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Managing the Risky Business of Loyalty Programs

Joe Mont | March 31, 2015

Reach into your wallet or purse. Chances are you have at least one customer loyalty card in there. Regardless of which business issued it to you, the arrangements are all pretty similar: You get discounts or rewards for using the card, and the business learns more about you and your buying patterns.

The compliance and privacy consequences of loyalty programs and their data, however … the arrangements around those can be pretty fluid. Amid the ever-increasing focus on data and privacy protection, it may be just a matter of time until regulators take a tougher stand on even the most basic loyalty programs.

The list of risks is long. How such data is stored and protected is ripe for scrutiny, experts warn. Are the terms and conditions customers signed being upheld, or will the Federal Trade Commission swoop in to slap an issuer with a fine for “unfair and deceptive practices”? Loyalty programs can also run afoul of antitrust laws, torpedo a merger, complicate a...

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