Customer loyalty schemes are building up detailed profiles about people and selling those insights to other businesses, the consumer watchdog has said.

In a draft report, the Australian Competition and Consumer Commission said customers had limited control over how their personal information and other data could be used by loyalty schemes and with whom it could be shared.

“The privacy policies of these schemes are frequently very vague and don’t tell consumers who their data is being shared with or how it is being used, shared or monetised,” the ACCC chairman, Rod Sims, said on Thursday.

Sims said the data collected by loyalty schemes could be used to profile consumers and produce insights about their purchasing behaviour, which might then be shared with or sold to third parties.

“Consumers may also be shocked to find that some schemes collect their data even when they don’t scan their loyalty cards, or that they combine it with data from other sources that they might not even be aware of,” he said. “Most people think they are being rewarded for their loyalty with discounts or points but in reality some schemes are building up detailed profiles about consumers and selling those insights to other businesses.

“Selling insights and access to loyalty scheme members are becoming increasing sources of revenue.”

About nine in 10 adults are members of a loyalty scheme such as frequent flyer, supermarket or credit card programs, with the average Australian carrying between four and six loyalty cards.

The ACCC said some loyalty schemes generated $110m to $370m in earnings each year.

Consumers have complained to the ACCC about not being able to earn, keep or redeem their points in the way they expected.

“Many people think they can redeem their points for a free flight but, in some cases, the cost of purchasing an airfare without using points may be similar to the cost of a flight using points once the airline adds on taxes and charges,” Sims said.