The Story Begins (original content from 08/2004)
During June of 2004, I was reading a free local advertising paper (e.g., Big Nickel, Penny Saver, Shoppers Guide), and I noticed a display ad featuring two "Great Deals" from a local equipment dealer. First, the dealer offered a new, brand name 25HP tractor for $16,995 less a $10,000 rebate for a final price of $6,995. Next, the same dealer offered a new, brand name ATV for $6,995 less a $3,000 rebate for a final price of $3,995. I was intrigued, but I did not follow up on the offering until I saw several additional advertisements by the same dealer in the same publication.
In August of 2004, a friend and I visited the dealer and inquired about the rebate promotion and specifically about its application relative to the new, brand name ATV. The dealer was clear that the rebate program was administered by a third party, Cashback America, Inc., and NOT by the dealer or the ATV manufacturer. The dealer explained how the program works and emphasized that, "if you follow the rules, you will get the rebate." He also said that, "Cashback America has been in business for 14 years and has never failed to pay on a legitimate rebate claim." The dealer also told us that Cashback America uses an "independent administrator," United States Administrative Services Company, to administer the rebate claim funds. After receiving further details and obtaining a sample rebate coupon and explanation, we went home to consider the offer. As I examined the "Sample" rebate form and instructions, I became concerned about the legitimacy of the program and Cashback America, Inc.
Being somewhat of an internet search wizard, I was very surprised at the lack of legitimate search results returned by Google for "Cashback America." In fact, Google returned only three results for "United States Administrative Services." Why were these businesses not better documented on the internet? Any business with any history whatsoever has consumers who love it and consumers who hate it; and, most every major business is discussed to some degree by consumers on internet websites and discussion forums. I explored further and found records for Cashback America (CBA) and United States Administrative Services Company (USAS) at both the Orlando Better Business Bureau and the Florida Secretary of State websites:
Florida Department of State Corporation Records:
Orlando Better Business Bureau Records:
I was surprised to see that both firms did not have records prior to 2000. I was also surprised to see Ronald K. Gooding's name associated with both companies, as USAS was represented by both the merchant and on the "Sample" rebate as an independent administrator.
My further searching revealed only a few US firms actively promoting the Cashback America rebate program on the internet. However, in the Montana-Wyoming region where I live, I found several dealers/retailers promoting the program. The Cashback America website itself had a fair amount of information, but I was disappointed at the lack of specifics about the inflows and outflows of the funds used to pay rebates. I was also amused at the organization's non-standard email address, cashbackamerica@aol.com.
Cashback America Uses an AOL Email Address as Their Main Point of Contact...???
Further Research
Thus far, I have discovered the following information about the various Cashback America Programs:
1) I believe the rebates are always deferred, usually requiring a consumer to wait from 12 months to 54 months before the consumer must follow a complex (almost comical) submission process to make a claim.
2) I believe that depending on the dollar amount of claims made during the week when you submit your rebate AND the amount available in "The Fund," (whatever that is) valid claims are paid out "Up To" the claimed rebate amount. In other words, if claims exceed funds available, you only get paid a prorated amount.
3) One participating dealership disclosed that the dealership was being charged around 13.5% of the face value of the rebate to participate in and promote the program.
4) CBA openly promotes its expectations that few consumers will remember to submit the rebate claim (I believe they expect a redemption rate of around 15%). However, because of the "Up To" phrase, I believe CBA does not really care how many valid claims are made, as additional valid claims simply reduce the amount available for each claimant, not for CBA.
In my opinion, the whole practice is extremely deceptive and should be investigated thoroughly by state Attorneys General. I do not know if the program rises to be classed as fraud or a ponzi scheme, but I suspect things are less than kosher. When was the last time you ever heard of a rebate program where the payout amount depended on 1) how well the administrator invested the funds and 2) how many other valid claimants lined up with valid claims? In my opinion, the program seems more like an investment vehicle than a rebate program. Where is the disclosure?
FOLKS, THIS IS AN IQ TEST.
Your Cashback Entitlement
The most critical part of the rebate form and conditions is found in the paragraph entitled, "Your Cashback Entitlement:"
"Congratulations! This promotional Cashback Voucher entitles you to claim up to 100% of the amount shown on the face of the rebate voucher 11 months after the issue date shown subject to the conditions of the promotion outlined for you below. We have appointed United States Administrative Services ("USAS") to act as independent administrators for the program. Funds are placed in interest bearing financial instruments by USAS for all Vouchers that are issued by the Merchant for the sole purpose of paying future valid claims ("The Fund"). The amount payable to each Voucher holder validly claiming will be dependent upon the value of The Fund and the total weekly value of valid claims received. If the total value of valid claims made in any week is smaller than the total amount in the fund for that week valid claimants will be paid 100% of the amount shown on the face of the Voucher. In the unlikely event that the total value of valid claims made in any week is greater than the total amount in the fund for that week the fund will be divided on an equal percentage basis among the valid claimants."
I believe this most critical disclosure is easily missed by most consumers. I offer a few questions to consider as you read the above paragraph:
1) up to 100% - so, I may receive less than the stated rebate amount; why didn't the retailer advertise the rebate this way. Why didn't the retailer explain the "up to 100%" clause when they were trying to close the deal?
