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Consumers getting clipped by some rebates

The retail world is in a rebate frenzy.

It's hard to buy electronics, appliances, baby furniture or a host of other products without encountering at least one offer to get back part of your purchase price.

But beware: Even if you follow rebate rules to the letter, you may not see a dime. And following the rules can be very difficult.

The rebate theory seems simple. You buy a product, mail in proof of purchase and the company sends you a check. The manufacturer and the retailer win because rebates stimulate sales without reducing the sales price. The consumer wins by pocketing what is often a deep discount.

In practice, however, the rebate business is tricky, fraught with the potential for misunderstanding and even fraud on both sides.

The Federal Trade Commission has been investigating complaints about rebate practices since 1998. "Rebates are a headache," says Michael Dershowitz, senior attorney in the division of advertising practices for the FTC. "Frustrating for consumers and frustrating for us."

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In five years, the FTC has taken action against a relatively small number of offenders. They include Iomega, Memorex disk producer Memtek Products, scanner maker UMAX Technologies and Okidata, all for nondelivery of rebates. It dinged Philips Electronics, Office Depot and Value America for late delivery. Buy.com was cited for deceptive advertising that promised free Internet service with computer purchases without explaining that a three-year contract was required.

Part of the problem is the question of who's issuing the check. Confusion over where rebates originate leaves consumers unable to target the problem and get it fixed.

Manufacturers offer most rebates, although occasionally retailers offer them. But consumers usually aim their frustration at the industry that manages rebates, called fulfillment companies. These companies handle the details, but it's not their money. They collect the rebate forms and proofs of purchase and then tell the manufacturer (or the retailer) what he owes. When the manufacturer pays up, the fulfillment house cuts the checks and mails them to the consumers.

One of the largest fulfillment houses, TCA of New Rochelle, N.Y., lists slow-paying manufacturers and retailers as one of the key reasons why it takes so long for consumers to get their money. "Customers get upset with us when it's really a manufacturer's or a retailer's problem," says a TCA employee who wishes to remain anonymous.

Complicated process means lost rebates
But most of the time, says Dershowitz, the problem is on the other end. Frequently, the consumer doesn't or can't follow the often-complicated directions associated with rebates.

"The system is so full of paperwork that somewhere along the way, some of it is going to get fouled up," he says.

The foul-ups aren't always the consumer's fault. For instance, Boston lawyer Edgar Dworsky, editor of Consumerworld.org, points to an offer of a $35 rebate from an Internet electronics retailer on a storage device.

Dworsky thought the rebate was a good deal until he read the fine print: The storage device had to be purchased between Feb. 9 and Feb. 16, with the completed rebate request postmarked by Feb. 17 and received at the fulfillment house by Feb. 24. Under those terms, notes Dworsky, it was impossible for anyone outside New York City, where the company has a retail store, to buy the item, receive it via mail and submit the rebate request in time.

Certainly, manufacturers have a vested interest in making the process difficult. In their defense, the potential for fraud exists. TCA says $500 million is lost annually on fraudulent rebate claims.

But part of the appeal of rebates to manufacturers is the number of people who don't make legitimate claims.

The FTC's Dershowitz estimates that at least 50 percent of rebates go unclaimed because consumers lose the form, throw away the UPC code or just can't be bothered to fill out the paperwork and mail it. And TCA brags on its Web site to its potential customers that it rejects 800,000 claims a year, "saving our customers $20 million."

Some state lawmakers are stepping into the rebate debate. The New York attorney general, for example, explored legislation that would force manufacturers to post a bond equal to the amount of money the company would have to pay if every consumer claimed the rebate. Although the bond proposal did not progress beyond the discussion stage, state officials nationwide continue to collect reports of unscrupulous rebaters.

"If consumers would not be comfortable loaning money to a company, they should feel no more comfortable giving that company a temporary windfall, to be repaid at a later date through a rebate," says New York Attorney General Eliot Spitzer. "Consumers are not banks, and should be careful not to assume that role."

The bottom line: Rebates can provide a nice shopping bonus, as long as you know the redemption rules and follow them. But don't buy something just because the product offers a rebate. If failing to get those extra dollars will stretch your resources, keep looking until you find a comparable item with a firm price you can afford.

 
-- Posted: July 23, 2003
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See Also
How to avoid the rebate runaround
The assertive consumer's guide to satisfaction
Financial advice glossary
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