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Extreme Couponing or Coupon Fraud?

Stephanie Wood, CPA, CIA, CFE  |  Manager

Whether you regularly cut coupons from the Sunday paper or search for promotional codes while doing online shopping, coupons can be a great way to provide consumers with a discount on various grocery, clothing, and personal care items. With several websites out there such as RetailMeNot, Coupons.com, and The Krazy Coupon Lady, consumers don’t have to look very hard to find deals. While coupons can offer great discounts, it is also important to remember that there are rules and regulations that need to be followed when using coupons. If not used properly, innocent couponing can become coupon fraud.

The Coupon Information Corporation (“CIC”), a not-for-profit association of consumer product manufacturers dedicated to fighting coupon mis-redemption and fraud, defines coupon fraud as someone intentionally using a coupon for a product that he/she has not purchased or otherwise fails to satisfy the terms and conditions for redemption, when a retailer submits coupons for products they have not sold or that were not properly redeemed by a consumer in connection with a retail purchase; or when coupons are altered/counterfeited. Since its inception in 1985, the CIC has exposed fraud schemes involving more than $750 million.

While it might initially seem insignificant compared to all of the other transactions being processed by retailers on a daily basis, the cost of coupon “mis-redemption” to manufacturers is estimated to be between $300 and $600 million per year. One of the unfortunate consequences is that retailers have to raise prices to mitigate their losses, ultimately costing consumers more money in the end.

Additionally, coupon fraud can actually lead to some pretty significant fines and even jail time, depending on how extreme it is. A man in Michigan was sentenced to 10 years in federal prison for running a scheme at a coupon redemption center. He collected coupons from stores and sorted them to get paid by the coupon issuer. According to the CIC’s website, the longest prison sentence ever imposed for coupon fraud was 17 years and the highest financial penalty imposed was $5 million.

What does coupon fraud look like?

So what does coupon fraud look like? The following are examples of the most common forms of coupon fraud:

  • Decoding: Intentionally applying coupons to the wrong products and pressuring cashiers to accept them. An example would be purchasing a different product/size than what is offered on the coupon.
  • Mass printing/gang cut coupons: Printing coupons to use multiple times to redeem at different stores.
  • Coupon modification: Adjusting coupon terms of expiration, value, and even the barcode.
  • Buying and selling coupons: Non-transferability is part of the usage agreement on all U.S. coupons. While sharing with friends and family is not prohibited, the act of collecting coupons for profit increases the risk of ending up with counterfeit coupons.
  • Using expired coupons: Most stores do not allow expired coupons. This should only be acceptable if you have an attached rain check that you obtained before the sale was over.
  • Shoplifting newspapers to get the coupons: Consumers stealing newspapers to get the weekly coupons for free.
  • Reselling products purchased with coupons: Coupons typically state that it cannot be used on items for resale.

How to avoid coupon fraud

Consumers should be mindful of where they are getting coupons from, and know the basics when it comes to coupon standards. This can help to be able to identify a fake. Below are the most common red flags to look for:

  • Coupons that are valued at more than the actual price of an item
  • Coupons without barcodes
  • Coupons that do not require a purchase to be made to redeem
  • Coupons that do not have conditions of usage in small print
  • Paying for a coupon

The CIC is a good resource to use as they regularly update their website with the most recent counterfeit coupon notifications and have good tips on how coupons should be used and what activities are prohibited. So far in the month of January 2019, the CIC has already posted 218 notifications of counterfeit coupons that should not be accepted by retailers.

What can you do?

If you observe something that appears to be coupon fraud, it is important to report it right away. You can file a complaint with the U.S. Postal Inspection Service, Federal Bureau of Investigation, Federal Trade Commission, or the Internal Revenue Service. In the end, if we all use coupons appropriately, it can be a great way to get discounts on a variety of items. However, if consumers continue to misuse them at the current rate, retailers will be forced to restrict their use or raise prices in response.

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