Coupon Fraud On The Internet Targeted For Warning Messages

The Federal Trade Commission joined with the Coupon Information Center (CIC) today in announcing that they have identified 31 Internet advertisements for potentially fraudulent coupon-related schemes and sent the advertisers e-mail messages warning about the conse quences of running such schemes. Generally, the targeted sites advertise one of two programs: a business opportunity where the investor sells coupon certificate booklets to consumers for $20 to $50 each; and a work-at-home coupon clipping scam. The problem with these “opportunities” is that the promoters may violate federal law by making exaggerated earnings claims, when they are the only ones who make any money. Investigators from the FTC partnered with industry members of the CIC, a nonprofit entity that combats coupon fraud, to conduct the coupon Internet “Surf Day” last week. The effort, FTC officials said, is part of a larger campaign to police fraud on the Internet.

“Surf Day lets us use the Internet to warn potential scammers who would destroy its marketplace credibility,” said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. “While fraud artists might try to take advantage of the Internet to perpetrate a fraud very quickly, the Internet also makes them susceptible to very quick and sure detection.” The FTC has conducted Surf Days targeting other types of scams as well, including pyramid schemes, credit repair schemes and other business opportunity schemes. Bernstein said she could not confirm or deny whether the FTC or other law enforcement agencies would investigate the coupon sites identified in this sweep, but noted that companies and individuals acting in violation of federal laws against false and misleading claims can be sued in federal district court; in such instances, the FTC seeks a permanent injunction barring the defendants from making challenged claims and an order requiring them to pay redress to victimized consumers. The FTC has brought more than two dozen cases in recent years challenging advertising on the Internet.

“The people who can least afford it are hurt the most by coupon-related scams,” said Bud Miller, Operations Manager at the Coupon Information Center. “I have received phone calls from people trying to work at home and raise children, retirees, individuals with limited income opportunities, entrepreneurs trying to create a new company, and charity groups. They find that these situations can be as costly to their reputations as to their finances. Of course, consumers often find that they have paid for complicated forms, usually entailing difficult procedures and handling fees to receive coupons that end up gather dust in their junk drawers.”

Although fraudulent promoters promise hundreds of dollars or more per week in earnings from coupon-related business opportunities, the FTC says there is only one legitimate way to use a coupon -- clip it out and use it to save money on the purchase of the designated product. According to a new FTC brochure, “Costly Coupon Scams,” selling or transferring coupons to a third party violates most manufacturers’ coupon redemption policies, and usually voids the coupon. Moreover, the brochure warns, consumers who buy coupon certificate booklets have to complete and mail a form, select 30 to 50 products from a list, and include a self-addressed, stamped envelope and processing fee in order to redeem the certificates. They end up paying substantial processing fees for coupons that they could clip for themselves out of newspapers and magazines. Promoters of these coupon booklet business opportunities also claim that the coupons have no expiration date, but the FTC says that’s true for only a tiny share of manufacturer-issued coupons.

“The bottom line is that these booklets are going to be very hard to sell given the limitations and costs involved for the ultimate purchaser,” Bernstein said.

The FTC brochure suggests that consumers tempted to buy into a coupon clipping venture ask:

• for details of the company’s refund policy;
• for the total cost of the work-at-home program, including supplies, equipment and membership fees;
• who will pay you, whether you’ll be paid on salary or commission, and when you will get your first paycheck;
• the Better Business Bureau and the local consumer protection agency in their own area, and in the area where the promoter is based, whether consumers have complained about the promoter; and
• about the postage costs and processing fees associated with getting the coupons.

The brochure also suggests that consumers victimized by fraudulent coupon clipping schemes complaint to the local Postmaster, their state Attorney General’s office, and the National Fraud Information Center at 1-800-876-7060.

Copies of the brochure and news releases regarding other FTC surf days are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.