Government Announces New Regulations to Protect Consumers When Using Prepaid Credit Cards

Our Government is committed to protecting Canadian consumers. We’ve demonstrated this commitment by introducing a variety of measures to make everyday financial products fairer and more transparent. We recently took further action by announcing new regulations to protect consumers when using prepaid credit cards. By taking this action, we’re ensuring Canadians receive the full value of their hard-earned dollar when they use prepaid credit cards.

On October 24, 2012, the Honourable Jim Flaherty, Minister of Finance, together with Lucie Tedesco, Deputy Commissioner of the Financial Consumer Agency of Canada (FCAC), made the announcement of the new regulations to protect consumers when using prepaid credit cards. These cards are relatively new to the market and provide consumers with the ability to make purchases or cash withdrawals through a payment network, such as American Express, MasterCard, or Visa, with funds that have been paid in advance to a financial institution.

Unfortunately, consumers are often unaware of the fees associated with using pre-paid credit cards, which can often result in the prepaid funds expiring or maintenance fees being charged. The proposed Prepaid Payment Products Regulations would require that fees be disclosed to consumers in an information box displayed prominently on the product’s exterior packaging and that other information for the consumer to understand when using these products, be provided prior to issuance in a manner that is clear and simple for the consumer and not misleading.

The proposed regulations would also limit certain business practices unique to prepaid payment products that would be harmful to consumers. For example, the proposed regulations would prohibit the funds from expiring, as well as prohibit any maintenance fees from being charged for at least one year after the prepaid credit card has been activated.

More detailed information on the Prepaid Payment Products Regulations was made available online as of October 26th in the Canada Gazette at http://gazette.gc.ca/rp-pr/p1/2012/2012-10-27/html/reg1-eng.html for a 30-day comment period. Contact information for forwarding comments is also provided with the regulations on the website.

The Prepaid Payment Products Regulations introduced by our Government will ensure Canadians understand what fees and conditions apply to prepaid credit cards so they can continue to make informed financial decisions.