Class Action Launched Against LoyaltyOne - Lessons Learned

Class Action Launched Against LoyaltyOne - Lessons Learned

Last updated on January 4, 2018 Views: 1218 Comments: 3

A class action lawsuit has been filed for certification against LoyaltyOne, owners of the Air Miles loyalty program.

On Dec 31, 2011, Air Miles announced that all points accumulated prior to that time, would expire within 5 years, at Dec 31, 2016. Moreover, all points accumulated thereafter, would also automatically expire 5 years after they were accumulated.

According to the Canadian Press, the class action claims the following wrong-doings:

  1. LoyaltyOne made “unfair and unilateral” changes to Air Miles’ terms and conditions
  2. Users were not given adequate notice of the changes
  3. Air Miles has made it difficult for users to redeem before the expiry deadline with unduly long wait times over the phone, and by displaying items online that members did not have enough points to redeem for.

The claim states “the net result is that Air Miles’ conduct will result in a large number of the class members’ miles expiring, resulting in a significant loss to the class, and a corresponding large windfall for Air Miles”.

The goal of the class action, if it wins, is for Air Miles to re-instate the points that will be expiring as of December 31, 2016.

The expiration of points is not the issue. Many rewards and loyalty companies have expiration policies. That said, most expiration policies are tied to activity. Air Miles is one of the few that automatically expires your points regardless of whether you’re actively accumulating or redeeming points.

For example, the Aeroplan loyalty program only expires your points if you have not collected or redeemed a mile within 12 months. If you make a purchase every 12 months with any of the Aeroplan credit cards, or with the Aeroplan loyalty card, your miles will never expire. The idea of the program is to rewards your loyalty. Air Miles seems to be doing the opposite.

From a legal standpoint however, the real issue, is that Air Miles not only changed the terms on points that had already been accumulated by members under the old policy, but allegedly did not give proper notification via mail, email, etc… and even more egregious, purposefully or negligently made it difficult for people to redeem, once they decided to do so.

By making it difficult for members to redeem prior to the expiry date, members would lose their points. As a result, Air Miles would make a significant gain by eliminating a financial liability, without a corresponding cash expense.

What Air Miles should have done is the following:

  1. Grandfathered all points prior to Dec 31, 2011 – only points accumulated after the initiation of the policy would be subject to expiration.
  2. Provided clear and transparent notification through all customer contact points. For example, many loyalty programs clearly state you have X points that will expire on Y date on all electronic statements and balance summaries.
    Moreover, for those that don’t have electronic access, the duty should be on Air Miles to notify members via mail. If Air Miles could use their member’s mail box to deliver their membership cards (which they do), surely they can use those same addresses to deliver a notification as important as this.
  3. Make it easy for people to redeem and compensate people for the inconvenience. LoyaltyOne had to know they would be receiving a MASSIVE influx in calls, requiring significant investment in call center capacity. They should have invested in increased capacity some time ago.
    Moreover, as opposed to allegedly increasing the cost of redemption items so that members have difficulty redeeming for their favourite merchandise, Air Miles should have done the opposite. They should have used the opportunity to wow the customer and provide them bonuses for redeeming their points.

As a customer loyalty program, Air Miles is the last company that can afford to get loyalty wrong. No one’s asking Air Miles to give away free money, but if Air Miles is going to benefit economically at the expense of members through an amended expiration policy, members should have an expectation that they get something in return. Fair treatment should be the minimum.

The truth is, Air Miles provides very good value to its members. With a strong network of retail and financial partners, people have the ability to accumulate substantial rewards on purchases they would otherwise receive no consideration for. Whether it be gas, groceries, pharmacy, electronics, office supplies, or credit card spend you can earn Air Miles rewards. Moreover, for all new members, and those who’ve earned points after 2011, this really shouldn’t be an issue. Now it’s up to Air Miles to come clean and do right by its most loyal members. There’s still time.

Article comments

A Canadian Consumer says:

The AIR MILES Reward Program was among the leading consumer loyalty reward programs in the Canadian market, prior to their implementation of Cash and Dream AIR MILES, which began their planned step by step process of limiting the options available to AM collectors to redeem their AMs. When the five year AM expiration policy was implemented, those AMs collected by several million collectors prior to January 1, 2011 were all defaulted into the “Dream” AM category. At the time, there were still plenty of options for AM collectors to redeem these AMs for gift certificates. Over the last five years, the management of the AM Rewards Program deliberately planned and implemented a strategy of reducing the redemption options available to those collectors who had AMs in their Dream AM collector accounts. This intentional limiting of redemption options for accounts with Dream AMs has had the effect of reducing the value of the AMs collected prior to Jan. 1, 2011.

The Owners and Management of this program have been paid by AM Sponsors for most, if not all AMs issued as by and large, AM Sponsors are required to pay the AM Program when the AIR MILES are issued. Therefore, the money is already in the bank and should cover any contingent long term liability that is caused by unredeemed AIR MILES. Perhaps the AM Management should be asked about that.The reasons (excuse) being used by the AM Program Management to expire Dream AMs is spin. It would seem that Canadian consumers who contracted to join the AM Reward Program with the expectations of a predefined benefit / return have been hoodwinked. The decision by AM Management to expire Dream AMs on January 1st, is no different from any enterprise that issues gift cards and then decides to expire the outstanding balances on these cards… which is theft, and against the law.

Joan says:

What are the chances of a successful outcome for this class action lawsuit against the Air Miles loyalty programme? I have been a collector for many decades and expect to lose 16,000 + air miles! This is really upsetting…

GreedyRates says:

Hi Joan,

We’re not lawyers so it’s very hard for us to have an educated opinion. That said, you can always contact the law firm that’s spearheading the class. It doesn’t look like Air Miles is doing anything to help themselves. In fact, Ontario just passed the second reading of a proposed law that would ban the ability for loyalty companies to forcibly expire points – that could also be a game changer.

GreedyRates Staff