On December 10, 2023, New York General Business Law § 520-e requiring a grace period for the use of credit card rewards points will go into effect. Specifically, the legislation provides that if any credit card rewards program is modified, cancelled, closed, or terminated, the card holder must be provided notice of such change “as soon as possible,” and shall have 90 days from the date on which notice was sent to “redeem, exchange, or otherwise use any credit cards points that the holder accumulated at the time of such” modification, cancellation, or termination, subject to the availability of the rewards. Section 520-e also prohibits any separate agreement between the card issuer and holder to waive or limit the grace period.

The legislation defines points as “units that can be accumulated in an account in connection with a credit card reward, loyalty, or other incentive program, often referred to as points or for certain travel-related rewards as miles, which are redeemable, fungible, or otherwise exchangeable, in whole or in part, for rewards.” Importantly, “modified,” in relation to a rewards program, is broadly defined as “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.” Notably, the last three circumstances seem to extend beyond the rewards program to changes in the credit card account itself.

Section 520-e’s protections do not apply in the case of fraud or misuse by the holder of the credit card account or related rewards program.” “Fraud” and “misuse” are not defined.

Our Take:

Section 520-e is geared towards preventing card issuers from forfeiting or diminishing the value of a cardholder’s pre-existing credit card points. Unfortunately, section 520-e is rife with ambiguities. For example, the definition of “points” includes points earned from credit card spend. The definition can also be read to include other non-card spend activities (flights, hotel stays, car rentals, etc.) because the definition lacks a requirement to earn in connection with spending on a card and specifically includes “certain travel-related rewards as miles, which are redeemable, fungible, or otherwise exchangeable, in whole or in part, for rewards.” This ambiguity could impact the rewards terms in the card agreement and any applicable separate rewards program terms. Also, because “fraud” and “misuse” are not defined, it is not clear what cardholder activities constitute “fraud” or “misuse” that would exempt a card issuer or rewards program manager from compliance with the law. Because of these ambiguities, there is an elevated risk of regulation by enforcement from the attorney general and claims from private litigants. As a result, rewards program agreements should be reviewed and potentially restructured to mitigate potential issues prior to December 10, 2023.