New prepaid credit card rules to be clearer, Tories say
Published Tuesday, December 3, 2013 11:49AM EST
Last Updated Tuesday, December 3, 2013 11:33PM EST
Ottawa is moving ahead with new regulations on pre-paid credit cards after consumers complained of unfair fees that eat away at the card’s balance.
The new rules, which will come into effect in May, will bring an end to expiry dates for its value and ban the practice of charging inflated fees to keep the card active within the first year.
Minister of State for Finance Kevin Sorensen said Tuesday that the rules governing use of the cards will have to be spelled out clearly for consumers.
Unlike traditional credit cards, prepaid cards don’t require credit checks, and 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, Sorensen said.
The new rules require that information for consumers using the cards is provided in a clear and simple manner that is not misleading.
While in the past the funds on the card would expire after a certain date, Sorenson said that will now change.
"Funds cannot, in general, expire," he said at a news conference. “Nor can financial institutions impose dormancy fees or maintenance fees within the first year of the product’s activation.”
But critics insist other fees are still too high.
Prepaid cards don’t involve interest charges, but often come with high sign-up, activation and reloading fees.
Despite inconveniences, the prepaid credit card sector is growing. In 2011, the market was worth $850 million, and this year, that number soared to $3.3 billion.
Sorensen also announced the start of consultations for a new financial code that aims to better protect consumers.
Speaking at an event in Ottawa, he said the goal is to streamline the current mix of consumer protection framework into one single code.
He said the new code will better protect consumers of financial products, "and ensure they have the necessary tools to make responsible financial decisions."
Canadians can offer suggestions for what they'd like to see in the code and comment on the proposed legislation online until the end of February.
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.
Ottawa 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.
With a report from CTV's Omar Sachedina and files from The Canadian Press