Happy new year, indeed. As we first reported in a bulletin last year, Ontario is moving to ban the expiration of rewards points based on the passage of time, and implementing other controls and restrictions on rewards/loyalty programs in the province. Effective January 1, 2018, provisions will come into force under the Consumer Protection Act, 2002 (“Act”) and the General Regulation (the “Regulation”) to regulate the expiry of rewards points.
Notably, the retroactive application of the legislation has been pulled back. When introduced in 2016, the Act contemplated that program providers must reinstate points that had expired between then and the date the legislation would come into force. When the legislation now comes into force, over a year later, the applicable sections of the Act (specifically, subsections 47.1(5), (6) and (8)) will be simultaneously repealed.
As time progresses, we anticipate that Ontario will not be alone to regulate such programs. Currently, both Quebec and Prince Edward Island have proposed legislation that is moving through the requisite channels. We anticipate that there will be no one national approach, as variations by province are likely. For now, however, we can speak to what will come into effect in Ontario. The proposed regulations contemplate, among other things, exceptions to the no-expiry rule, minimum value thresholds and carve out certain transactions from the definition of “rewards points”. The highlights of the Regulation include:
- One-time gift with purchase and gifting of rewards points are excluded
Subsection 43.1 (1) clarifies the definition of rewards points to mean that: “a consumer must earn the points across multiple transactions in order to exchange for money, goods or services…”. So, a one-time gift with purchase would not be captured, but a program that accumulates points (whatever they are called, or however dollars spent are tracked) will be. The Regulation also contemplates “gratuitous” gifting of points, not tied to a purchase, which may expire no later than 30 days if the expiry is set out in the terms and conditions.
- Specific goods or services identified at the outset are not rewards points
Subsection 43.1 (2) explains that reward programs that, at the outset, set out the specific good(s)/service(s) that a consumer will receive after accumulating a specific amount of points are exempt. An example of a program that should qualify for this exception is a coffee stamp card, where you buy 6 coffees and get the 7th coffee free. This exemption is not available, however, to gift cards or vouchers; the good or service must not be redeemable for future goods or services if it is to qualify for the exemption.
- Consumer reward programs that only feature low-value rewards ($50 or less) can have their rewards points expire
Programs offering only low-value items, whether redeemed individually or en masse, will not be captured by the prohibition. In other words, where no single good or service offered under the program is over $50, the points under the program may expire. Again, though, gift certificates and similar instruments are a special case and can only be included where both the individual value is under $50, and where they cannot be combined to a total of more than $50.
- Consumer agreements where the consumer is not required to make a purchase can have their rewards points expire (Section 43.4)
However, despite this no-purchase exclusion, rewards points cannot expire if they are provided by a supplier who has entered into a consumer agreement where purchases are required to earn rewards points with any consumer. This would capture most reward programs.
- The prohibition on expiry does not apply to consumer agreements where the supplier has no control of rewards points.
Again, most suppliers have an agreement with their rewards points program affiliates and will likely not qualify for this exception.
- Consumer agreements can allow points to expire if the consumer has not earned or redeemed his/her points for a specified time.
While it will be prohibited to expire points on the basis of time alone, account inactivity may trigger expiry of points if it is provided for in the consumer agreement governing the transaction.
- A supplier terminating any rewards points program to then reinstate a similar one will have to credit back the terminated rewards points to consumers
Some businesses may be tempted to terminate their current reward programs with their customers, have all the rewards points expire and enter into a new, yet similar, rewards points program without the customer’s consent. But, the Regulation does not endorse such practices and, as a consequence, will oblige the supplier to credit back all the rewards points.
If your business has not done so already, this is the time to review (and, if necessary, amend) the terms of any operating loyalty programs to bring them into compliance with applicable law. For assistance in reviewing your programs for compliance, contact Catherine Bate.