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New York Law Requires Credit Card Rewards Programs to Give Notice of Reward Program Changes, Grace Period to Redeem Rewards

A New York law enacted at the end of last year requires reward programs associated with credit cards to provide cardholders advance notice of changes to credit card accounts and the rewards programs associated with those accounts as soon as possible and within a minimum of 45 days before the change. In addition, cardholders must be given a 90-day grace period from the date the notice is sent to redeem any points associated with a card’s rewards program. The new law also makes it “unlawful” for any agreement between a card issuer and cardholder, or any related reward program, to allow for the expiration, forfeiture or cancellation of reward points associated with a credit card before the end of the 90-day grace period. It also deems “void as contrary to public policy” any agreement that attempts to waive, limit or disclaim the rights conferred by the new law.

Gov. Kathy Hochul signed Senate Bill 133B/Assembly Bill 5698B into law Dec. 10, 2021. The legislation, which amends the state’s general business law to add new Section 520-e, takes effect one year after enactment and applies to all credit card agreements entered into, renewed, modified or amended on or after that date.

Given its broad definition of the term “points,” the new law arguably applies not only to credit cards but also to the reward programs associated with those credit cards, which can be governed by separate agreements. New Section 520-e defines “credit card points” or “points” as “denominated units that can be accumulated in an account in connection with a credit card reward, loyalty, or other incentive program … or for certain travel-related rewards as miles, which are redeemable, fungible, or otherwise exchangeable, in whole or in part, for rewards.” The definition is not limited to points that are earned by spending money on a credit card. Instead, it includes not only “other incentive program[s]” but also more specifically “travel-related rewards as miles.” For some credit card rewards programs, the member may be governed by two different agreements—one for the credit card and one for the overarching reward program—and the rewards programs allow members to accumulate points not only for purchases on the card but also for actions taken in connection with the linked reward program (such as hotel stays or flying with an airline). The broad definition of “points” in the new law arguably encompasses both the credit card and the related loyalty program points.

The new section also specifically defines “modified” or “modification” to cover a broad range of situations:

a change that has the effect of eliminating points, reducing the value of points, affecting the ability of a holder to accumulate points, limiting or reducing rewards availability, limiting a holder’s use of points or the credit card account, otherwise diminishing the value of the rewards program or the credit card account to the holder or changing the obligations of the holder with respect to the rewards program or credit card account.

Some of these defined modifications may be made by the credit card company, but they also may be made by an overarching reward program.

The notice and grace period provisions require issuers of the credit card and/or the reward program to provide notice to holders anytime either the credit card or the reward program is “modified, cancelled, closed or terminated,” “as soon as possible” and within a minimum of 45 days. From the date the notice is sent, the cardholder must be given 90 days to “redeem, exchange, or otherwise use any credit card points that the holder accumulated,” subject to the terms of credit card or reward agreements and the availability of rewards. While the law exempts cases of fraud or misuse from the notice requirement and grace period provisions, misuse is not specifically defined.

The new law does not provide either a specific recourse for cardholders have or penalties assessed against card issuers for violating the law.  However, because it amends New York’s general business law to add a new section, both private plaintiffs and the state attorney general could bring actions for violations.