This New Law Could Make Points Expiry Illegal

A story on CBC this morning talks about Ontario MPP Arthur Potts introducing Bill 47, Protecting Rewards Points Act at Queen’s ParkThe essential elements of the bill are as follows:

  • Rewards points in Ontario wouldn’t be allowed to expire, and;
  • Any points that expired on or after October 1, 2016, would have to be reversed.

This is clearly a response to Loyalty One’s Air Miles new five-year expiry rule, to start January 1, 2017. Personally, I think it’s a wretched bill that would be bad for business and consumers.

Is this a good idea?

I believe in the freedom of contracting. People ought to be able to agree to whatever they want (of course within limits). In the case of rewards program expiry, you are either expressly agreeing to that expiry rule, or are agreeing for the introduction of an expiry clause in the future. In this case, personal freedom to contract ought to prevail.

The bill ignores the financial reality of rewards program. These programs have created a pseudo currency, subject to the same market forces as any other currency. Look at Aeroplan – as they issue more miles through their new TD joint-venture, they had to devalue their award chart. By banning expiry terms and re-introducing millions (billions?) of miles that were expired, market forces will drive the value of the “currency” down accordingly. Sure, you might get your miles, but Air Miles might just dramatically increase the value of their rewards, creating an aggregate loss or status-quo of utility.

As noted in the CBC article, having a single province ban rewards points expiry makes for a logistical nightmare for loyalty programs, further increasing operating cost and decreasing the value of their currency.

Finally, on a personal moral perspective, people really ought to take responsibility for their own points. Air Miles gave plenty of notice of their new expiry rule, and giving a five-year lifespan for a point is perfectly reasonable. Many people in the points community use the mantra “earn and burn,” because points don’t earn interest and only deflate in value. Points holders should be responsible enough to monitor their accounts, updated terms that are widely announced and publicized, and very basic economic principles.

What do you think about banning expiry clauses in loyalty program contracts?

Comments

  1. i agree with you. Banning the expiry will add major liabilities to the companies and force them to reduce the benefits just to keep the balance sheet equal.
    It does open up some interesting avenue though, as to what can be considered loyalty programs. Let’s challenge the next benefit the government of Ontario cuts, as a Reward loyalty program for living in Ontario.

  2. Meanwhile, Japan requires reward points offered by companies operating in Japan to expire in a year. Otherwise the point program will be treated as currency; earning, transaction, and exchanges will be taxed as if real money is involved.

    I couldn’t tell if the bill applies to Ontario businesses or residents. If the latter, many programs will probably stop offering points to Ontario residents, especially if the provider is required by law to expire them.

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