The Winnipeg Free Press Online Edition

Consumers Trust - Part II
Oh, I See, It's a "Slippage" Scheme.

From the Winnipeg Free Press:

How it worked


How the voucher promotion worked and what happens next: * Merchants participated in the program by entering into a deal with Consumers Trust, in which they transferred to Consumers Trust 15 per cent of the face value of each voucher handed out in a given week. Forty per cent of that money was held in an account for future voucher payouts. The rest was used to pay the costs and marketing expenses of the program.


* When a consumer bought something from a participating merchant, the consumer was given the cashable voucher along with a set of complicated instructions.


* The customer was required, within seven days of purchase, to send by registered mail a copy of the cash voucher to Consumers Trust.


* Within five days after the three-year anniversary of the purchase, the customer was required to send a long list of documents to Consumers Trust in order to redeem some or all of the cash promised. The list of documents included a notarized copy of the customer's birth certificate, a copy of the registered mail receipt issued by the post office three years ago, the original voucher, a copy of the invoice issued by the merchant at the time of purchase and proof of payment.


* Court documents filed by Consumers Trust in a New York bankruptcy court explain how the program worked: "Until recently, the cashable voucher program was viable because it is "slippage based," meaning that the vast majority of consumers simply forget to submit claims to the trust three years later, lose their cashable vouchers or the requisite proofs of purchase or otherwise fail to follow the steps detailed on the back of the cashable voucher. The cashable voucher program is explicitly marketed in written promotional material to the merchants and consumers as being precisely what it is, a memory test that most people will fail."

The FTC really should get more involved with regulating rebate advertising and administration. Claims of "free after rebate" are deceptive when the company issuing the rebate isn't solvent or isn't paying claims, when sales tax is charged on the pre-rebate amounts, when the cost of complying with the rebate is a substantial portion of the rebate amount. Also, in some rebate situations, you must deface the product or box to redeem the rebate, and in so doing, you might cut short your warranty.

The Winnipeg Free Press Online Edition