Canada: Points expiry ban passes in Ontario

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By: RickFerguson |

Posted on December 7, 2016

The global loyalty industry suffered a seismic jolt this week as the Ontario legislature in Canada unanimously passed an ammendment to the province's Consumer Protection Act banning the expiry of reward points in Ontario. With legislatures now taking an active role around the globe in regulating reward programs, how should program operators respond? And what will this ban mean for reward programs in Canada? We assess the landscape.
By Rick Ferguson
As we reported on this site, Bill 47, which passed the Ontario legislature this week with a vote of 77-0, has been viewed by the Canadian business press as a legislative response to coalition loyalty program Air Miles' decision to date-stamp reward miles with a five-year lifespan that was set to go into effect in January of 2017. Just last week, Air Miles reversed its date-stamping policy in a move largely seen as an attempt by Air Miles' parent company LoyaltyOne to forestall the vote on Bill 47. 
With the passage of the bill, LoyaltyOne, Aeroplan owner Aimia Inc., and all other sponsors and operators of loyalty programs in Canada must now face an environment in which they are forbidden by law from expiring points and miles in Ontario, but may still do so in other Canadian provinces. Now that the bill has passed, the Ontario legislature must develop detailed regulations to implement the law. 
The bill's sponsor, MPP Arthur Potts, has indicated that he would support reasonable exceptions to the no-expiry policy, such as a requirement that loyalty program members must demonstrate some signs of active membership - earning or redeeming currency, for example - within a reasonable time period or risk forfeiting their points. Money quote from MPP Potts as quoted in the Globe and Mail:

"[The ammendment] will set some ground rules about how a consumer's points are treated by suppliers over time. Because there are so many different reward programs, it's important that consumers are able to expect some basic standards... We will consult with stakeholders to ensure it doesn't present an undue burden on business or create unintended consequences."

Those of us who have been around the block a few times understand that business regulations nearly always have unintended consequences. LoyaltyOne chief executive Bryan Pearson hinted as much prior to the bill's passage, when he suggested that the regulations might prompt loyalty program operators to cease offering programs in Ontario altogether. Money quote #2, courtesy of the Globe and Mail: 
"In an interview last week, LoyaltyOne chief executive officer Bryan Pearson suggested that the legislation would be a burden on companies that operate rewards programs, noting that it would be costly to have to cope with a separate regulatory environment in Ontario as in the rest of the country. He speculated that some of those companies – including airlines, coffee chains, or others that offer loyalty rewards – might choose not to offer those programs in Ontario. 'If there's one thing companies need to create value, it's a level of consistency and a clear understanding of what the playing field will be for industry,' Mr. Pearson said at the time."
It's highly unllikely that, as a result of this legislation, Air Miles and other loyalty programs will cease to operate in Canada's most populous province. The Canadian business and consumer advocacy press, however, has been merciless in its condemnation of the way Air Miles has handled its expiry policy, its redemption catalog, and its collector communications. Whether deserved or not, the company must now face the reality that it is viewed as largely responsible for the ban on points expiry in Ontario. LoyaltyOne has also indicated that as a result of its date-stamping reversal, it will most likely devalue Air Miles in order to maintain the financial health of the program. 
So far, it appears that everyone involved loses. Air Miles and other providers lose a valuable tool to help control reward program costs and liability; collectors who redeemed Air Miles on lower-cost items in advance of the proposed expiry deadline lost out on the ability to redeem them for trips and other aspirational rewards; those same collectors will now most likely receive less value for their miles; and the broader Canadian loyalty industry must now face a patchwork regulatory environment.
Two questions remain: What is the path forward for Air Miles, and what lessons can the broader loyalty industry learn from this episode? Here are some unsolicited answers and suggestions.
1. Over-communicate and over-service program changes. The Canadian press called out Air Miles all summer over its perceived lack of proactivity; after announcing the expiry policy in 2011, the public verdict is that the company failed to communicate the upcoming expiry deadline effectively, resulting in a social media firestorm and a flurry of righteous indignation from the Canadian press. Meanwhile, the program forced collectors to do their own work to determine when their miles were set to expire. The lesson: Get ahead of the firestorm by over-communicating changes and providing a frictionless customer service experience. The up-front costs will pay dividends down the line.
2. Get ahead of public perception. The press has been on Air Miles' case for most of 2016: first over supposed shenanigans involving its preference-based redemption catalogs, and then over its upcoming expiration deadline. In many cases, the company either declined to comment or issued cursory responses to collector or press complaints. The lesson: Have your senior spokespeople ready to go, and respond swiftly and cheerfully to complaints and requests for comment. It's neither necessary nor desirable to apologize or admit fault; it's only necessary to demonstrate that you're listening. Offer clear, concise explanations for changes or missteps, and offer simple solutions whenever possible.
3. Work proactively with regulators. Air Miles executives are correct when they say that the Ontario ammendment and the resulting patchwork legislation in Canada will harm the company's ability to manage their business effectively. Now that the bill has passed, loyalty providers should reach out to legislators in the other provinces to get ahead of any copycat regulations. By proactively working with government, providers can help craft uniform regulations that protect consumers while providing reasonable freedom for companies to set expiry policies that promote program financial health.
4. Practice targeted generosity. There are a lot of angry collectors out there, particularly those who proactively redeemed expiring miles before the deadline only to learn that they could have saved them for bigger-ticket items. Air Miles might assuage their anger by proactively reinstating a portion of redeemed miles for those collectors who redeemed, say, 60 days ahead of the expiry deadline. It might then announce a PR-friendly move by providing a matching donation for collectors who donate their miles to charity within a specified period. The short-term costs incurred would pay dividends by repairing damaged relationships with collectors.
Look, it's easy to pile on Air Miles - and since the company is getting enough of that from the Canadian press, we won't do it here. Whatever the company's missteps, they will certainly learn from them. Air Miles is a great program that provides real value to its collectors, partners, and shareholders, and it will continue to do so. The lessons learned here aren't just for Air Miles - they're for all of us who make our living in the loyalty industry. So long as we collectively learn from our mistakes, we'll continue to become better, stronger, and more effective advocates for our best customers.
Rick Ferguson is CEO and Editor in Chief of the Wise Marketer Group.