Harvard Coop members began to face the shock of drastically lowered rebate checks yesterday.

Coop President Milton P. Brown '40 announced that rebates on purchases during the fiscal year ending June 30, 1970, fell by more than half to three percent on cash purchases and one per cent on charge purchases.

"From the point of view of earnings and patronage refund this has been the worst year in the modern history of the society," Brown said in a letter distributed with the patronage checks, which were available beginning yesterday.

Brown listed five causes of the Coop's financial problems:

The rise in the number of rebates because of the new policy of giving rebates to charge purchasers who pay late;

The burdens of wage increases and of a business depression, the latter partly "because of traffic and parking difficulties";

The expenses of financing expansion;

The $30,000 cost of revising the bylaws and holding the first elections for student directors;

The increase of 40 per cent in shoplifting-the total cost of errors in record-keeping, inside pilferage and shoplifting came to $525,000.

The patronage refunds for cash and charge purchases were ten and eight per cent until 1966 when they dropped to eight and six per cent. They fell again last year to seven and one-half and five and one-half per cent.

"Our new credit arrangement with the Harvard Trust Company didn't save us as much money as we hoped," Alexander Zavelle, Coop general manager, said last night. "But we did save money, and we think we can save even more next year.

"We'll bounce back this year," Zavelle said. "At this time next year we will have a big surprise for everyone."

The Coop's financial picture is actually even bleaker than it at first appears. Of the $215,000 available for patronage refunds, about 75 per cent is the result of new accounting practices. Without these adjustments there would have been a very small patronage refund on cash purchases with none at all on charge purchases.