Transactions using prepaid cards still represent a relatively small proportion of non-cash payments but there has been a large increase in the use of pre-paid cards in recent years. Recently, the Federal Trade Commission of Canada announced proposed new regulations to abolish expiry dates on prepaid cards. In addition, card issuers will not be allowed to impose fees in relation to dormant balances during the first year of use. Canada also intends to publish a comprehensive consumer financial code to provide better protection to consumers.
The proposals are in response to consumer complaints about fees not being properly set out for their consideration and the fact that, on expiry, any funds remaining on the prepaid card would be lost and would no longer be accessible to the cardholder.
What this means for you
Whilst the regulations set out above relate to Canada, similar regulations are already in place in the UK and the Consumer Financial Protection Bureau in the USA aims to introduce similar provisions this year. The industry should be alert to changes such as this since the popularity of prepaid cards only seems to be increasing as a useful alternative to credit and debit cards.