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Senator Warns Consumers Of "Rebate Traps"

Rebates Are "Fool's Gold," Schumer Charges

January 6, 2006

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With holiday sales just so-so for many retailers, some stores are launching post-holiday sales, slashing prices and offering rebates. But a member of the U.S. Senate warns consumers to be leery of rebate scams, charging some companies do nothing but make sure consumers have a hard time cashing in those rebates.

Sen. Charles E. Schumer (D-NY) wants the Federal Trade Commission to standardize rebate procedures and he outlined ways in which consumers can make sure they get their rebates.

"These rebates are fool's gold," Schumer said. "The promise of cash back quickly turns into frustration for consumers who can't get what they were promised. The FTC needs to step in and regulate these practices immediately."

Schumer says advertised rebates catch consumers' eyes, as they lure them in with a the promise of a lower price while getting them to buy the product at the regular price. Now, as the New Year begins, many people are starting to send in their rebate applications for products that were purchased around Christmastime.

The Senator says rebates are extraordinarily popular for the very reason that most of them go unredeemed and provide what is essentially free money to the manufacturers. Very few places offer immediate cash rebates, the most common are those that are done through the mail.

Industry figures show that 40 percent to 60 percent of rebates go unredeemed. While some of the rebates are not redeemed because consumers don't bother to send them in, in all too many cases even the most diligent consumer is unable to receive his or her rebate.

However, Schumer said, many companies contract with rebate-processing centers, or fulfillment houses, to pay customers' rebate requests, some of whom market themselves with their low rates of redemption. Many of these companies design complex rules, have very short filing periods or ask for documentation that is nearly impossible to obtain – all in an effort to not give consumers their money back.

The rebate companies will ask for copies of receipts multiple times or delay the rebate check for months. Applications will be ignored and consumers will have to redo the entire process. Many of the companies make the rebate check envelope look like junk mail so it ends up in the trash and consumers are stuck retracing all their steps to get the money again.

Oftentimes months after a rebate application is sent in, the customer will be asked for other documentation to get their rebate such as codes off of the products box that was thrown out months before or original receipts that have already been sent away.

Rebates are big business. According to Business Week, nearly one-third of all computer equipment is sold with some kind of rebate along with 20 percent of digital cameras, camcorders and LCD TV's. The industry estimates that 400 million rebates are offered each year with an estimated worth of $6 billion. The Better Business Bureau has received thousands of complains, in 2001 they had only 964 while last year they received 3,641.

"This is the post Christmas bait-and-switch," Schumer said. "People go into stores with the promise of getting money back, and months later they still haven't seen checks."

In an effort to combat these deceptive rebate offers Schumer called on the FTC to implement a standard rebate policy to address the growing challenges of rebate offers.

"The bottom line is, rebates unfailingly bring in billions in excess profits for companies that offer them, but when it comes to saving the shopper a dime, as rebates claim to do, they fail the consumer more often than not," Schumer said.

"It really is a combination of scrambling to meet deadlines, reading the extremely fine print, following unclear instructions and then crossing your fingers in hopes that the rebate check ever gets sent."

In a letter sent to the FTC, Schumer urged an investigation of company rebate policies, and an overhaul and standardization of the rebate process to ensure that all consumers can participate in a fair rebate process. Specifically, Schumer requested that the following consumer protections are put in place:

• Companies must provide consumers at least 30 days to redeem their rebates and must fulfill the terms of the rebate within the same amount of time required of consumers but it should not exceed 60 days.

• Companies must take steps to send the rebate check in a manner which identifies the piece of mail as the expected rebate check.

• Companies must accept copies of receipts, not just originals.

• Companies cannot require consumers to write identifying information on the rebate form unless the receipt does not identify the purchased product.

• Companies offering rebates may not require information that is not necessary to process the rebate, including information other than name, address and phone number.

• Companies must provide telephone numbers or contact information for rebate inquiries so consumers are able check on the status of their rebates.

Schumer also outlines steps that consumers can take to ensure they get their rebates. Schumer today told consumers:

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