R.I. law gives consumers rebates on spot

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01:00 AM EDT on Wednesday, July 19, 2006

BY PAUL GRIMALDI
Journal Staff Writer


A new Rhode Island law requires retailers to offer rebates on the spot to buyers rather than making them send off coupons or log onto Web sites to get their money.

Passed in the waning days of the General Assembly session, the bill went into effect July 3, without Governor Carcieri's signature.

Sponsored by Rep. Brian P. Kennedy, the bill mirrors Connecticut state law. The Hopkinton Democrat said he's tried several times to get the law passed here.

Under the law, retailers advertising a manufacturer's rebate on any sale item must apply the rebate amount at the time of the sale and complete the rebate redemption process themselves, rather than requiring the consumer to do it.

The law prohibits retailers from advertising a "net," or final, price for an item that includes a payment from a manufacturer -- unless the retailer gives the buyer the amount of the manufacturer's payment at the time of the sale.

"In many cases, [companies] assume consumers are going to forget all about it," allowing the businesses to keep the money, Kennedy said. "Offering a deal and then making the consumer jump through hoops to get it is inappropriate and not all that great a deal."

Rebates have become a contentious retail practice in recent years as the number of offers has mushroomed and the problems getting payments have multiplied.

Retail-industry research estimates that 40 percent of all rebates are never redeemed, said John Palangio, director of the consumer protection unit for Attorney General Patrick C. Lynch. That rate translated into $500 million in unredeemed rebates last year, Palangio said.

"The great disconnect is when you open your Sunday circular and see a price [advertised] -- that is the price eight or ten weeks later," after the rebate process is complete, he said.

Last year, Rhode Island joined 39 other states in a federal lawsuit against Young America Corp., a Minnesota company that processes rebates for manufacturers and retailers. State treasurers say the company, the nation's largest rebate processor, improperly keeps unredeemed rebates that should be turned over to the states as unclaimed property.

That lawsuit is pending.

Separately, Massachusetts filed suit against Young America to demand that it submit to an audit of $43 million in uncashed rebate checks. Bay State officials claim the company kept that amount over seven years in return for charging its clients lower fees. The arrangement could be an incentive to deny legitimate rebate requests.

The attorney general's office in Rhode Island regularly receives complaints from residents upset about "thick and confusing" rebate rules, Palangio said. Among them are hard-to-read fine print, tight deadlines, rules demanding proof-of-purchase seals from packages and requiring rebate documents be filed in triplicate.

But, he said, consumers who see the process through to the end are rewarded.

"Once you have gone through that painstaking process," he said, "manufacturers are pretty good about giving you the rebate."

Paul T. DeRoche, of the Rhode Island Retail Federation, said stores and manufacturers will have to adjust to the new law, as they have in Connecticut.

"It was a pro-consumer bill," he said. "[But] I'm not quite so sure the manufacturers would say the same thing."

Jerry Cerasale, a spokesman for the Direct Marketing Association, said member companies are urged to make rebates simple.

"DMA believes that any rebate offer should be clear to the consumer," he wrote in an e-mail to The Journal.

A CVS Corp. spokesman said the Woonsocket drugstore chain was aware of the new law, but declined further comment. Other retailers contacted for this story did not respond before The Journal's deadline.

The law may simply mean companies will do away with rebates in Rhode Island, DeRoche said.

"But you've got to let it play out," he said.

Kennedy, the law's sponsor, said it will take time for retailers and manufacturers to get used to the new law.

"My guess is it probably hasn't filtered out to every retailer in the state yet," he said.

In hindsight, Kennedy said, he would have set a later effective date for the law, giving retailers time to adjust advertising and accounting systems.

Palangio saud he expects some confusion as buyers and sellers get used to the new law.

"This is kind of landmark legislation as far as consumers in Rhode Island," are concerned, he said. "I think, when consumers become aware of this, there's going to be an avalanche," of complaints.

pgrimald@projo.com / (401)-277-7356