New prepaid credit card rules to be clearer, and cards can't expire, say Tories
OTTAWA - The federal government says it's doing away with expiry dates on prepaid credit cards.
And new regulations will ensure card issuers aren't allowed to impose fees that eat away at a card's balance within the first year.
The change comes after consumers complained that terms for using the cards were unclear and cumbersome and that card issuers imposed unfair fees.
Minister of State for Finance Kevin Sorensen says the rules governing use of the cards, which will come into effect in May, will have to be spelled out clearly for consumers.
Sorensen says Ottawa will also create a comprehensive consumer financial code to better protect users of financial products.
Through a consulation process, Canadians can offer suggestions for what they'd like to see in the code.
"A consumer code will help Canadians make more informed financial decisions today and in Canadaâ€™s rapidly changing, increasingly digital financial marketplace in the future,â€ said Maxime Bernier, minister for small business.
People can comment on the government's proposed consumer code online ([email protected]) until the end of February.
Unlike traditional credit cards, prepaid cards allow consumers to pre-load funds that can be used to make purchases or cash withdrawals.
But the fees for using the cards haven't been spelled out as well as they should be, said Sorensen.
The new regulations will ensure that consumers are able to clearly see any fees for using the products.
"These regulations will help consumers who choose to use this product by firstly disclosing fees and other essential information in an information box right on the package," Sorensen told a news conference.
A big complaint from consumers has been over card expiry dates. Once the cards expire, card holders would lose the funds that were loaded onto them. Not anymore, says Sorensen.
"Funds cannot, in general, expire," he said.
"Nor can financial institutions impose dormancy fees or maintenance fees within the first year of the product's activation."
The Harper government highlighted its so-called "consumer first" agenda in the fall throne speech, and is using it as a key plank leading up to the 2015 election campaign.
It has already announced plans to reduce cellphone roaming charges, force cable companies to unbundle TV packages and seek ways to reduce the gap in retail prices between Canada and the United States.
"Both the launch of the consumer code consultations and the final publication of the prepaid payment products regulations (will) have immediate inroads" to her agency's work, said Lucie Tedesco, Commissioner of the Financial Consumer Agency of Canada.
"We look forward to reading consumersâ€™ views."
The prepaid card industry, while relatively new, has grown recently and was estimated in 2011 to be worth $850 million.
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