Breaking: New York Passes Law That Credit Card Companies Must Give 90 Days to Use Points After Account Closure

(2) require that notice be provided to credit card holders within
forty-five days of the cancellation, closure, termination or modifica-
tion of a credit card account and establish a 90-day grace period
(beginning on the day such notice is sent) for the use of accumulated
credit card points;

(3) prohibit agreements that provide for the expiration, forfeiture or
cancellation of credit card points;

(4) create an exemption for fraud or misuse by the card holder; and

(5) prohibit agreements that waive, limit, or disclaim the rights set
forth in the new section 520-e creating these consumer protections.

Section 2 provides an effective date of one year after the act becomes
law, and provides the provisions of the act apply to agreements entered
into, renewed, modified, or amended on or after such effective date.

 
JUSTIFICATION:

According to the Consumer Financial Protection Bureau, points, loyalty
programs, and other rewards are among the most important factors for
consumers when selecting a credit card, and more than 60% of all new
credit card accounts were for rewards cards (see https://www.consuert,
ance.gov/data-research/research-reports/the-consumercredit-
market-2019/).

However, credit card rewards programs are often governed by agreements
that are not transparent to consumers. One particular provision in many
credit card agreements allows the credit card issuer to cancel all accu-
mulated rewards points or other rewards benefits upon the closure of the
credit card account, without affording the credit card holder any oppor-
tunity to use accumulated points. This becomes a consumer protection
issue when the issuer unilaterally closes such an account. Card agree-
ments allow for point cancellation without a grace period in connection
with certain account closures, for example, if a holder fails to make a
payment, as well as for unspecified reasons that fall under catch-all
clauses such as if the issuer believes the holder may be unwilling or
unable to pay their debts on time. In some cases, the card agreement
allows the issuer to cancel the account for no reason at all.

Credit card holders often save up their points, so the cancellation of
such points can result in substantial loss of value for the holder.  In
one instance, a cardholder had just reached one million points (worth
approximately $50,000) which they had saved up for use during their
retirement, when the issuer closed their account and cancelled all their
points. The issuer's card agreement allowed the issuer to do so for any
reason, or no reason, and without notice.

Rewards points are understood by consumers to be part of the bargain
when they sign up for a credit card, regardless of how they may be
described in a card agreement. Canceling points without notice and with-
out a grace period to use them constitutes a failure by the issuer to
honor consumers' understanding of that bargain. Although issuers provide
for a grace period in some situations, consumers should always have the
ability to use their accumulated points after the closure of their
account so long as they have not engaged in fraudulent or other improper
activities relating to that card or the related rewards program.

 
PRIOR LEGISLATIVE HISTORY:

2020: S7104-A / A9588-A - Passed Senate, died in Assembly Consumer
Affairs and Protection Committee

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect one year after it shall have become a law,
and applies to card agreements entered into, renewed, modified, or
amended on or after such effective date.