Coupon Fraud

Notable Cases & How to Prevent Coupon Abuse

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Coupons are a quintessential way for a business to incentivize more sales by giving customers a discount. But there are people who steal, duplicate, modify, sell, or otherwise intentionally misuse coupons to get more out of them than what the business intended. This is known as coupon fraud.

In this piece, we’ll discuss what coupon fraud is, how it happens, what its consequences can be (for both businesses and perpetrators), and what Trust & Safety teams can do to minimize the risk of it happening.

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What is Coupon Fraud?

Coupon fraud is the use of fake coupons, or the misuse of actual coupons, to derive more value from a promotion than someone would usually be entitled to. This can include using a coupon multiple times, changing its value or expiration date, or redeeming it for the wrong (or even no) product.

“Coupon glittering” and “coupon glitching” are terms that refer to specific methods of coupon fraud. They involve analyzing legitimate coupons for mistakes in how they were printed or programmed, and then deliberately taking advantage of any found errors to use coupons in unintended ways. For example, a person could redeem a coupon for a different size, style, or brand of the advertised product than the coupon’s terms and conditions would normally allow.

Also sometimes called “coupon abuse” or “promo abuse,” coupon fraud is a serious trust issue that affects businesses and consumers alike. For a business, coupon fraud costs it money, often forcing it to raise its prices to compensate for the losses. This not only punishes honest customers for something that isn’t their fault, but it can also erode their trust in the company if news of it being defrauded becomes public.

Why Does Coupon Fraud Occur?

In some cases, coupon fraud is unintentional and is simply the result of a consumer trying to save a bit of money. For example, a consumer may present a coupon that they don’t realize has been counterfeited, has an error on it, or is otherwise being used for a promotion it’s ineligible for. But a cashier may not realize this either (or choose to ignore it) and accept the coupon anyway.

Other times, coupon fraud is done deliberately. Some people may copy coupons and then use them at different stores. Others may steal newspapers or coupon inserts within them. Often, they will pressure cashiers to accept coupons that they know are illegitimate. They may do this to get deep discounts on high-priced items, or multiple purchases of hot-ticket items. Another standard coupon fraud scheme is reselling discounted items at full price to make a profit.

In the case of coupon glitches, some fraudsters learn how to decipher the barcodes of physical coupons to look for printing errors or the programming of digital coupons to find logical loopholes. Then they can change the coupon’s description – or even modify its properties – to present it as usable for something it wasn’t initially intended for. After that, they may try to use or even sell these exploitable coupons.

Is Coupon Glittering Illegal?

As a type of intentional coupon fraud, coupon glittering is illegal. It involves deliberately modifying and/or using a coupon in a way not allowed by its terms and conditions for undue financial or material gain.

This is almost always a violation of federal and regional laws in the US and other countries and can result in charges such as theft, larceny, and counterfeiting.

Notable Coupon Fraud Cases

Intentional coupon fraud is a serious crime that can have drastic consequences. To drive home that point, here are a few stories of criminal convictions involving coupon fraud.

Lori Ann’s coupon fraud

This 2021 coupon fraud case was one of the largest schemes of its kind ever uncovered in the US, causing an estimated $32 million in losses. It involved a woman named Lori Ann Talens and her husband, Pacifico Talens Jr., operating a coupon fraud ring out of Virginia Beach, Virginia from 2017 to 2020.

Lori Ann designed and printed counterfeit coupons that were virtually indistinguishable from real ones – and often for much higher values. She would then find coupon enthusiast groups on social networks and messaging applications and offer to sell the counterfeit coupons to members. Her husband would help her ship the coupons out through parcel delivery services (including USPS), and get paid through digital payment services like PayPal and Bitcoin.

The Virginia Beach couple’s coupon fraud operation was exposed when a suspicious customer reported them to the Coupon Information Corporation (CIC), a not-for-profit coupon fraud watchdog. The CIC’s audits led to investigations by the USPIS, and ultimately arrests by the FBI. Lori Ann was sentenced to 12 years in prison, and her husband was also sentenced to over 7 years in prison for his role in the fraud.

The ‘Queenpins’ case

Another of the most prominent coupon fraud cases in US history began in 2007 in Phoenix, Arizona. A woman named Robin Ramirez bought bulk quantities of counterfeit direct-from-manufacturer coupons made overseas. 

She then teamed up with Marilyn Johnson and Amiko Fountain to package and sell the fake coupons through SavvyShopperSite.com. The trio named their website after the legitimate (but unaffiliated) coupon magazine Savvy Shopper to make it seem credible.

Their fraud was discovered when affected manufacturers learned about the fake coupons through internal audits, and then hired private investigators to trace their source. In 2012, the Phoenix police and the FBI raided the women’s homes, recovering over $40 million worth of fake coupons. 

Ramirez was sentenced to 2 years in prison and 7 years of probation; Johnson and Fountain each received sentences of 3 years’ probation. The three women also had to collectively pay almost $5 million in restitution to the affected companies.

