I second what Billie Dee said. The customer service for Provo craft is really wonderful, and they are willing to work with their customers. So if your store won't replace it, try them, they'd likely just send you a new folder.
Which Happy Birthday folder is it? The A2 one or one of the folders that comes in the set of 4? I have all of the birthday folders I think, and all of them emboss well. It's probably just your folder.
Good luck and I hope they can help you out.