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Another kind of coupon fraud

Dear Jill,
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. The wages for the employee were nowhere near the amount they took in. My question is, isn’t this more fraudulent than a customer trying to turn in a coupon for something they didn’t purchase?

Jim L.
This absolutely is another example of coupon fraud, and it’s one that consumers may not be aware of. Jim’s describing a “clipping room,” and unfortunately it used to be a fairly common occurrence. As Jim noted, 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 the extra clipped coupons in with the coupons the store legitimately took in and it’s a recipe for 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 store cutting coupons from extra or unsold newspapers and then turning them in for reimbursement. It had gotten so bad that one organization estimated that over 108 million coupons were redeemed fraudulently annually — and that was back in 1977!

In a sting operation almost worthy of its own feature film, the industry fought back. Targeting an area in New York where gang-cutting and fraudulent redemption was suspected to be rampant, a new “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 solely to catch organizations that were operating “clipping rooms,” cutting every coupon from inserts and submitting all of the coupons for redemption.

Over 117,000 coupons for the non-existent 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.

Another similar sting took place in Chicago when coupons for Essent shampoo appeared in the newspaper inserts — again, Essent didn’t exist. But any coupons turned in for “sales” of the product would easily be identified as fraudulent redemptions.

You might wonder why stores would turn in coupons for products that didn’t exist. Consider that there are many new products launched each year. In these cases, the product coupons looked legitimate enough to pass a cursory glance from the person doing the clipping. (You can see a photo of the Breen coupon on my blog at jillcataldo.com/gang_cut_coupons – the fine print on the back of the coupon even reads a bit tongue-in-cheek, stating “Do not embarrass your retailer by asking him to redeem this coupon.”)
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.
Smart Living Tip: As attractive as “beating or cheating” the system may seem, it’s never advisable to do something fraudulent in the name of saving or making money. While we seem to hear more fraud stories on the consumer side versus the retailer side, neither shoppers nor stores should be committing acts of fraud.

Jill Cataldo is a coupon workshop instructor and mother of three.


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