Jill Cataldo: Another kind of coupon fraud

  • Posted: Wednesday, May 29, 2013 12:01 a.m.

Q I worked for a grocery store chain for several years. One of the things they did was purchase several extra newspapers for the coupons. They would hire a person at minimum wage to cut out these coupons, which averaged around $500 extra money for the store plus handling fees for the coupons. My question is, isn’t this more fraudulent than a customer trying to turn in a coupon for something they didn’t purchase?

A: This absolutely is another example of coupon fraud, and it’s one that consumers may not be aware of. The reader is describing a “clipping room,” and it used to be a fairly common occurrence. Even if a store paid someone to clip coupons out of extra newspapers, the benefits they’d reap financially would far outweigh the cost of paying the clipper. Mix in the extra clipped coupons with the coupons the store legitimately took in and it means even more money when the coupon reimbursement is paid.

But again, it’s fraud. And it’s a form of fraud of which manufacturers are aware. So how do you catch someone committing a seemingly “invisible” crime? With a sting.

Many years ago, manufacturers were having problems with stores cutting coupons from extra or unsold newspapers and then turning them in for reimbursement. One organization estimated that over 108 million coupons were redeemed fraudulently annually, and that was back in 1977!

The industry fought back. Targeting an area in New York where gang-cutting and fraudulent redemption was suspected to be rampant, a “manufacturer” offered a new product in the coupon inserts, Breen Laundry Detergent. The catch was that Breen detergent did not exist. The 25-cent Breen coupon was designed to catch organizations that were operating “clipping rooms.”

Over 117,000 coupons for the nonexistent Breen detergent were submitted for redemption from that single ad campaign! It gave investigators specific information as to which stores, retailers and firms were fraudulently submitting these coupons.

With the advent of modern coupon technology, stores have computerized records of products sold. If a manufacturer suspects a store is turning in higher numbers of coupons than it believes the store had in stock during the redemption period, it can audit the store and ask the store to prove that number of products were sold. If the store cannot, guess what happens. The manufacturer doesn’t have to reimburse the store for any of the coupons it submitted.



www.jillcataldo.com

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