When front line staff can't solve a problem, it erodes your reputation one customer at a time.
If you want a reputation for outstanding customer service, you can't worry about customers taking advantage of you. Put the proper controls in place and work to delight the customer. Don't make people's life more difficult than it already is.
You can hear a great example of customer service from Moo on this episode of The Jody Maberry Show.  

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