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North Stars
There is significant growth potential in the Cana- dian prepaid market. The open-loop prepaid market currently is only $4.5 billion in Canada, which leaves plenty of room for increased adoption of open-loop solutions. The government, travel, con- sumer reloadable and B2B payments segments all
have significant growth upside. We expect the major banks in Canada to garner a large share of the government business. StoreFinancial will concentrate on the consumer and B2B segments.
Regulatory changes continue to challenge prepaid program manag- ers and issuers. The biggest challenge facing the industry in Canada is the new federal prepaid rules enforced by the FCAC (Financial Con- sumer Agency of Can-
ada). The new disclosure rules required significant replacement of plastic and packaging for card pro- grams, which drove up costs. The clarity provided by the prepaid rules is welcome, but there is still discord between the agencies in the provinces and at the federal level, which leaves uncertainty in jurisdictional authority—which may play out in the court system
in 2015. We would like to see clear safe harbor rules at all levels of jurisdiction. Educating lawmakers and the public on prepaid is one way to combat these challenges. Self-regulation by the industry can
help also.
The Canadian market closely follows the U.S. market, so with the expected publication of new prepaid rules by the CFPB in the U.S., we will be monitoring any reaction by the Canadian regulatory bodies.
The new Prepaid Payment Products Regulations that came in force in May
of this year are largely disclosure-based, focused on providing clear and simple dis- closures to customers so they understand the
nature and features of the products they are purchas- ing. Among the disclosure requirements is a fee in- formation box on the exterior packaging and on any other document prepared for the issuance of a pre- paid product. There are also required disclosures
to be placed on the product itself. The only fee re- strictions in the federal regulations are on mainte- nance fees, which are prohibited for at least one year after issuance, unless the product is a GPR card and a cardholder has provided express consent to the imposition of the maintenance fee. By comparison, the existing provincial prepaid product regulations tend to be much more restrictive of fees, and some provincial legislation prohibits charging any fees except for replacing a lost or stolen card. Given these differences, it’s important to understand which re- gime—federal or provincial—a prepaid card program is subject to.
Meanwhile, the federal government is in the process
of creating a new consumer code, which is meant to apply across a broad spectrum of financial products. It’s not currently clear what products and entities will be covered by the code, but based on consumer codes in other jurisdictions, the code could include a broad general duty of fairness, which would require institu- tions to conduct an assessment of whether certain financial products or services are suitable for a par- ticular consumer, among other things. The final con- tent of the code could have an indirect effect on the federal prepaid requirements. The government is currently carrying out consultations on the code, and it’s not clear at this point when it will be released.
—Eric Mettemeyer, CEO, StoreFinancial
—Jacqueline Shinfield, Partner, Blake, Cassels & Graydon LLP