The California Attorney General sent a sweep of notices to businesses with loyalty programs alleging noncompliance with the California Consumer Privacy Act.

Why are loyalty programs implicated in the California Consumer Privacy Act (CCPA)?

Under the CCPA, "financial incentives" include any "program, benefit, or other offering, including payments to consumers, related to the collection, retention, or sale of personal information." Often, these appear in connection with loyalty programs where consumers get discounts for purchases once they provide their contact information.

Similarly, an offer to receive a 10% off discount after inputting an email address or phone number would qualify as a financial incentive. Other programs that may be considered a financial incentive include "internet price" offers where consumers must enter contact information to see the "internet price" of a product.

To lawfully operate a financial incentive program under the CCPA, certain threshold requirements must be met. Namely, companies offering these incentives must conduct a data valuation, provide notice, and avoid discriminatory practices for non-participants and/or those that opt-out. Businesses may offer a financial incentive, price, or service difference if it is reasonably related to the value of the consumer's data. Loyalty programs were several examples of financial incentives that must not have discriminatory practices in the CCPA regulations.

Who received these notices?

Letters were sent out to major corporations in the retail, home improvement, travel, and food and service industries. These businesses have 30 days to cure and come into compliance with the law. Attorney General Bonta specifically noted offline instances of data collection as well, noting that "brick and mortar stores are collecting our data – and they're finding new ways to profit from it." Examples used in the statement are loyalty programs where consumers enter a phone number for a discount at the supermarket, use rewards for free coffee at a local coffee shop, and earn points to purchase items at a clothing store.

What to do?

Businesses can expect to see continued enforcement action for CCPA compliance issues. The press release, available here, affirms that the Attorney General is conducting investigative sweeps. As a reminder, the Attorney General also released a consumer tool where consumers can directly notify businesses of potential violations as well.

Businesses are urged to review loyalty programs and other activities that may be considered a financial incentive and ensure, or prepare for, compliance with the CCPA. More information on the requirements surrounding financial incentives can be found here.

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