Canadian Prepaid Card Regs Go into Effect (May 6, 2014)
Rules issued last December by Canada’s Department of Finance affecting open- and closed-loop prepaid cards went into effect May 1. In addition to fee disclosure requirements and a ban on the expiration of funds on prepaid cards not part of a promotional, loyalty or reward program, the final version of the Prepaid Payment Products Regulations includes rules on maintenance fees that could prove challenging for providers, according to Jacqueline Shinfield, partner with the Toronto office of law firm Blake, Cassels & Graydon LLP.
“You can charge maintenance fees on reloadable products upon activation provided you obtain express consent of the cardholder, otherwise you have to wait 12 months,” Shinfield tells Paybefore. Express consent means cardholders have to do something that signifies consent, like click a box. “It’s difficult from a practical standpoint because providers have to implement policies and procedures to get express consent,” she says.
The initial draft didn’t allow maintenance fees at the time of purchase at all, but regulators listened to industry stakeholders and recognized that “there are expenses inherent to issuers and program managers at the outset of a program,” she adds.
Missing from the rules is any mention of grandfathering existing inventory. Without leniency for stock on hand before May 1, all cards must comply with the rules or be pulled from the shelves. Also missing were any disclosure carve-outs for government program cards or B2B cards.
“There’s been no guidance issued with respect to the interpretation of the regulations and many aren’t as clear as they could be and there’s no guidance,” Shinfield says. “The industry will wait and see if any guidance or clarification is issued by the regulator on some of the more unclear provisions or whether any enforcement actions are taken on what it views as a noncompliant card.”
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