They are everywhere – freebies, added benefits and loyalty schemes. Loyalty programmes, credits and schemes incentivise consumers to stay loyal to certain brands, retail outlets, airlines, banks, cellular providers and many other suppliers of goods and services.
As a consumer, chances are that you have shopped, flown, spent or phoned because of the so-called added benefits, points or cash-backs you can earn by doing so. It is often the thing with the added benefits that gets bought over a better product that does not have those loyalty benefits attached. This is why many suppliers use this as a tool to attract or keep consumers. What are the laws, rules, codes and standards that apply to them? You must provide loyalty programmes lawfully.
Loyalty Programmes and the law
Rewards are as valuable as money
The new Consumer Protection Act (CPA) says that loyalty credits or awards are a legal medium of exchange (like cash) when suppliers offer it as consideration for:
- any goods or services offered; or
- transaction contemplated,
under that loyalty programme.
This means that loyalty credits or rewards are just as valuable as cash. A loyalty programme customer or account number also falls within the definition of an account number under POPI.
Terms and conditions apply
Under the CPA, suppliers have a duty to ensure that the goods offered to consumers in loyalty programmes are in stock.
In most advertisements you will hear the “while stocks lasts”, “subject to availability” or “terms and conditions apply” at the end, which suppliers believe cover them if they are not able to satisfy the promises made.
Under the CPA, suppliers have a duty to ensure that the goods offered to consumers in loyalty programmes are in stock. A supplier can only restrict availability if they follow the rules in the CPA. Suppliers must give consumers advance warning (in writing) that the product or service may not be available for a certain time. They must give this notice at least 20 business days before the beginning of the restricted period and it may not be longer than 90 days (in one year).
No added costs or conditions
consumers must not have to pay or do anything extra to receive their loyalty benefits
Suppliers also cannot charge customers to pay for costs related to the service or product they are exchanging for loyalty points or benefits. This means that suppliers are responsible for all the costs for administering, processing and carrying out the loyalty programme. They also cannot require that consumer buy any other goods or services related to that transaction. In other words consumers must not have to pay or do anything extra to receive their loyalty benefits.
The CPA also requires that suppliers include certain prescribed information in every loyalty programme offer, namely:
- the nature of the programme, credit or award being offered;
- the goods or services to which the offer relates;
- the steps required by a consumer to participate in the programme or to receive any benefit in terms of the programme; and
- any person from whom, any place where, and any date and time on or at which, the consumer may gain access to the programme, or to any loyalty credit or awards in terms of the programme.
CPA warranty of quality and other protective measures
consumers will be fully protected against defective, unsafe and hazardous products
The loyalty programme provisions in the CPA says that suppliers offering loyalty programmes may “not require the consumer to accept an inferior quality of those particular goods or services than those generally available to any other consumer on the same date who tenders a different form of consideration”. This means that the implied warranty of quality that usually applies to goods and services will apply here as well.
Because the loyalty benefits are legal forms of exchange, the goods given in return will also be subject to the CPA. This means that consumers will be fully protected against defective, unsafe and hazardous products in the same way as a consumer who purchased goods and services with cash or on credit.
Processing of personal information
Loyalty programmes process a lot of personal information and this must be done lawfully in accordance with POPI.
How can we help you?
If you are a supplier who offers loyalty credits or rewards, you need to review your existing customer loyalty programme or design a new loyalty program to ensure that you comply with the relevant law. We can help you by:
- providing training on the law (including CPA and POPI) specifically focusing on loyalty programmes;
- help you develop or review your current loyalty programme;
- help you draft your loyalty offers in plain language so as to comply with the CPA; and
- provide ongoing assistance as your programme progresses.