Prepaid cards continue to grow in use. They can be physical or electronic and, depending on the context, are sometimes referred to as gift cards.
Types of prepaid cards include:
- Specific retailer – can be used only at the particular retailer (either a specific location or chain of stores)
- Branded – branded with a payment card network logo g. MasterCard or Visa
- Promotional/Charitable – provided as part of a promotional program or charitable program
Prepaid cards are regulated federally and provincially in Canada.
The federal Prepaid Payment Products Regulations applies to prepaid cards and other prepaid payment products issued by federally regulated financial institutions. The regulations do not apply to retailer issued cards or prepaid cards and other prepaid payment products issued by provincially regulated institutions. The regulations include requirements and restrictions, as applicable, regarding disclosure, expiry dates and fees.
Consumer protection laws in Canada are not entirely harmonized. The prepaid legislation in Canada evolved at different times so while the prepaid/gift card legislation have some similarities, the compliance requirements are not uniform. Similar to the federal regulations, the provincial laws include requirements and restrictions, as applicable, regarding disclosure, expiry dates and fees.
The provincial laws apply to retailer issued cards and other prepayment products (physical or electronic).
There have been a number of cases over the last few years that relate to prepaid cards and the application of provincial laws to federally regulated entities. More on this in an upcoming post.