The Australian Competition and Consumer Commission (ACCC) has recommended that consumer data protections under the Privacy Act need to be strengthened and a broader reform of Australia's privacy laws is needed, after it identified several concerning practices around customer loyalty schemes in relation to consumer privacy.
In its Customer Loyalty Scheme draft report [PDF], the ACCC has highlighted how customer loyalty schemes -- including frequent flyer, supermarket, and credit card operators -- are not properly disclosing relevant information, providing sufficient transparency, or giving consumers control of how their collected data is used and shared.
The report said loyalty programs are selling insights from consumer data to other parties without consumer knowledge, sharing that data with unknown third parties, and are providing only a limited ability for consumers to opt-out of targeted advertising delivered by third parties on behalf of loyalty schemes.
At the same time, the report highlighted how customer loyalty schemes do not present terms, conditions, and privacy policies in a way that can be readily understood by consumers.
The consumer watchdog believes such practices have the potential to cause "widespread consumer detriment".
"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," ACCC chair Rod Sims said.
See also: 3 things businesses need to know about customer privacy expectations (TechRepublic)
In addition, the ACCC has also made a draft recommendation for loyalty schemes to improve data practices, suggesting that companies need to review their approach to presenting consumers with information about how consumer data is handled, as well as provide consumers with more control over their data.
Specifically, the ACCC has recommended that loyalty schemes improve the clarity, accessibility, navigability, and readability of privacy policies; minimise information overload for consumers; end the practice of automatically linking customers' payment cards to their profile to track their purchasing; disclose to consumers the sources of third party advertising; and outline which entities consumer data is being shared and for what purposes.
The other draft recommendations that ACCC put forward as part of the report included the need for loyalty scheme operators to improve how they communicate with customers to ensure they are given adequate notice of any changes and for Australian consumer law to be amended to prohibit unfair contract terms and certain unfair trading practices.
The ACCC is seeking comments on the draft report until 3 October 2019, with plans to release a final report in late 2019.
The ACCC findings from this draft report reinforce similar recommendations that were made by the ACCC in its Digital Platforms Inquiry Final Report, which highlighted how Australians are still in the dark when it comes to the extent of the collection and use of their data by companies such as Facebook.
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