Your rights under the Prepaid Payment Products Regulations
New federal regulations dealing with prepaid cards and other prepaid products will come into force on May 1, 2014.
Under the federal Prepaid Payment Products Regulations, consumers must be provided key information related to prepaid cards and other prepaid products. The Regulations do not apply to prepaid products issued by provincially regulated institutions or retailers.
The Regulations cover prepaid payment products issued by federally regulated financial institutions (FRFIs), including banks. These products are preloaded with funds which can be used to make purchases or cash withdrawals through a payment network such as American Express, MasterCard or Visa. Prepaid cards and products are available through federally regulated financial institutions, online, by telephone or at retail commercial outlets.
FRFIs that issue prepaid cards or products may not set an expiry date on the funds loaded onto them. The product itself can have an expiry date. There may be a fee to transfer the funds and to issue a new card.
Promotional cards and products distributed by a company as part of a promotional, loyalty or award program may have an expiry date on the funds. This expiry date must be shown on the product.
Your right to receive information
The Regulations require issuers to provide certain information to consumers:
- before issuing the card or product
- when the card or product is issued
- directly on the card or product.
This information must be provided in a manner that is clear, simple and not misleading.
Information required before issuing the card or product
The Regulations require that the product’s exterior packaging prominently display an information box disclosing the fees. If the consumer applies for the card or product by telephone, the fees must be disclosed verbally.
This information includes:
- the name of the issuing institution
- a toll-free telephone number to make inquiries about the terms and conditions
- restrictions on the use of the product
- all fees that may apply
- a statement that the funds are not insured by the Canada Deposit Insurance Corporation (when that is the case)
- information about fund expiry dates.
Information required when the card or product is issued
When the card or product is issued, the Regulations require that consumers be provided with written information, including:
- all fees and charges that may apply
- the terms and conditions of use of the card or product, including consumers’ rights and responsibilities related to a lost or stolen card or product
- a description of how consumers can verify the balance of the funds loaded onto the card or product
- a description of how consumers may, in certain circumstances, use funds loaded on the product toward partial payment of a purchase
- all of the information required before issuing the prepaid card or product (except when a prepaid card or product is issued in person and the information was disclosed before issuing it).
Information required on the card or product
The following information must be set out directly on the prepaid card or product, or if the product is electronic, by disclosing it electronically at the consumer’s request. This includes, but is not limited to:
- the name of the issuing institution
- the date on which the funds on the prepaid payment product will expire (allowed only on promotional products)
- a toll-free telephone number that can be used to make inquiries about the card, including balance inquiries and complaints
- a website where consumers can get more information about fees, restrictions and other terms and conditions.
What issuing institutions are not allowed to do
Institutions that issue prepaid cards or products to consumers are not allowed to increase fees or introduce new fees unless:
- the cardholders provide the institution their names and mailing or email addresses, and have the opportunity to change this information
- the institution discloses the new or increased fee by:
- sending a notice to the most recent address provided at least 30 days before the new or increased fee takes effect, and
- displaying a notice on its website for at least 60 days before the new or increased fee takes effect.
Use of funds
Institutions are not allowed to set an expiry date on the funds loaded onto a prepaid card or product (except for promotional cards and products). The expiry date on promotional products must be indicated on the card and in a statement before the product is issued.
A maintenance fee is a type of fee that can be charged after the prepaid card or product has been purchased, but that is not associated with the cardholder’s use of the product or any service related to it. Institutions are not allowed to charge maintenance fees for at least one year after the prepaid card or product is activated unless it is:
Institutions are not allowed to charge overdraft fees or interest for prepaid cards or products unless the cardholder gives express consent.
Implementation of the Regulations
FCAC is responsible for overseeing compliance with the Prepaid Payment Products Regulations and is working with federally regulated financial institutions that offer prepaid payment cards to ensure that the new requirements are fully implemented.
These institutions have all indicated that the Prepaid Payment Products Regulations will apply to all prepaid cards in the market on May 1, 2014, regardless of when the card was purchased.
For example, if a consumer purchased a non-promotional prepaid card in January 2013 and the card had an expiry date of June 2014, the expiry date on the funds will no longer be in effect.
What you should do if you feel your rights are not being respected
If you feel that a federally regulated financial institution is not respecting your rights, contact FCAC.