Coupon fraud…did you know it's an actual crime? Let's discuss what it is, how you might be committing it, and examples of arrests/penalties incurred.
Several years ago, I became a dedicated couponer.
And more times than I can count I have excitedly prepared my coupons at home for the perfect transaction, ran to the store with high hopes, only to be turned away by a disgruntled cashier who can either not figure out how to use the coupon, or who does not know their corporate coupon policy.
But it’s also a bit more than that.
Store coupon policies have gotten really stringent due to the fact that coupon fraud is on the rise.
Yes – there is such a thing as coupon fraud, and it’s a real crime.
Let's dig in, so that you can make sure you're using coupons within the law.
What is Coupon Fraud?
Let’s get the definition straight from the Coupon Information Center:
“Coupon fraud occurs whenever someone intentionally uses 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. These activities are almost always in violation of Federal, State or local laws.”
There's also coupon balancing and coupon misredemption, which are basically the same thing.
“[Il]legal or fraudulent traffic in consumer product coupons, including mail theft and counterfeiting.”
Coupon balancing is using a coupon intended for one product on a different product that it was not intended for.
Let's look at specific examples now of coupon Fraud and misredemption.
Examples of Coupon Misuse and Misredemption
As discussed in this article about how the coupon industry is fighting extreme couponing, there are many fraudulent ways consumers have devised to use coupons for their own economic benefit.
- using a coupon for a different product within the same company
- using a coupon for the wrong sized product
- using photocopy versions of online printable coupons
- printing multiple coupons from multiple computers when only one coupon is supposed to be printed per household
Psst: no, not all extreme couponers are not all breaking the law. Check out my article on extreme couponing tips.
1. Fake Coupons that Scan
Fraudulent coupons that are too-good-to-be-true circulate the web all the time and many innocent consumers, retailers, and manufacturers get stuck with the lost time and money.
A few years ago, I walked into my local Subway store for a sandwich. From the back of the line I could see a piece of paper with a coupon for a free premium Subway sub taped to the display case. Written in black marker was “Fraudulent coupon. We are sorry, but we cannot accept this.”
I started imagining both the consumer’s dismay at making it up to the cashier with a sandwich chocked full of their favorites (mine is spinach, cucumbers, green peppers, honey mustard, and a little mayo) and then being declined their free treat at the cash register and instead having to pay for it. I can also imagine the poor cash register clerks who had to repeatedly let their customer down each time they saw a folded-up piece of computer paper and an “I’m-about-to-get-a-free-lunch”, eager smile.
So, who makes these fraudulent coupons anyway? Are these people ever found, and if so, what are the penalties?
Once I began researching, I was very surprised to find the problem is more widespread and costlier than just a few consumers getting away with free products.
Just in the month of May 2011 there were 25 counterfeit coupons posted on the Coupon Information Corporation (CIC) website with various rewards being offered from the manufacturing companies for the successful prosecution of individuals responsible for producing the counterfeit coupon.
For example, Del Monte is offering up to a $2,500 reward for a counterfeit coupon that promised to save $1.85 on a case of Fruit Chillers® and another coupon to save $1.00 off the purchase price of a Del Monte® Fruit Naturals® cup. Nestle and Post Foods are offering the same reward amounts for counterfeited coupons of their products.
2. Coupon Glittering
So many interesting terms in coupon fraud!
Coupon glittering is the act of using a glitch in coupon codes/barcodes to your advantage (illegally).
For example, a coupon for $3.00 off a huge bottle of expensive lotion might also work on the free trial version of the same product due to a glitch in the coupon’s barcode.
The fact is, just because the cash register scanner accepts the coupon, doesn’t mean it’s not coupon fraud.
3. Illegally Selling Coupon Inserts
Yes, it is illegal to sell coupon inserts.
It’s not necessarily illegal to sell your time it takes to clip coupons as a service (you’ll see this on eBay and other coupon sites). HOWEVER, it is against the coupon fine print. As soon as a coupon is transferred, the value is supposed to be voided.
More manufacturers are also adding language to their coupons that the coupon may not be auctioned for sale (at venues such as eBay).
How to Report Coupon Abuse
If you would like to report coupon fraud, the CIC stresses that you do not confront the individual involved, but instead keep all of your records and contact the CIC (communications are kept confidential):
The Coupon Information Corporation
115-D South Saint Asaph Street
Alexandria, Virginia 22314
Coupon Information Corporation Phone Number: (703) 684-5307
You can also contact one of the law enforcement agencies listed below:
Federal Trade Commission: http://www.ftc.gov
Federal Bureau of Investigation: http://www.fbi.gov
Internal Revenue Service: http://www.irs.ustreas.gov
U.S. Postal Service: US Postal Inspection Service (USPIS)
What are Possible Penalties for Committing Coupon Fraud?
