Consumer Protection Act crimps loyalty programmes

“This is not a matter of ‘tweaking' here and there but, in many cases, of completely rewriting the terms and conditions of loyalty programmes,” says Ina Meiring, director at Werksmans Advisory Services.

She also warns that companies cannot afford to wait to start revising their loyalty programmes. “If your existing loyalty programme will still be in place on that date, you must make sure it complies now.” The reason is that these programmes will be regarded as ‘pre-existing loyalty programmes,' key aspects of which will be governed by the Act.

No more ‘not available'

One example, with major implications, is the common practice of imposing limitations on when, how and what goods and services consumers can exchange for loyalty credits. “Currently, it is not uncommon for loyalty programmes to say that goods or services are ‘subject to availability'. Under the Act, companies have a duty to ensure that the goods offered to consumers in loyalty programmes are in stock. Companies will in future only be allowed to impose restrictions on availability if they follow the correct procedure.”

This entails giving consumers advance warning, in writing, that a product or service will not be available for a certain period. “In turn, that period may not be longer than 90 days,” she says.

No additional charges

Another change is that companies will not be allowed to carry on with another relatively common practice, asking consumers to pay for any other costs linked to the product they are exchanging for loyalty points.

“Businesses may not impose any monetary charge for administering, processing or handling a loyalty programme transaction if the consumer is required to pay a periodic fee to remain a member of the programme. Furthermore, companies will be obliged to make sure that prescribed information is carried on all loyalty programme offers and documents meant for members.”

Quality guaranteed

She says that the sponsors and suppliers of loyalty programmes should also be aware that all programme-related transactions (meaning goods and services supplied in exchange for loyalty credits or awards) will be subject to the Act. “This means consumers taking part in loyalty programmes will be entitled to the full protection of the Act.” This protection includes, for example, the right to safe, quality goods and recourse for hazardous or defective products.

“The protection offered by the Consumer Protection Act for consumers is to be welcomed. Companies would be well advised to start revising their customer loyalty programmes sooner rather than later to determine compliance,” concludes Meiring.