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Customer loyalty programs have come under intense scrutiny in an ongoing review from the consumer watchdog.

Thousands of consumers have complained about being misled by loyalty programs, according to a draft review into customer loyalty schemes from the ACCC.

The ongoing probe into loyalty schemes like Flybuys, Woolworths and Priceline’s Sister Club has urged retailers not to mislead customers or subject them to unfair terms and conditions.

The ACCC’s draft report, released on Thursday, calls on customer loyalty schemes such as frequent flyer programs, supermarket and credit card operators to put consumers first – with 90 per cent of Aussie consumers estimated to be a member of a loyalty program.

The watchdog’s draft report flags serious concerns about some retailers failing to present terms and conditions in a way consumers can readily understand, unfair changes to T’s and C’s and the misuse of consumer data.

Retailers failing to advise consumers about critical components of loyalty schemes are leaving consumers in the dark, the report says.

“The ACCC has received complaints from customers of loyalty schemes that alleged they had not earned, maintained or redeemed their points in the manner they anticipated, with these consumers reporting that they did not obtain any benefits from participation at all.”

The major review focuses on whether consumers are properly informed and receive the benefits spruiked by these schemes, how data is used and the potential impact of loyalty schemes on competition.

An increasing number of complaints about loyalty programs sparked the review after the consumer watchdog received more than 2000 reports about loyalty schemes in five year period.

Retailers urged to rethink schemes

The report calls on retailers to re-evaluate business practices to ensure they comply with the consumer law.

Improving communication with customers by making T’s and C’s easier to understand and prohibiting unfair contract terms are two key recommendations put forward by the report.

Being more upfront with consumers about the handling of their data and strengthening privacy laws is also essential, according to the ACCC.

“Loyalty schemes should consider whether consumers are being misled or subject to unfair contract terms,” the report says.

“Further, loyalty schemes should review their approach to presenting terms and conditions to ensure consumers have a genuine opportunity to review and understand their policy and operation.”

The ACCC is urging consumers to come forward with any concerns of malpractice.

The watchdog’s final report is due later this year and stakeholders are being invited to make submissions.