Canada Issues New Prepaid Card and Payment Product Rules

by Bennett Jones LLP
Contact

The Canadian government has announced the launch of a consultation on a comprehensive financial consumer code and the final publication in the Canada Gazette of Prepaid Payment Products Regulations increasing protection of consumers using prepaid cards.  Following publication of proposed Regulations on October 27, 2012, comments were received from a wide range of stakeholders representing financial institutions, payment network operators, consumer groups, and industry associations. These views were taken into consideration in the development of the final Regulations. Overall, stakeholders supported regulations to protect consumers of prepaid products. Comments recommended fine-tuning of the Regulations in order to achieve high standards of consumer protection and preserve consumer choice. The Regulations are expected to come into force on May 1, 2014 and apply to all federally regulated financial institutions that issue prepaid payment products.

The Constitution confers on Parliament exclusive jurisdiction in relation to banking and the incorporation of banks. In this regard, the Bank Act constitutes the complete and exclusive charter applicable to each bank and its products and services. Relatively new to the Canadian market are payment network–branded prepaid products (prepaid payment products) which are used to access funds that a customer has prepaid to a financial institution. The funds are accessed by the cardholder to make purchases or withdraw funds via a payment network such as American Express, MasterCard or Visa. While a credit product is a pay later product and a debit product is a pay now product, a prepaid product is a pay before product. Some prepaid payment products are available through financial institution branches; others, although they are issued by financial institutions, are sold at retail commercial outlets.

Existing Canadian federal and provincial laws, as well as Codes of Conduct, have provided a comprehensive framework of rules and protection in regards to many types of payment products, except prepaid payment products.  The new Regulations were issued in light of concerns regarding some features of prepaid payment products issued by federally-regulated financial institutions, such as the terms, conditions, fees and limitations associated with some products.

The new Regulations will require, among other rules, that fees for prepaid payment products, which allow consumers to make purchases or cash withdrawals using funds that have been pre-loaded onto a card, be disclosed to consumers in an information box displayed prominently on the product’s exterior packaging.

The Regulations will also require that other information be provided prior to issuing the card or payment product and in a manner that is clear, simple and not misleading. Technical changes were made to fine-tune some elements of the Regulations. These include changes that remove duplicative disclosure requirements when both the initial disclosure and additional disclosure documents are received simultaneously. Changes were also made to further clarify the type of product restrictions required to be disclosed, namely, those restrictions that could reasonably be expected to have an impact on a consumer’s decision to acquire a card.

In addition, the Regulations limit certain business practices that could be harmful to consumers. For example, they generally prohibit pre-loaded funds from expiring. They also prohibit federally regulated financial institutions from imposing dormancy fees or maintenance fees for one year on simple purchase products. Some stakeholders requested a clarification regarding the expiry of physical prepaid cards. While funds loaded onto a prepaid card cannot expire, this prohibition does not prevent a physical prepaid card from expiring for security purposes, as is the case with credit cards.

Other broader issues were raised that fall outside the scope of the Regulations. These include applicability of Canada Deposit Insurance Corporation insurance and applicability of the unclaimed balances provisions to prepaid products issued by federally-regulated financial institutions.

Canadians will have the ability to comment during the Consumer Code consultation over the next 12 weeks and provide feedback for roundtable discussions across Canada in 2014. The consultation will seek to establish high-level principles for a financial consumer protection framework leading to a Code that will streamline the existing and dispersed mix of legislation and regulations, and take into account the needs of vulnerable Canadians including seniors.

The Financial Consumer Agency of Canada (FCAC) is responsible for enforcement of the Regulations, and already administers the consumer provisions in the federal financial institutions statutes, using its existing compliance tools, including notices of violations, compliance agreements and administrative monetary penalties.  The Consumer Code consultation paper makes specific reference to the FCAC and asks what additional tools and authorities the FCAC may need in order to effectively carry out its supervisory role in a principles-based financial consumer protection environment.

The announcement came today from Ottawa by the Minister of Finance, Minister of Small Business and Tourism, and Agriculture and the Commissioner of FCAC.  

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bennett Jones LLP | Attorney Advertising

Written by:

Bennett Jones LLP
Contact
more
less

Bennett Jones LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!