Even though it hardly makes national news, there have been many arrests of coupon crime rings and individuals.
While penalties vary depending on the number of laws that have been violated and the scope, the CIC says that the longest prison sentence for coupon fraud was for 17 years, and the highest financial penalty was for $5 million. Much more commonly, the penalties are a prison sentence of between 3-5 years and penalties in excess of $200,000.
Here are some examples:
- Arrest of couple who used coupons to score $30,000 in Walmart products, then set up a store in their basement to sell it all (at a about a $100,000 profit). They used the illegal coupon glittering technique, where they used high-value coupons on lower-priced items for which they were not intended. They received 20 months in prison.
- Arrest of Lucas Townsend Henderson, 22, known as “The Coupon Guy”, on May 12, 2011. Lucas wrote and distributed a book detailing how to make coupons. He was personally responsible for the fraudulent redemption of over $200,000 worth of counterfeit Tide coupons that Proctor and Gamble and retailers had to absorb.
- Arrest of Glenn Rodgers, 66, who created fake coupons for national brands including Gillette, Olay and Norelco on his home computer that ranged in value from $10 to $70. Target reported losses nationwide of $25,000-$30,000 directly related to him. He had $182,000 in sales on eBay from all of the free loot.
- John Stottlemire, 42, was arrested in 2007 for allegedly posting codes and instructions on how to circumvent the maximum printable coupons allowed from Coupon Inc.'s proprietary software. The allegation is that it is in violation of the Digital Millennium Copyright Act. Coupon Inc. represents 500 merchants.
- Cynthia Madej, 40, was arrested in 2007 for running a counterfeit coupon operation out of her home. Once she got free products with the fake coupons, she then sold the items on eBay and at garage sales for a profit.
- On May 11, 2011 charges were brought against Lucas Townsend who produced a fraudulent Tide Detergent coupon that cost P&G and retailers $200,000 in coupon redemptions over a 2-3 week period in December of 2010.
- In 2008, Target sent a $5 off $25 toy purchase coupon to 85,000 customers via email. Someone changed the coupon to read “$5 off any $25 purchase”, and the fraudulent coupon went viral.
- A counterfeit Free Doritos coupon began circulating in 2009. Frito-Lay had these removed from the websites, but then the counterfeit coupon spread very quickly by email to friends, family, and coworkers (I received one as well!), causing thousands to be redeemed at retailers around the nation. The estimated damage is in the millions of dollars, though they will not release the total dollar loss. Spokeswoman Aurora Gonzalez stated that “the dollar value of bogus coupons consumers took to retailers in just five weeks was equal to 5 percent of Frito-Lay's yearly payout for 250 coupon offers”.
- International Outsourcing Services (IOS), the nation's largest coupon clearinghouse, allegedly cost providers more than $250 million over 10 years by obtaining unused coupons never touched by a consumer, mixing them with redeemed coupons, and sending them in for redemption. IOS directed its employees in a Mexican coupon processing plant to mix the unredeemed coupons with the redeemed ones. The brokers signed up stores that would claim the coupons came from them for a piece of the payback.
How to Spot Fake Coupons
If you are not paying attention or you do not know what to look for, then you may use a counterfeit coupon unknowingly. Here are some things to watch out for:
- Suspect a coupon if it is high-value and/or offers a product completely for free (note: this does not mean that you cannot get a product for free, but to do this you generally need to stack sales, store coupons, and/or manufacturer coupons, which is all legal; also manufacturers will mail consumers coupons for free products to replace a defective item, as a contest winner, or for a free sample).
- Print at Home coupons are typically legitimate if the actual coupon image does not show up on your computer screen when you press print. You can generally print two of each of these coupons per computer, and then when you click it a third time a window will pop up to tell you that you have printed the maximum allowable.
- If you see a coupon online to print that is for a free product with no purchase necessary, it is almost always a fake coupon.
- Don’t print coupons directly from internet coupon forums. Instead, follow the link or do a Google search for the company and that coupon in order to find if it is a legitimate money saving resource.
- Never purchase coupons online. People who sell coupons on eBay get around this by stating that they are selling their time and not the actual coupons. But this is shady at best; I have never actually purchased coupons online because it always seemed like a bit of a hassle. But after doing all of this research, I am very glad that I haven’t and will not ever do so in the future. Interestingly enough, eBay still has a coupon selling policy that permits sales of coupons in batches not to exceed 100 coupons in total, 20 identical coupons, or 5 coupon inserts.
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