The Bait in Mail-In Rebates

I recently
talked about
how I try to solve the asymmetrical
information problem by using a third-party expert called the
Better Business Bureau. Today I want to talk about mail-in
rebates.

A lot of businesses use mail-in rebates as a way of
getting you to buy stuff you wouldn’t otherwise. The way it’s
supposed to work is you buy the stuff at full price with the
business’s promise that when you mail in the verification
you will in turn get a check equal to the amount
promised by the seller.

When it works, the seller makes money because they traded
an item they wouldn’t otherwise have sold and the buyer
eventually gets a check in the mail that reduces the
cost.

The problem seems to be that it usually doesn’t work that
way and that’s because it appears it’s not designed to. For
example, about 40
percent
of the buyers never send in the forms in the
first place. The reasons vary but the point is businesses
know there is a good chance the buyer will never even try to
get the rebate.

Clearly, if the business wanted to sell something at a
lower price it could just put the item on sale. Why make the
customer go through a delayed process with all kinds of
onerous requirements? A cynical person would say because the
harder the business makes the process the fewer people will
request rebates and, here’s the payoff, the less costly it
will be to the business.

In addition, even if the customer sends in the properly
filled-in rebate forms and all required verifications, there
is a short-term economic incentive to delay or even ignore
the process. By that I mean if you delay sending out a rebate
for say, three months, that is a free three-month loan to the
business. Score one for the business.

If the business (or third-party rebate company)
conveniently loses or says they never received the
forms/verification it gets even better. Many customers, after
waiting patiently for their rebates, but not having received
them, follow-up with the business only to be told nothing was
ever received and that they should submit the forms and
verification again. The problem is most businesses require
the original forms and verifications
(usually sales slips and UPC codes cut from
the box). If you’ve already sent those in, there is no way
you can send them in again. If you send in copies, the
companies, if they respond at all, will say the customer
failed to send in the required original documents. Score
another one for the business.

So it is interesting to see the US Federal Trade
Commission (FTC), for the first time, has
entered into consent agreements
with computer superstore
CompUSA and their third-party processor Q.P.S., Inc. The
agreement, based on allegations that CompUSA failed to pay,
“in a timely manner, thousands of rebates for products sold
under the CompUSA and QPS brands. Under the terms of the
settlement with the superstore, CompUSA will pay consumers
who purchased QPS products at CompUSA their due or past-due
rebates, which ranged from $15 to $100 each.” One hopes you
don’t have to send in original sales receipts to get the
rebates.

The bottom line is mail-in rebates are scams that work.
One way to stop it is to stop buying stuff with rebates. If
you refuse to do that, at least require some kind of
delivery confirmation
when you mail your rebates in. That
way, you have a legal confirmation that the envelope was
delivered to their address, who signed for it, and when. If
they still refuse to pay, immediately file a complaint with
the FTC and the Better Business Bureau. But don’t come crying
to me about rebates because I never buy
anything with a mail-in rebate. YMMV. Insert disclaimer here.

Aloha!

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One response to “The Bait in Mail-In Rebates

  1. And you didn’t even mention that a lot of these ‘rebates’ come as vouchers and coupons you can use on your next purchase.