Rebate Strategies to Prevent Fraud & Stay Compliant


Rebates are one of the most effective ways to increase sales and gain visibility for a product or service. They allow manufacturers to reach price-sensitive shoppers while minimizing impact on overall margins.

However, before beginning a rebate program it is critical for brands to educate themselves on the rules and regulations surrounding rebate compliance. Third party promotions processors are well schooled in the various rules and offer consulting services that not only protect your brand, but also deliver additional strategies to help deter consumer fraud and save you both time and money.

Preventing Rebate Fraud


Rebate fraud costs brands hundreds of millions of dollars annually. Much of the fraud that occurs can be prevented through proper form design and fraud protection services. The U.S. Postal Inspection Service reports there are approximately 200,000 fraudulent consumers. The most common types of fraud schemes include:

  • Submissions by groups and organizations.
  • Multiple submissions using fictitious names and addresses.
  • Counterfeit rebate offer forms, register tapes and proofs of purchase.

Proper design of the rebate form will help deter fraudulent activity, but you still need to thoroughly review submissions before honoring rebate claims. Here are a few things brands and their fulfillment providers should look for to help reduce their exposure to rebate fraud.

  • Receipts that do not state the name of the retailer or store.
  • Consumers who request the rebate be sent to a PO Box
  • Computer generated address labels.
  • Similar handwriting patterns.
  • Postmark on the envelope differs from the return address

One of the best ways to deter rebate fraud is through the proper design of the submission form. Below are a few guidelines to follow, but be sure to have a legal team review the document to ensure complete compliance.

  • Clearly print the mail fraud statutes to serve as a deterrent and avoid claims of ignorance on behalf of the consumer.
  • Print your rebate offer form in at least two colors to prevent photocopying. Use screens, tints, watermarks and other anti-counterfeiting techniques.
  • Expiration dates should be limited to less than 6 months (3 months, where possible).
  • Clearly state that proof of purchase must be acquired only through purchase of the product.
  • Require store register tapes be dated and have store name on them.
  • State that rebate offers forms must be hand-written and no mechanical reproductions or name and address labels will be accepted.
  • State that rebate checks will be made only in the name of the requester.
  • Specify the exact brand(s) and size(s) required to be purchased.
  • Show cash redemption value of 1/100 of 1¢. This is a legal requirement in some states.
  • State that reproduction of this offer in any form voids this offer and violates copyright statutes.
  • Include void where prohibited by law language.

Staying Compliant


Many states have changed laws in recent years resulting in offers that were acceptable before, but are now illegal. Brands that are relying on rebate guidelines from even a few years ago may not be compliant. Compounding the situation is the fact that each state has the authority to create their own legislation surrounding rebate offers; therefore what is legal in one state may not comply in another.

For example, some states prohibit brands from mentioning an items post-sale price, unless they reveal the pre-sale price. Other states are even more restrictive and do not allow brands to mention the post-sale price at all. They can mention the pre-sale price and the discount (i.e. $3 off a $10 product), but they need to leave it up to the consumers to do the final math.

Regulators are also focusing on how a rebate is fulfilled. The federally-mandated Mail Order Rule requires brands to mail rebates within the timeframe that was promised in the initial offer. If no timeframe was given, brands have 30 days to fulfill the order from time of receipt. Brands that are unable to meet the deadline are required to send a first class letter to each consumer providing a reason for the delay as well as when they can expect to receive their rebate check.

Both federal and state regulators have stepped up their efforts to crack down on brands that do not comply with laws surrounding disclosure terms and rebate turn times. Companies have been charged, prosecuted and fined for failure to adhere to the legislative terms. While some brands can be intentionally deceptive in their tactics, some companies are simply unaware of the regulations and fall.

Selecting a Rebate Provider

When selecting a rebate provider there are seven key areas that should be considered prior to making a contractual commitment.

  • The company should have a strong history of providing rebate consulting, processing and fulfillment.
  • They should offer flexible rebate reward options including check, pre-paid card, retail check and premium incentives.
  • The company should have the ability to scan rebate forms for archival, audit and customer care reference.
  • The data entry capabilities of the rebate provider should yield both accuracy and scalability through technology and data entry operators.
  • The rebate provider should clearly state the processes and procedures it has in place to identify and handle fraudulent claims. Rebate providers must be committed to fast turn times and accurate processing.
  • The company should have a strong knowledge of escheatment policies, procedures and how they apply to each state.
  • They should offer complete transparency into your program by providing comprehensive, real-time reporting and experienced, proactive account management.


While there has been significant progress made with respect to rebate processing, brands must be vigilant and responsive to the ever-changing laws and regulations. Rebates implemented with a customer-centric approach can continue to be effective promotional vehicles, yielding great results for rebate sponsors, while leaving behind both positive and memorable customer experiences.

Category: Promotions Insights