Beware of prepaid ‘credit cards’

Regulations still fuzzy for money cards with expiry dates

Susan Flanagan susan@48degrees.ca
Published on June 4, 2013
— Photo illustration
by Thinkstock

No. 1 recently returned home from an engineering workterm in Calgary. He bought a car while he was out there and drove it back.

Because he wanted to be able to book hotels while he was on the road, he needed some sort of credit card in his wallet. He opted to purchase a Canada Post Visa prepaid card issued by the Citizens Bank of Canada.

It seemed like the perfect option. Simple: just transfer money from his bank account using his bank card right there at the Canada Post counter and all his problems were solved. He wouldn’t arrive at a hotel to find his reservation had been given away because he didn’t have a credit card number.

Was this a good choice?

Well, I guess first you have to look at what a Canada Post Visa prepaid card really is.

It’s not a credit card. “This card is not a credit card,” it says right on the back.

And because it has a clear expiry date printed on the front — two years after the date of issue, it can’t be a gift card. Because didn’t the provincial government rule that gift cards are not allowed to expire?

Indeed, Vanessa Colmann-Sadd, at Service NL, directed me to assembly.nl.ca where section 106 of the Consumer Protection and Business Practices Act specifies:

“‘Gift card’ means an electronic card, written certificate or other voucher or payment device, including a gift certificate, that has an express or implied monetary value and is issued or sold in exchange for the future purchase or delivery of goods or services”

That sounds like a description of what No. 1 purchased. Yet the Act goes on to say:

“Expiry dates prohibited

“3. (1) A supplier shall not issue or sell a gift card that has an expiry date.

“(2) A gift card which is issued or sold with an expiry date is redeemable as if it had no expiry date.”

So, No. 1’s Canada Post Visa prepaid card is not a credit card and it’s not a gift card.

So, what is it? I don’t know, but whatever it is, I know that in order to use it you have to pay several fees.

“Beware virtual money,” says Al Antle, executive director of the Credit Counselling Services of Newfoundland and Labrador. There are often strings attached.

Antle is right. The VISA prepaid card costs $15 to load, has a fee of $3 at the beginning of each month and $2 for every cash advance (plus any ATM fees). My son can add $500 to the card at a time, but each time he loads money he gets dinged another $3. No pin or signature is required, so if the card is lost or stolen, he can more or less kiss that money goodbye.

Here’s what the Canada Post site warns: “If the card is lost or stolen, you must notify us immediately by calling 1.866.760.1543 and provide your name, the card number, date of expiry, original value and recent transaction history to us. Keep a secure record of the card number, date of expiry and your transactions separate from the card.”

Canada Post does not issue paper statements — they are not an option — and my son may not look at his Visa prepaid card account for months. So, unless No. 1 is vigilant and reports the illegal use of funds immediately and has a copy of his card number, expiry date and transactions, he’s out of luck.

So, my next question was, why does the Canada Post Visa prepaid card, that is not a credit card nor a gift card, have to expire? I figured the best people to call would be at Canada Post.

“We don’t make the rules,” the telephone responder told me.

“Who does?” I asked.

“I can’t answer that.”

Then I got her supervisor, Carla, and although I explained I had general questions concerning the card, she wanted to speak to my son so he could give me permission to talk about his card.

“What actually happens … is that the card — the plastic — will

expire. … We are giving you a time period to use the funds. I do not know how to explain it. We give you a new plastic … By the end of April 2014, a new card will be created and sent to you and after creation of the card is completed …”

The explanation was difficult to follow. I found a more satisfying answer in the FAQ section of the Canada Post website.

Must be active

“Thirty days prior to the expiry date on the front of your card, if your card is active and has funds remaining, you will automatically be issued a replacement card with a new expiry so you can continue to use your funds. Your card will not be replaced if 30 days prior to expiry, your card is not in an active status and/or has a zero balance.”

Lorraine Wilson, media relations representative with Vancity media (which represents Citizens Bank of Canada, the issuer of the cards) says otherwise.

“For the reloadable card (I assume here Wilson is referring to the Canada Post Visa prepaid card) we return funds to the registered cardholder via a cheque on their request.”  

So, let’s review.

The onus is on No. 1 to make sure his current address is on file and is up to date and that he remembers to request a cheque for unused funds. Oh right, and he has to make sure his account is not inactive. I wasn’t sure what “inactive” meant, so I called back the number on the card and spoke to Mia. It was like pulling shark’s teeth, but I finally got a definition out of her.

“The definition of ‘inactive’ is you haven’t used the card in three months?” I asked.

“Correct,” she said.

James Nesbitt, communications consultant with Vancity adds, “If there are funds on a card that has been inactive for four months or more and the card holder doesn’t request a payout on the remaining balance, the only transaction that would occur is the monthly $3 admin fee; the balance of the funds remain untouched. Once the balance on an inactive card reaches zero, the $3 admin fee ends.”

Clear as the oily sludge I poured out of my lawnmower yesterday. They continue withdrawing your money until there’s none left.

Then I decided to ask how much Vancity has accumulated in unclaimed funds from expired Canada Post Visa prepaid cards.

“This isn’t something we typically share,” wrote Karen Chen, manager of Payment Solutions with Vancity.

I decided to call the federal government to hear what legislation they have concerning expiry dates on cards like the Canada Post Visa prepaid non-gift non-credit card.

“Prepaid card regulations are not yet final or enforced,” said Julia Howser with the Financial Consumer Agency of Canada.

Howser put me on to David Barnabe, senior media relations and consultations officer with the federal Department of Finance.

“The government is working to bring forward the final regulations for publication in the Canada Gazette in the coming months.”

So, there you have it, folks. Beware virtual money, especially for children. And if you have a complaint about Canada Post prepaid cards, you can go online (www.citizensbank.ca) to engage in Citizens Bank’s dispute resolution process.

Or you can write a letter and send it to:

Financial Consumer Agency of Canada

Enterprise Building

427 Laurier Avenue West,

    6th Floor

Ottawa, ON, K1R 1B9

Telephone: 1-866-461-3222

(en français 1-866-461-2232)

Website: fcac-acfc.gc.ca

By the way, No. 1 had a choice between buying the Canada Post Visa prepaid card over a Canada Post prepaid Visa gift card. But since Canada Post advertises: “Get a reloadable Visa prepaid card for yourself or a Visa gift card for friends and family,” he went for the prepaid card. Had he chosen the Canada Post prepaid Visa gift card, there would have been “no monthly fees” and “funds NEVER expire.” But there would be a different fee structure for uploading money.

Susan Flanagan can  be reached at susan@48degrees.ca.