Loyalty glossary · 11. Legal and compliance (15)
Points Forfeiture
Points forfeiture is the permanent cancellation of a member's earned points before redemption, typically triggered by inactivity, account closure, or a breach of programme terms. Unlike expiry, it usually takes effect immediately and without a value payout.
Expiry is the quiet end of a point after time passes. Forfeiture is the operator actively taking points back before their natural end, and the law mostly lets it happen. Terms of service almost always include a forfeiture clause, and almost no member has read it. That is why forfeiture is the most one-sided enforcement tool in a loyalty programme.
Inactivity forfeiture is the worst version because it punishes the member for living a life that does not generate a transaction. A programme that cancels points after 12 months of no earning activity is not protecting itself from abuse. It is taxing ordinary absence. Active-member rates stay low on paper because the programme has already removed the disengaged members from the count, which makes the programme look healthier than it is.
Forfeiture sits in direct conflict with accrual and activity-based qualification. A member who accrues points slowly because the programme rewards only certain stays or spend is still earning on the programme's own terms. Then the same programme voids those points because the slow accrual pattern does not meet an activity threshold. The member has not broken a rule. The programme has changed the rule after the fact.
The value at stake is easy to calculate. Take a member with 60,000 points and a redemption value of 1 cent per point, which is 600 dollars of stored value. If the programme forfeits the balance after 12 months with no earning activity, and the member returns after 14 months, the full 600 dollars is gone. Extend the grace period to 24 months and the member keeps every point. The difference between 12 months and 24 months is the entire economic loss.
Regulators treat forfeiture inconsistently. Some view points as a revocable licence and let programmes cancel them for almost any reason. Others treat accrued points as stored value and require notice, a cure period, or a payout. The correct position is the second one. A point earned is a point owed, and forfeiture without compensation is confiscation.