Look who’s benefiting most from your loyalty – and it’s not you

Big businesses boosting their earnings and selling out customers: ACCC.

loyalty schemes

Is your coffee shop loyalty card the most valuable one in your wallet?

Possibly so, according to a report from the Australian Competition and Consumer Commission (ACCC).

Customer loyalty schemes, including frequent flyer, supermarket and creditcard operators, are making millions annually by onselling insights about scheme members, according to an ACCC draft report that listed a series of concerns, including:

  • whether consumers receive the benefits advertised by loyalty schemes
  • unilateral changes by loyalty schemes to their terms and conditions, and poor communication about how their schemes work
  • poor disclosure about how consumer data is used and shared, including selling insights from consumer data to other parties without consumer knowledge
  • the sharing of consumer data with unknown third parties.

At least your coffee shop loyalty card gets you a free coffee after five or so coffees – no need to read the terms and conditions.

The ACCC draft report shows that almost nine in 10 adults belong to at least one loyalty scheme and that the average Australian has between four and six loyalty cards. Some of the most popular Australian loyalty schemes have more than 10 million members.

The report raises concerns about 'opaque'terms and conditions that could lead to consumers making ill-informed choices about their privacy. It also says consumers have limited control over how their personal information and other data could be used.

“The privacy policies of these schemes are frequently very vague and don’t tell consumers who their data is being shared with or how it is being used, shared or monetised,” said ACCC chair Rod Sims.

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

The ACCC says that loyalty schemes can contribute to a significant proportion of a company’s profits and that some schemes generate $110 million to $370 million in earnings each year.

“Most people think they are being rewarded for their loyalty with discounts or points,” said Mr Sims, “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.”

The ACCC said that it had received numerous reports from consumers that they hadn’t earned, kept or been able to redeem their points in the way they expected. For example some operators of loyalty schemes:

  • failed to adequately advise them about critical components of their loyalty schemes, including the need to remain ‘active’ by earning or redeeming points to avoid point expiry or restricted availability of redemption opportunities
  • made unilateral changes that unfairly restricted the benefits available, such as reducing the rate at whichcustomers could earn points, or the value of points previously accumulated
  • imposed high ‘carrier charges’ when points were redeemed for flights.

“Many people think they can redeem their points for a free flight, but in some casesthe 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.” Mr Sims said.

“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.

“Having put loyalty operators on notice, we call on consumers to contact the ACCC to report concerns. The ACCC will consider these concerns in deciding whether enforcement action will be required to effect broader change.

“The ACCC’s findings in this draft report also reinforce the recommendations of our Digital Platforms Inquiry Final Report for consumer and privacy law reform. In particular, the ACCC recommends strengthening the Privacy Act 1988 and broader reform of the Australian privacy regime to maintain effective protection of consumers’ personal information in the longer term.”

The ACCC also recommends that a prohibition against unfair contract terms be introduced and that a new prohibition against certain unfair trading practices provision be considered.

You can add to the conversation by contacting the ACCC via this link by 3 October.

Have you been able to use loyalty cards to your advantage? Or do you find turning points into rewards confusing and not worth the effort?

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    COMMENTS

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    Rosret
    10th Sep 2019
    11:14am
    If you always use cash then they just won't know who you are, when you shop and what you bought.
    jackie
    10th Sep 2019
    11:33am
    Rosret, even if you pay cash for your shopping and use a loyalty card they find out plenty from your purchases.

    The idea is to not use them at all. The plan is to eliminate cash completely for everyone. It's all about total control of the masses. The banks and their shareholders are behind it all. They are behind the cashless welfare card too. They first got into Howard's pocket. The failed trial cost $10,000 for each person on it. This has been happening for 10 years and the only people benefiting from it have been the banks and their shareholders. It never stopped addictions and poverty.
    KSS
    10th Sep 2019
    1:16pm
    They will if you use a loyalty card even if you do pay with cash Rosret.
    VeryCaringBigBear
    10th Sep 2019
    11:27am
    Simple. Learn the rules and play the game so you win not them.
    jackie
    10th Sep 2019
    11:35am
    VeryCaringBigBear, you are never a winner in their games. They are designed to control you. The occasional reward tightens the noose around your neck.
    VeryCaringBigBear
    10th Sep 2019
    2:39pm
    I'll remember that on my next annual free return flight and the 20c plus cents discounts on my fuel as I drive around the country. If that's a noose around my neck then I simply love it.
    Intellego
    10th Sep 2019
    4:25pm
    Love the irony of your name "Very Caring" BB; you care only about yourself and your beloved Lieberal Party vermin, for whom you troll.
    Gra
    10th Sep 2019
    8:10pm
    Intelligo - wow, almost wet myself laughing at the irony of your tag . Seems intelligence is exactly what you don't have.
    sunnyOz
    10th Sep 2019
    1:24pm
    It's not just 'buying coffee' loyalty cards or similar. What about loyalty to insurance compnaies, health insurers, energy providers, etc?
    A few years ago, I went to see my elderly aunt who was extremely upset. Aged 86, recently widowed, she had just got her home/contents insurance. She lived over the road from me - both our houses were of similar style, age, etc. I nearly passed out when I saw the cost of the renewal they wanted! So I hit the research trail, and ended up getting BETTER cover from another company for less than half what her renewal would have been.
    My aunt said - 'but I've been a loyal customer for over 20 years'. She simply assumed she would be getting the best deal. Even going online and getting a quote for the exact same figures, but as as a new customer, saw a much cheaper cost.
    It's a damn pain but every year, when ever I get any renewal, I hit the computer and check rates. If my current insurer/company will not match, I have no qualms about changing. Now a-days, loyalty means bugger all - you are actually penalised.
    Ted Wards
    10th Sep 2019
    2:21pm
    Privacy is an absolute illusion these days. The moment you sign up for email or many of the apps etc, or sign up to receive a newsletter your email is sold before you receive the first newsletter or offer etc.
    VeryCaringBigBear
    10th Sep 2019
    2:41pm
    Just use second date of birth and other details with a junk email address. Emil address gets too many emails simply delete it.
    Gra
    10th Sep 2019
    8:08pm
    I have both Coles Flybuys and Woolworths Rewards cards. I have no problem with either card but find the Flybuys card best. Points I have earned just with normal shopping have paid for numerous car services, new tyres, a couple of new phones, a Samsung tablet and other items. Whether others use loyalty cards I don't care, that is their choice. If they have been misled to believe they are being duped, used or any other ludicrous idea poor fool them.