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Commission warns to be wary of cash-back schemes

Commission warns traders and consumers to be wary of cash-back schemes

The Commerce Commission is warning traders and consumers to be wary of cash-back schemes after receiving information that an Australian-based company, Cashback Australia Limited, is trying to get off the ground in New Zealand.

Cash-back schemes are typically promoted by their operators as a marketing tool for traders to attract customers. Under such schemes, traders can promote their products or services by offering rebate vouchers, enabling customers to redeem a portion of the purchase price after a specified period.

Director of Fair Trading Deborah Battell said that the Commission’s counterparts in New South Wales had issued a warning in January 2003 with respect to Cashback Australia due to concerns over the viability of the scheme the company operates and the fact that there were too many ways for businesses and consumers to miss out on the scheme’s benefits.

Cashback Australia lists a number of New Zealand companies it claims to be involved in the scheme on its website www.cashbackaustralia.com.au and has now registered itself in New Zealand as Cashback Redemptions NZ Limited.

“The operators of Cashback Australia promote the value of their scheme to traders through the concept of customers forgetting or failing to successfully redeem the vouchers, undoubtedly because the operators make it so complicated for customers to get their money back,” Ms Battell said.

The Commission understands that both the customer and the trader must register the claim with an Australian-based Trust within 14 days of the date of purchase. If a trader fails to do so, the customer’s claim will be rendered invalid.

“In the Commission’s view, this opens the scheme up to potential abuse by traders, over which consumers have absolutely no control. We are also concerned that there appears to be little protection for consumers should this happen.” said Ms Battell.

After the voucher is registered, the customer must wait for a specified period – between 13 and 51 months depending on the size of the claim – before contacting the company to claim the rebate.

“The length of the rebate period is dependent on the total amount of the rebate claimed, however it appears that this detail is not disclosed to customers until they contact the trader about the offer,” Ms Battell said.

Ms Battell said the Commission was also concerned that Cashback Australia had been misrepresenting in both promotional material and on its website that customers had the opportunity to claim up to 100% of their money back through the scheme. “The Commission is aware, however, that Cashback Australia has suggested to at least one New Zealand trader that they should never offer a 100% rebate, and that 50% would be more believable,” Ms Battell said.

“We have also received information that one New Zealand trader, advertised by Cashback Australia as a participating merchant, is not, and never has been, involved in the scheme,” said Ms Battell.

“Traders and consumers should ensure they know exactly what they are getting into before making marketing or purchasing decisions based on this scheme,” she said.

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