This case became the inspiration behind the 2021 coupon fraud movie Queenpins, starring Kristen Bell and Kirby Howell-Baptiste.

The ‘Connie Coupon’ fraud

This case from 1990 involved a woman from Boca Raton, Florida named Connie Arvidson. In her neighborhood, she became known as “Coupon Connie” or “Dumpster Lady” for her habit of rummaging through garbage containers to find coupons or proof-of-purchase seals on item labels. 

Besides using the coupons to save on groceries, she would also mail in the proof-of-purchase seals to make money from rebate programs.

Her coupon obsession led to her becoming involved in a $2-million operation based in San Antonio, Texas to buy and sell counterfeit coupons. When ringleader David Rackmill was arrested, he became an informant to help root out the other members of the ring – including Arvidson. 

For her role in the scheme, Arvidson was sentenced to over 2 years in prison for mail fraud and conspiracy.

How to Prevent Coupon Fraud

Coupon fraud can be difficult to detect and prevent. The main reason for this is that it can be a challenge to determine whether a person doing it is making an honest mistake, or is deliberately trying to defraud a company.

To cut down on the guesswork, here are some coupon fraud prevention techniques.

1. Emphasize education and communication regarding coupon fraud

A good starting point for a business wanting to stop coupon fraud is to educate its employees – especially its Trust & Safety team – on how to both recognize and report coupon fraud. Some common signs that a coupon may be fraudulent include:

  • Its barcode appears to be modified, or is missing
  • It’s for a “free” item, or worth more than the price of the item it’s discounting
  • It doesn’t require the user to purchase anything in order to redeem it
  • It doesn’t have any terms or conditions associated with it
  • The user had to purchase it from someone

If a business can identify a pattern of coupon fraud, there are several organizations it can contact to investigate, depending on what it believes the scale of the fraud to be. These include:

2. Limit the number of times coupons can be redeemed

Coupons should always have a limit on the number of times they can be redeemed by the same customer. So there should be some sort of quick identity verification process (usually email address or phone number) involved in using a coupon, so a customer doesn’t double-dip.

It can also be useful to place a cap on the total number of times a coupon can be redeemed. This helps not only to stay within the advertising budget but also to deter fraudsters from abusively redeeming offers over and over again.

3. Place additional conditions on the use of the coupon

The fewer restrictions on how a coupon can be used, the more vulnerable it is to abuse. Consider adding conditions such as requiring a minimum purchase before the coupon can be used. 

Or, in addition to the expiry date, specify a time-of-day window in which the coupon is valid. Another option is to place a geographic restriction – using IP addresses for digital coupons – on where a coupon can be used, to limit legitimate uses to areas actually close to a business.

4. Limit the number of partners used to distribute coupons

Deciding how many other companies to allow to distribute coupons is a balancing act. On one hand, more distribution partners means wider reach. On the other hand, it also means a greater risk of fraud if a partner doesn’t do its part to distribute the coupons securely.

5. Invest in advanced printing technology for physical coupons

If a business deals in physical coupons, there are new printing technologies that make them more difficult to counterfeit. These include microprinting, watermarks, and specific color combinations. 

They also include next-generation barcodes that are more difficult to decode, can void the coupon immediately after it’s used, require smartphone verification, and more. Consider using this technology on coupons that offer free items or heavy discounts on high-priced items.

6. Use random or custom digital coupon codes

A common mistake when making digital coupon codes is to represent them with easy-to-guess phrases. Codes like “10PCTOFF” are vulnerable to being brute-force guessed by scraper robots used by fraudsters to find and abuse coupons. Instead, randomize codes, and try to vary their length as well. You can also generate a unique code for each customer you send an offer to.

7. Monitor and gatekeep web traffic regarding the use of coupons

Configure website settings to allow robots from search engines (as this will help with exposure), but don’t allow any other robots. Also consider setting up a robot challenge (i.e. reCAPTCHA) for pages where users can input or submit information, to deter robots from rapidly creating accounts to abuse offers. 

In addition, use software that monitors web traffic and uses behavioral analytics to check for activity where fraudsters may be attempting to abuse coupons. An example might be an unusually high number of coupons redeemed in a short amount of time.

8. Place limits on cart abandonment rewards

Another way people abuse digital coupons is to put items in their shopping cart, then leave the website and wait until they are emailed a discount coupon enticing them to return and complete their purchase. Consider reserving these types of coupons for first-time shoppers, or setting other specific conditions on when cart abandonment coupons will be sent out.

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Stamp Out Coupon Fraud with Transaction Monitoring Services

Coupon fraud may seem like a small thing, but those small thefts can add up to big losses for both a business and its customers. Fortunately, there are ways to prevent coupon fraud before it starts, and to catch fraudsters in the act before they cause large-scale financial damage.

A key element of that is to have a Trust & Safety solution that monitors transactions involving coupons for suspicious elements: high transaction velocity, VPN use, fake verification credentials, and so on. 

Get in touch with us at Unit21 today, and let us show you how our platform can solve these problems to keep coupon fraudsters out of your system.