On January 1, 2018, new consumer protection regulations came into effect in Ontario that generally prohibit the expiry of royalty or rewards points due to the passage of time alone (the “expiry ban”). The new rules stipulate that, with certain exceptions, any provision in a consumer agreement that purports to have rewards points expire due only to the passage of time will be unenforceable. As expected at the time the Bill 47 – Protecting Rewards Points Act was enacted (see our previous post from December 2016), the expiry ban has retroactive effect to any points (earned at any time) that expired between October 1, 2016 and January 1, 2018.
The regulations provide for some exemptions to the expiry ban. First, for the expiry ban to apply, the points must be “rewards points” which are defined as points that are accumulated based on purchases, over time and that can be exchanged for goods or services at a later date. In addition, the regulations provide that the expiry ban will not apply in the following circumstances:
- Points redeemable for a specific good or service – If the reward points can be redeemed against only one specific good or service identified at the outset. For example, if a spa offered a frequent customer card entitling the holder to a free manicure following the purchase of ten manicures, neither the frequent customer card nor the free manicure reward would be subject to the expiry ban;
- Low value points – If the rewards points can only be redeemed against single items having a value under $50 (i.e. the rewards are all low value);
- Third party points – If the rewards points are issued by a third party pursuant to a relationship between the consumer and another supplier, and the agreement with the supplier does not entitle the consumer to those third party rewards points. For example, if a health tracking app awards its users with app-based reward points when they make a purchase at a smoothie bar (and if the smoothie bar had not indicated to the consumer that they would receive such rewards points), the expiry ban would not apply to the app-based reward points;
- Points for which no purchase required – If the consumer is not required to purchase goods or services from the issuer or a third party, either upon entering into the agreement or during the entire term of the agreement, including to earn rewards points, unless such issuer or third party has entered into at least one other consumer agreement with any consumer that requires the consumer to purchase goods or services to earn rewards points;
- Gratuitously issued points – If the points are awarded gratuitously and not as a result of any purchase of goods or services by the consumer, and the points issuer (i) gave notice at the time of the award that the gratuitous points would expire; and (ii) the expiry date is no earlier than 30 days after the points were awarded;
- Wound up or terminated points program – If the points are awarded pursuant to a rewards program that, prior to December 8, 2016, was announced to be winding up, or if the points were awarded pursuant to an agreement that (i) the consumer requested be terminated; or (ii) had terminated (or notice of termination had been provided) prior to October 1, 2016; or
- Expiry due to inactivity – If the customer agreement provides that points expire in accordance with the agreement when the consumer has not earned or redeemed any points for a specified extended period of time. The Ontario government has advised consumers, as a precautionary measure, to maintain good records of points balance statements to ensure issuers are abiding by the new rules.
- Any points that purport to expire in contravention with the expiry ban must be returned or reinstated by the issuer. The regulations also prohibit issuers from terminating an existing agreement as a whole simply to replace it with a substantially similar agreement with more restrictive rewards point provisions, unless they obtain the consumer’s explicit consent to do so.