Query: 

If a customer paid the amount of a sale transaction (partially or completely ) using loyalty points and then refunded the sale , the loyalty points did not Roll back using the Loyalty Tender type.

Response /Workaround:

Loyalty Tender type can not be used to refund the Loyalty points.

Loyalty tender type remains to disable while refunding a transaction in which loyalty points have been redeemed.

Loyalty points used will not roll back, however, any monetary refund for such a transaction can be made via other available option for refund,e.g. CASH 

The functionality is by product design, this is not a product issue.