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About loyalty schemes
Customer loyalty schemes offer points or discounts to boost repeat business.
Many businesses use customer loyalty schemes. This includes supermarkets and airlines, where they may be known as frequent flyer programs.
Things to look out for when signing up to a scheme
- Loyalty schemes often collect personal information. This information can be combined with information from other sources, such as social media accounts and web browsing.
- The business may create a detailed profile about members to send targeted advertising. A loyalty scheme may end up knowing more about their members than they are comfortable with.
Costs and value
- Weigh up whether using points is actually the cheapest way to buy something. It may be better to shop around for a better deal.
- Find out if there are fees. When using loyalty schemes, such as frequent flyer points to book a flight, there may be extra fees. In some cases, the cost of purchasing an airfare outright may be the same as using points to book a flight.
- Find out if the points earned in the scheme will expire. Many loyalty schemes have conditions about expiry of points.
- Be wary of making purchases simply to earn points.
Changes to the program
- Pay attention to any notices or emails from the loyalty scheme. These often describe changes to the program and its terms and conditions.
Ways for loyalty schemes to improve their practices
We carried out a review of customer loyalty schemes in 2019 and released a report with our findings.
The report recommended 5 ways to improve loyalty schemes. Some ways involved loyalty scheme businesses improving their practices with some suggested changes to the law to better protect consumers.
1. Terms and conditions should be presented clearly
Any changes to a loyalty scheme should be fair. Members and business should be given adequate notice.
A business should make sure:
- notification about expiry of point balances is clear
- frequent flyer schemes show any routes, seasons or classes of travel where ‘free’ seats are not available.
Before making a change in the value of points or earn rate, a business should:
- provide members with clear and timely notice and the opportunity to use their existing point balance
- consider providing members with some form of compensation. For example, an increased point balance.
2. Unfair contract terms should be banned
The Australian Consumer Law should be updated to include bans on unfair contract terms and certain unfair trading practices.
3. Automatic linking of payment cards should end
End the practice of automatically linking members’ payment cards to their loyalty scheme profile.
This is to prevent tracking purchasing behaviour and transaction activities when consumers don’t scan their loyalty card.
4. Data practices of loyalty schemes must improve
Loyalty schemes should:
- show information to consumers about how their data is handled
- give consumers control over their data.
5. Protections in the Privacy Act should be strengthened
Strengthen protections in the Privacy Act and broader reform of Australian privacy law
Recommendations for Privacy Act amendments include:
- updating the definition of ‘personal information’
- strengthening notification requirements relating to collection of consumers’ personal information
- improving consent requirements
- entities to erase consumer personal information on request
- the right to seek compensation for breaches of privacy.