Can the State claim uncashed rebate cheques?

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By: Wise Marketer Staff |

Posted on May 16, 2006

Can the State claim uncashed rebate cheques?

A rapid rise in consumer rebate spending - an estimated US$6 billion per year in the US - has focused some potentially unwanted attention on rebate sponsors' obligations with regard to uncashed rebate cheques, according to promotions firm Promotional Marketing Insights.

In the rebate industry, the term "slippage" refers to funds resulting from uncashed rebate cheques. Officially, in the US, the reversion of unclaimed property to the state in the absence of legal heirs or claimants (called "escheatment") may pose a real problem for marketers that rely on rebates. Currently, many uncashed cheques are not escheated, leading to many of the states taking a more active interest in the process.

With state tax revenues shrinking, enterprising legislators searching for new revenue sources realised that at least some of the rebate cheques issued by marketers are never going to be cashed, and arguments are already being put forth that they should become the property of the state.

Who's money is it? Some states argue that the party responsible for escheatment is the account owner (often the fulfilment provider), while others suggest that it is the marketer's responsibility (because it was their money and their incentive programme to begin with).

According to Promotional Marketing Insights, one major problem is that some unsuspecting marketers routinely allow rebate fulfilment providers to retain monies from uncashed rebate cheques in exchange for lower rebate processing fees.

Conflict of interests So this may now create the situation where rebate promoters have promised those funds to a fulfilment supplier, only to discover that the state treasurers want the same pool of money.

When Promotional Marketing Insights examined the situation, it found that there are 42 State Treasurers currently demanding that certain fulfilment suppliers disclose how much money results from uncashed rebate cheques.

Shift in rebate tactics If suppliers are required to give up those funds to the state treasury, it may herald not only financial trouble but a significant change in the way rebates are handled and issued.

And if the state treasuries are unable to demand that fulfilment providers escheat their unredeemed funds, the next port of call in the continuing battle may well be rebate sponsors themselves.

How to escape Some marketers are already reported to have gone as far as switching rebate delivery mechanisms from rebate cheques to prepaid debit cards (which bring a different set of challenges in their own right), while some others have switched to paperless rebates to avoid the issue altogether.

The message, the company warns, is that CFOs and CMOs from promotionally active companies that use rebates as a sales promotion tactic should be concerned, and take early action to avoid the problem before it strikes.

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