Loyalty Register glossary
Escheatment
The legal process by which unclaimed money or property is reported and handed over to a state after a set period without owner activity.
Escheatment is the process by which money or property that its owner has not claimed is reported and handed over to a state. In the US, each state sets its own rules: what counts as property, how long it must sit without owner activity (the dormancy period), and how and when the holder must report and remit it. For a loyalty program, the question is whether unused points, credits or rewards are property that has to be escheated.
Updated · By Loyalty Register Editorial TeamRelated terms
Does escheatment apply to loyalty points?
Often not, but it depends on the state and on how the reward works. Illinois is a clear example. Its unclaimed property act defines a loyalty card as a record given without direct monetary consideration under a reward or promotional program, redeemable only for goods, services or discounts, and excludes loyalty cards from the property the act covers. The state treasurer’s rules confirm that loyalty cards are exempt from reporting and remitting. The same rules say the exemption does not apply to rebate cards, which are given in return for a purchase.
When could points be treated differently?
The Illinois definition points to the features that matter. Rewards that can be redeemed for cash, or otherwise turned into money by the issuer, fall outside the loyalty card definition. Value that the customer paid for directly, such as purchased points, prepaid balances or rebates, can also be treated as property. Other states use different wording, and some have no specific loyalty exemption at all. That is why programs that sell points, offer cash-out options or operate across many states need state-by-state advice.
How is escheatment different from expiry and breakage?
Expiry is a program rule: it ends a member’s right to use points. Breakage is an accounting estimate of points that will never be redeemed. Escheatment is a legal obligation to hand unclaimed value to a state. If a balance is subject to escheatment, the business cannot count it as breakage, because it still owes the value to someone, only now to the state. Mixing the three up can produce both an accounting error and a compliance problem.
What should you check?
- Whether any of your rewards can be converted to cash or were paid for by the customer.
- Which states your members live in, and how each treats loyalty rewards.
- How your terms describe points, since the wording can affect how they are classified.
- That finance excludes any escheatable balance from breakage.