Speedier rebates - for a price

'Tis the season, once again, for rebates. Most people, me included, hate rebate hassles with a passion. A new service, Rebate Remedy, says it can help.

It works like this: You sign up with Rebate Remedy, fill out a form assigning your rebate to them and send them all the paperwork by mail. They review your rebate information, and if everything is in order they mail you a check - or send it electronically using PayPal. From there on out you're out of the loop. They deal with the rebate servicer and you walk with your money - less Rebate Remedy's commission. David Sheriden, a founder of the startup, says the main benefit is that you get your money sooner. Reducing user frustration, he says, is a win-win proposition. "I am trying to make rebates positive for consumers as well as manufacturers," he says.

While most rebates require six to eight weeks to process, Rebate Remedy issues payment within three to five days of receiving your paperwork - sooner if you use PayPal. But there's no free lunch here. Rebate Remedy takes a piece of the action for its troubles. Says Sheriden "..most people would rather have their money in days not months, even if that means giving up a percentage."

But that percentage can be substantial - especially these days, when every dollar counts. Rebate Remedy's commission structure includes a $2.50 processing fee per transaction plus another "processing fee" of between 20% and 30% of the rebate amount, depending on the rebate's face value. As the rebate value increases, the percentage that Rebate Remedy takes goes up, not down. After fees, your cut of your $25 rebate will be $17.50. A $30 rebate will net you $20. A $100 rebate leaves you with $67.50.

Rebate Remedy Pricing

Instant Rebate or Instant Loan?

You could think of Rebate Remedy as a more or less instant (within one week) rebate for those who can't wait six to eight weeks for their money. But you might also think of it as a variation on the payday loan business model - with similarly high interest rates. In this case the vendor takes the interest from your rebate advance and the principal is paid six to eight weeks later, when the lender receives your rebate check. Replace the word "processing fee" with the term "interest" in the fee structure and there you have it: a rebate payday advance.

The actual dollar numbers involved sound small, but a 30% interest rate on an eight-week rebate payday loan, when extended out over 12 months, would amount to an annual interest rate somewhere in excess of 180%.

But Sheridan says his customers aren't complaining. "The fees we charge from what we have heard back from customers is fair. Please don’t forget we are paying consumers in days and waiting months for our return." And getting paid well for it.

Rebate Remedy is developing partnerships with vendors so that buyers can sign up for the expedited rebate when they make a purchase. "This is great for consumers because they can purchase products and take care of the rebate all at once," Sheriden says.

The hassle factor

But if getting your money faster sounds attractive, Rebate Remedy doesn't entirely solve the biggest hassle with rebates: The paperwork and the fine print.

Sheriden acknowledges that according to industry studies only about 40% of rebates are claimed. Part of the reason is that it's a hassle to do the paperwork. To redeem a rebate offer you must meet a confusing array of terms and conditions that are often spelled out in the small print. For example, you must include the original UPC code printed on the box. You must submit an original copy of the rebate claim form. The original receipt is required - no copies please. No rebates will be mailed to post office boxes.

Follow those rules and, if you are lucky, a rebate check will arrive. If you did something wrong (or sometimes even if you didn't) you may get a rejection letter - or never hear from the rebate processing company at all.

Rebate Nightmares

A few years ago I had to complete six different rebates for a single purchase after buying a "free" computer offered by Circuit City on Black Friday - the day after Thanksgiving. Each offer - for the monitor, printer, etc., had its own terms and conditions. In another instance I submitted a rebate and forgot about the no P.O. boxes rule. I received a rejection letter with no address or phone number for appeal. Calls to the the manufacturer went unanswered. I never received my money.

It's no secret that third party processors that handle many rebates don't exactly have a sterling reputation for customer service. And it sounds great to just get your money and let a third party worry about dealing with them. But Rebate Remedy needs that same paperwork - you just send it to a different address. What's more, Rebate Remedy will check what you sent in with those terms and conditions and if you didn't cross all of your "t"s and dot the "i"s you won't get your rebate until the problem is addressed.

For some customers Rebate Remedy may be worth the price just to get the rebate hassle over and done with (although I am not one of them).

But in the grand scheme of things, Rebate Remedy is not a remedy at all, but a symptom of the greater problem that exists within the rebate business model.

Rebates are hated by retailers, manufacturers and consumers alike. The industry continues to use them because they get consumers to buy, but the programs are costly to administer and create customer service nightmares. By adding Rebate Remedy to the process you now have two third-party servicers acting as brokers - and getting a piece of the action on each end. The rebate processing house gets paid by the retailer or manufacturer, while Rebate Remedy takes a cut of the rebate from the consumer side. So what does that $25 rebate really cost?

Perhaps with money so tight these days, vendors will see their way clear to forgo this folly in favor of the more direct approach. They could just put that item on sale for $25 off and be done with it, but retailers complain that jaded consumers are immune to sale prices these days. To keep up the illusion of the rebate, then, retailers could simply call the sale price an "in-store instant rebate," a practice which is, in fact, becoming more common. Why not make that approach universal?

Manufacturers would lose the revenue they don't currently return to the 60% of customers who don't ever fill out and mail those annoying, arcane rebate forms. But they also would gain customer appreciation and loyalty.

Now that would be a win-win remedy.

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