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Consumer Group Calls for Increased Scrutiny of Loyalty Programs

OTTAWA, November 13, 2013 – Consumers need more protection in their loyalty programs, according to a report released today by the Public Interest Advocacy Centre (PIAC) entitled, “Customer Loyalty Programs: Are Rules Needed?” The report based calls for a rebalancing of the scales between consumers and loyalty providers.

The report looked at the popularity of loyalty program branded credit cards and found a loyalty program is the primary factor that makes a card a consumer’s preferred choice. Such programs are a significant revenue generator for Canada’s banking institutions. In return for using their loyalty brand credit card, Canadian consumers typically receive about 2% of their spending, back in terms of rewards, unless they use a credit card with an annual fee. As a result, Canadians usually have to spend over $1000 to obtain a $20 reward. The study recommends an evaluation be done to assess loyalty programs and credit cards.

“PIAC is calling on policy makers to define ‘loyalty currency’ as a form of non-cash payment, with the intention of having loyalty currency enjoy protections similar to other forms of payment under the payments system in Canada” added John Lawford, Executive Director of PIAC. The report noted that consumers have little recourse when loyalty program providers unilaterally decide to devalue their loyalty currency, or change other terms and conditions of loyalty programs. In its recommendations the report concluded industry-wide guidelines be introduced relating to loyalty currency devaluation to provide greater certainty for consumers.

“The collection of consumers’ purchasing data is the prize for customer loyalty program providers,” noted Jonathan Bishop, PIAC Research Analyst, “the data is the main reason behind loyalty brand marketing which aims to both keep customers and have them spend on other products and services”.

Other recommendations in the report include the creation of a complaints body for consumers on issues that arise relating to the operation of loyalty programs, industry-wide guidelines introduced regarding the notice given to change loyalty program terms and conditions, loyalty program withdrawal, as well as for practices relating to the transfer and bequeathing of loyalty program currency.

Download the report at Customer Loyalty Programs: Are Rules Needed?

Download French edition of the report at Programmes de fidélisation de la clientèle ― des règles sont-elles nécessaires?

The appendices to the report are at this link.

PIAC received funding from Industry Canada’s Contributions Program for Non-Profit Consumer and Voluntary Organizations to prepare the report. The views expressed in the report are not necessarily those of Industry Canada or the Government of Canada.

For more information please contact:

Jonathan Bishop
Research & Parliamentary Analyst
Public Interest Advocacy Centre (PIAC)
(613) 562-4002×23
jbishop@piac.ca
www.piac.ca

John Lawford
Executive Director & General Counsel
Public Interest Advocacy Centre
(613) 562-4002×25
Mobile (613) 447-8125
lawford@piac.ca
www.piac.ca

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