The Canadian Federal government has the consumer’s best interests in mind by removing expiry dates on prepaid credit cards and mandating card issuers to clearly advertise any fees that take away from a card’s balance within the first year. Back in October 2012 Finance Minister Jim Flaherty announced new regulations for the prepaid credit card market requiring what the finance minister called “reasonable disclosure” and eliminating some things about the cards the finance minister says are “quite unfair”.
More on announcement by Finance Minister Jim Flaherty regarding new regulations
The change, which will be effective in May 2014, comes after consumers complained that terms for using the cards were unclear and burdensome and that card issuers imposed unfair fees.
Unlike traditional credit cards, prepaid cards allow consumers to pre-load funds that can be used to make purchases or cash withdrawals. Many consumers use such cards as a means to control spending within a pre-determined budget.
One problem with using prepaid credit cards is the existence of expiry dates. If a person loads $500 on his card, he would have to spend it within a pre-determined period of time. If not, the funds would be lost to the consumer. This is unfair. Expiry dates would force the consumer to spend whatever is left just to avoid losing his money. This will change in May 2014.
The second issue consumers have complained about are the fees when using prepaid credit cards. Currently, fees are not clearly outlined to consumers, and many are surprised to see some of the funds they loaded onto their cards are eaten up by fees. With the new regulations card issuers will clearly explain any fees (activation or maintenance) they charge so that consumers can choose wisely which cards are right for them.
In order to make the new regulations clear across all Canada to consumers, the federal government is creating a detailed consumer financial code that will better protect users of financial products, such as prepaid credit cards.
You can comment on the government’s proposed consumer code online (code.consult@fin.gc.ca). Suggestions can be submitted until the deadline at the end of February. .
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