Can loyalty schemes be trusted?

Loyalty schemes are becoming increasingly popular, with almost nine in 10 adults being a member of a loyalty scheme, according to a recent ACCC report.

However, there are some concerns about certain terms and conditions where consumers have limited control over how their personal information and other data could be used by loyalty schemes and with whom it could be shared.

ACCC chair Rod Sims says that the privacy policies of these schemes are frequently very vague. 

“The data that loyalty schemes collect can be used to profile consumers and produce insights about their purchasing behaviour,” he explains.

“These insights about consumers may then be shared with or sold to third parties.

“Consumers may also be shocked to find that some schemes collect their data even when they don’t scan their loyalty cards, or that they combine it with data from other sources that they might not even be aware of.”

Sims adds that some schemes generate between $110 and $370 million a year by selling customers' data to other businesses.

“Most people think they are being rewarded for their loyalty with discounts or points, but in reality some schemes are building up detailed profiles about consumers and selling those insights to other businesses. Selling insights and access to loyalty scheme members are becoming increasing sources of revenue.”

However, consumers have not been able to redeem their points in the way they expected, for example, when trying to get free flights.

“Many people think they can redeem their points for a free flight, but in some cases, the cost of purchasing an airfare without using points may be similar to the cost of a flight using points once the airline adds on taxes and charges,” says Sims.

Loyalty scheme operators must ensure they comply with the Australian Consumer Law, including by avoiding statements that are incorrect or likely to create a false impression, and avoiding unfair contract terms.

“Loyalty schemes also need to review the way they explain to customers how their schemes work, and how they notify their consumers of any reductions to the benefits offered.”