Too good to be true? Consumers warned about the use of cashable vouchers

Toronto, August 26, 2003 - The Ontario Motor Vehicle Industry Council (OMVIC) encourages consumers to think twice before making a purchase based on so-called cashable voucher programs – a new sales and marketing initiative now being offered through a handful of dealers and other merchants in Ontario which raises more questions than it answers.

The cashable voucher program is presented to merchants as a promotional sales program that will “increase customer traffic flow, boost gross margins and eliminate discounting and customer price shopping.” In other words, consumers may pay more for the product than they normally would have based on the offer of a future windfall.

The program works as follows: when purchasing goods or services, participating merchants may offer customers the opportunity to claim a portion of their purchase price (up to a maximum of several thousand dollars) through the use of a “cashable voucher.” The voucher is issued by the merchant and claimed by the consumer at maturity – approximately three years’ time. In order to obtain the rebate, however, consumers are required to comply with a complex set of very strict criteria at the time of purchase and again at the time of maturity. Failure to meet all of the criteria results in disqualification. Even if all of the prerequisites are met, there is still no guarantee consumers will receive the full face value of the voucher at the end of the three-year period.

The voucher is provided at no cost to the consumer – other than the increased product cost – but the merchant pays 15% of the written value of the voucher to something called “The Consumers Trust” which administers the program and validates registrations and claims.

“If you think the program is too good to be true,” says Carl Compton, OMVIC’s Executive Director, “then chances are you should think twice about it. Not only is your claim denied if you fail to comply with the strict rules, but consumers should be sure they are not paying higher prices for goods today based on the promise of a future rebate. Marketing materials issued by B.C.-based marketing firm CP Promotions, Ltd. indicate the promotion will allow merchants the opportunity to charge full Manufacturer’s Suggested Retail Prices given that consumers believe they’re going to receive a future windfall.”

The marketing materials used to convince merchants to buy into the program state: “When using cashable vouchers the merchant is able to pay the full 15% cost of the voucher amount with little or no impact on their normal profit margins. In fact, in many cases merchants are actually able to INCREASE their gross profit per sale net of the 15% cost of the promotion.”

This arrangement will obviously benefit retailers, but with little guarantee to consumers.

OMVIC will be issuing a statement to Ontario’s registered motor vehicle dealers warning those participating in the voucher program to fully research the financial arrangements made for the 15% charges which are held until maturity as well as other liabilities they may be responsible for.

Participating dealers must also be in compliance with OMVIC’s marketing and advertising standards and refrain from printing misleading statements related to the voucher program.

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