Points expiration regulation covers the rules governing whether, when and how a loyalty program can let earned points lapse. The rules differ by jurisdiction, and some come from gift card and unclaimed property law rather than from loyalty law.
Three questions determine the exposure.
Were the points bought or earned? Points a member purchased, or received in exchange for something of value, look more like stored value than like a promotional reward. Stored value attracts far more regulation.
Where does the member live? Rules vary by state and by country. A program operating across the US and into Canada or the EU is subject to several regimes at once, and the strictest one effectively sets the policy unless the program varies by geography.
What was disclosed, and when? Most regimes care less about the expiration itself than about whether it was clearly stated at the point of earning, and whether members were warned before points lapsed.
Unclaimed property law is the part that catches brands off guard. In some jurisdictions, unredeemed value can be treated as property owed to the member and escheatable to the state, rather than simply forfeited.
Expiration is usually set as a financial lever. It caps the liability and limits how long an obligation stays on the books. It is also an engagement lever, because a clear expiration date gives members a reason to come back and redeem. It is rarely reviewed as a legal question, and that is where the exposure sits.
It is also the part of a program most likely to generate complaints. A member who loses a balance they were saving reacts badly and publicly, and “it was in the terms” is a weak position if the terms were never surfaced after sign-up.
A brand sets points to expire after twelve months of inactivity, with the rule stated in the terms and conditions at sign-up. Members who lapse at month eleven get no warning and lose their balance. The policy is defensible on paper, generates a wave of complaints, and would likely have been avoided with a reminder email at month ten.
Treating expiration as purely a liability-management decision. It is simultaneously a legal question, a customer-experience question and an accounting input, and it is usually decided by whoever owns only one of the three.
This entry is a general description of how these rules work. It is not legal advice, the position varies by jurisdiction and by program design, and any brand setting or changing an expiration policy should take it to its own counsel.
Usually yes, but it depends on the jurisdiction and on how the points were obtained. Points earned through purchases as a promotional reward are generally treated more permissively than points a member bought, which can fall under stored-value or gift card rules.
Twelve to twenty-four months of inactivity is common, but common is not the same as compliant. The right period depends on the jurisdictions a program operates in and on what was disclosed when members earned.
Some jurisdictions require notice and some do not, but notice is good practice regardless. Most complaints come from members who did not know a balance was at risk rather than from the rule itself.
The process by which unclaimed value can pass to the state rather than being forfeited by the business. Whether loyalty points are escheatable varies by jurisdiction and usually turns on whether they are treated as stored value.
Points liability accounting is how a brand records the value of unredeemed loyalty points on its balance sheet. Every point issued and not yet spent is an obligation the business still owes, carried as a liability until redeemed or expired.
Breakage is the share of loyalty points issued and never redeemed. Breakage recognition is the accounting treatment that releases the revenue sitting against those points once it becomes clear they will not be used.
Deferred revenue is money a business has received but not yet earned, because it still owes the customer something. In loyalty, the obligation is the points a member has earned and not yet spent.
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