Ottawa, October 24, 2012
The Honourable Jim Flaherty, Minister of Finance, and Lucie Tedesco, Deputy Commissioner of the Financial Consumer Agency of Canada (FCAC), today announced new regulations to protect consumers when using prepaid credit cards.
The Harper Government is extending the existing consumer protection framework to prepaid payment products so that Canadians are better able to choose forms of payment that best meet their needs.
“Our Government is committed to protecting consumers,” said Minister Flaherty. “We want to be sure Canadians understand what fees and conditions apply to prepaid products so that they can continue making informed financial decisions in their day-to-day lives. These changes will ensure that Canadians get the full value of their hard earned dollar when using a pre-paid credit card.”
Relatively new to the market, prepaid payment products allow consumers 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.
Currently there are fees associated with prepaid payment products that are not entirely clear to the consumer. 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, simple and not misleading.
“Improving consumer awareness through regulations like these helps to improve financial literacy and helps protect consumers. And a better-informed public means far more than better decision making; it can empower individual Canadians while contributing to a strong economy,” added Deputy Commissioner Tedesco.
The proposed regulations would also limit certain business practices that could be harmful to consumers. For example, they would prohibit the funds from expiring and prohibit any maintenance fees for at least one year after a prepaid credit card has been activated for customer-purchased products.
The proposed regulations will be available online in the Canada Gazette on October 26 for a 30-day comment period. Contact information for forwarding comments will be provided with the regulations.
The Minister also took the opportunity to announce the final publication of regulations prohibiting unsolicited credit card cheques on October 10, 2012. Credit card cheques are considered cash advances, which generally incur higher interest rates and fees, and do not offer an interest-free grace period.
“We welcome the Government of Canada’s continuing efforts to protect consumers,” said Laurie Campbell, CEO of Credit Canada Debt Solutions. “Regulations like these are essential safeguards for Canadians who need a little extra information when making important financial decisions.”
Office of the Minister of Finance
Department of Finance