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NY passes law to preserve credit card points and rewards for consumers

On December 10, New York General Business Law § 520-e went into effect according to the Governor’s press release. The new law prevents credit card holders from losing unused earned credit card points and requires credit card issuers to send consumers a notice of any outstanding credit card points or rewards they have accrued in their accounts, even after the account is closed. Specifically, credit card issuers will have 45 days to provide notice of any outstanding credit card rewards or points following the closing of a consumer’s account. From the date of the issuer’s notice, consumers will have a 90-day grace period to redeem their points or rewards.

State Issues New York Credit Cards Rewards Programs State Legislation

CFPB Examinations Of Card Rewards Program Underway

On November 15, Bloomberg reported that the CFPB is examining credit card issuers’ rewards programs. The article quotes CFPB Director Cordray stating that rewards programs can involve “detailed and confusing rules” and that the CFPB “will be reviewing whether rewards disclosures are being made in a clear and transparent manner.” The CFPB’s recent Credit CARD Act report identified rewards product disclosures as one of many card practices that “pose risks to consumers and may warrant further scrutiny by the Bureau.”

Bloomberg reported that the examinations cover the marketing of rewards programs, “particularly the marquee promise of a given card, such as cash back, or redeemable airline miles, and what a customer needs to do to get it.” The article notes that there is no apparent sudden rise in consumer complaints about rewards, but the CFPB has targeted the programs because they are, according to the source, the primary reason consumers choose a particular card.

While the CFPB reportedly is not examining the disclosures on the basis that they could present UDAAP risk, the article states that the scope of the targeted examinations includes (i) the time it takes for card holders to redeem their rewards, (ii) the potentially obscure nature of the conditions on redeeming rewards, (iii) programs that require increasing amounts of spending over time to redeem an award, and (iv) forfeiture and reinstatement of rewards.

Credit Cards CFPB Examination Rewards Programs

Second Circuit Remands Dispute Over Arbitration Of Bank Rewards Program Claims

On October 22, the U.S. Court of Appeals for the Second Circuit overturned a district court’s denial of a motion to compel arbitration in a dispute over a deposit account rewards program and instructed the district court on how to assess whether the claims should be arbitrated. Hirsch v. Citibank, N.A., No. 13-1172, 2013 WL 5716397 (2nd Cir. Oct. 22, 2013). In this case, two individuals filed suit on behalf of a putative class of similarly situated bank customers, alleging that the bank attracted customers with promises of frequent flier miles rewards but failed to disclose that customers would be required to report part of the rewards to the IRS as income. The district court denied the bank’s motion to compel arbitration, holding that the agreement to arbitrate was not binding on the parties as the signature cards signed by the customers upon opening deposit accounts failed sufficiently to reference a document containing an arbitration provision. On appeal, the bank argued that the district court should not have relied solely on the incorporation by reference doctrine and that the court ignored the bank’s policy of providing at account opening a deposit account client manual including an arbitration provision. The Second Circuit found that the district court failed to conduct a complete analysis of incorporation by reference, and held that the district court must conduct a factual inquiry into whether the bank actually provided the client manual. The Second Circuit held that on remand the bank must sufficiently demonstrate that it had in place a corporate policy requiring provision of the client manual. Further, the court held that, because the client manual does not on its face state that it is an agreement governing the account, the bank must show that new customers are informed that the client manual governs the account and that it contains an arbitration clause.

Class Action Rewards Programs