2) subject to the conditions - consumers should carefully read the 11 conditions detailed in the "Cashback Promotion Conditions" section of the rebate document. For instance, condition #1 asks you, the consumer, to ensure that the merchant has met all required terms and conditions of the offer. How do you know that the merchant has done this? Will the merchant guarantee the rebate? Check out condition #4 (my personal favorite), which says you can't use any reminder service whether "commercial, free of charge, or otherwise." Can I use a post-it note? How about a tattoo?
3) United States Administrative Services and independent administrators - Is USAS really independent from Cashback America? How do you know? How does the merchant know? Why is Ronald K. Gooding named on Florida Secretary of State documents pertaining to the origin of each firm? (Cashback America Corportate FilingsUnited States Administrative Services Company (USAS) Corporate Filings) and
4) Funds - What funds? I believe CBA only collected 13.5% of the rebate amount from the merchant. How on earth do I know how much of this fee went into "The Fund?" The consumer simply has NO IDEA because there is no disclosure!
5) interest bearing financial instruments - what banks are holding the funds? Why does CBA not explain its "escrow" process in detail on its website or in any published disclosures? Who runs USAS? Inquiring minds want to know...
6) issued by the Merchant - so are the funds for my rebate held separately from funds for other merchant's rebates? Don't ask, don't tell.
7) The amount payable to each Voucher holder validly claiming will be dependent upon the value of The Fund and the total weekly value of valid claims received. - Wow, I hope I pick a good week to submit my claim. Can you tell me the accounting and investment controls for The Fund? Is newly received money used to pay old rebate claims? Consumers deserve disclosure!!
8) If the total value of valid claims made in any week is smaller than the total amount in the fund for that week valid claimants will be paid 100% of the amount shown on the face of the Voucher. - I'm not sure I understand. Why would the fund fluctuate so much from week to week? I thought my rebate funds were in escrow. Again, I hope I pick a good week. I know I only get one shot at this (condition #7)
9) In the unlikely event that the total value of valid claims made in any week is greater than the total amount in the fund for that week the fund will be divided on an equal percentage basis among the valid claimants. - Who says it is unlikely the value of the claims will exceed the total amount in the fund? Is this product rated like an insurance product? Again, NO DISCLOSURE.
In short, if you wait 11, 35, or 54 months AND precisely meet the exact eligibility and submission requirements outlined in the rebate agreement, you MAY receive "up to" 100% of the stated rebate amount, depending on 1) how many other valid claims are submitted and 2) how much money is in "The Fund," which is a black hole in terms of disclosure.
My Sample Calculations
Say a retailer sold 10 tractors with $10,000 rebates on each one. I believe the retailer would pay CBA $13,500 (13.5% of $100,000) for promoting, administering, and funding the rebate program. In 54 months, 10 consumers would be eligible for rebates of "Up To" $10,000.
If all 10 consumers turned in eligible vouchers, CBA would need $100,000 in "The Fund" to pay out in full. How can CBA turn $13,500 into $100,000 in just 54 months, an annual return of over 56%? Well, in short, I believe they won't. Instead, they are counting on slippage, i.e., some consumers will fail to claim their rebates, some will not submit the claim correctly, some will die, etc.
Let's say that CBA is correct and only 15% of consumers make valid claims. In this case, assuming no dollars for administration or profit, CBA will need a return of only about 2.4% to pay out in full. I believe that any redemption rate above 15% will cause CBA to pay less than the stated rebate amounts.
Let's look at some scenarios for redemption rates falling between CBA's 15% expectation and the (equally) unlikely 100% redemption rate:
| My Estimate of Retailer Paid-In Amount |
Redemption Rate |
Full Rebate Payout |
My Estimate of CBA's Required Rate of Return |
| 13,500 |
15% |
15,000 |
2.4% |
| 13,500 |
20% |
20,000 |
9.12% |
| 13,500 |
30% |
30,000 |
19.4% |
| 13,500 |
40% |
40,000 |
27.3% |
| 13,500 |
50% |
50,000 |
33.8% |
| 13,500 |
60% |
60,000 |
39.3% |
| 13,500 |
70% |
70,000 |
44.2% |
| 13,500 |
80% |
80,000 |
48.5% |
| 13,500 |
90% |
90,000 |
52.4% |
| 13,500 |
100% |
100,000 |
56.0% |
Realistically, if the redemption rate is anywhere above 20%, CBA and USAS would be better off simply investing money rather than messing around with consumer rebates, they would, in short, have a "money machine."
Are You Going to Forget a $10,000 Rebate?
Why
Why did I build this site, and why did I conduct the indicated research? That is a reasonable question, and I'll provide a brief answer: 1) I believe the Cashback America program to be misleading and unfair to consumers; 2) I believe participating merchants should be sophisticated enough to realize that the Cashback America program is misleading and unfair to consumers; and, 3) I believe publishing my findings and opinions on the internet to be an efficient means of educating consumers, merchants, and (hopefully) state/Federal investigators of the nature of this program.
Please continue to send in your thoughts and experiences.
My Advice
If you are considering making a purchase decision based on the promised rebate value associated with the purchase, think again, carefully. I suggest you 1) carefully examine the rebate documents, 2) explore the Cashback America website, 3) consider the calculations presented above, and 4) never go back to the promoting dealership because they insulted your intelligence by promoting this offer.
FOLKS, I'M TELLING YOU...THIS IS AN IQ TEST, PLEASE PASS.