Canada’s Supreme Court Raises BIG Federal Preemption Issue (Sept. 22, 2014)
Did Canada’s Supreme Court just create a significant regulatory issue for the country’s prepaid issuers? According to at least one prominent Canadian attorney who’s following the court’s decisions, it appears quite possible—although more investigation is needed.
In three similar cases involving currency exchange fees on credit cards, the Canadian Supreme Court appears to have concluded that provincial legislation and regulation trump federal law, and this ruling could have implications significantly broader than credit card exchange fees. Although the federal preemption issue, as we’d call it in the U.S., has been a bit of a gray area in Canada, many card issuers have reasoned that if they are federally regulated, then federal requirements supersede or preempt those of the provinces. Whether the Supreme Court’s decisions also affects prepaid cards, which have been the subject of significant restrictive provincial regulation in Canada, is not entirely black and white, but it appears possible the court’s decision may have wide ranging implications—unless there is federal legislative clarification.
The issue won’t be settled overnight, but if you’re doing business in Canada, you’d be well served to check in with your counsel to determine potential implications for your specific situation. And, we’ll follow developments in Paybefore and keep you up to date as this story unfolds.
Click here for the relevant rulings of Canada’s Supreme Court: