Peoples Trust prepaid cards class action lawsuit | Peoples Trust | Discussion forum

Norman1 said

The full facts paint a different picture. The claim by the law firm:

The representative plaintiff:

The lead plaintiff is Joyce Bernstein, who in September, 2010 obtained a prepaid visa card branded with the name “Vanilla Prepaid Visa”. The Vanilla Prepaid Visa card, which the defendants issued, stated on it that it was “valid thru to 04/14”. In September, 2013, and despite never having used her card, Ms. Bernstein learned that all the amounts on her card had been seized by Peoples.

Plaintiff likely did not read or understand this term in the card agreement for Vanilla Visa* Prepaid Cards purchased before 1 July 2012:

ADMINISTRATIVE FEES
We encourage you to use your Card soon! Except where prohibited by law, a monthly Service Fee of $2.50 per month will be applied to the remaining balance of the Card beginning in the seventh (7th) month from the date of purchase. This fee will not be charged once the balance on the Card reaches $0.00. If you have any questions about the monthly Service Fee, please call Customer Service at…

I received one of those cards in the past and made sure I spent the entire balance before its seventh month mark.  

It sure does not sound like a great product for the consumer - an Admin service fee of $2.50 a month for not using a prepaid card.

These stupid cards should be illegal from a consumer protection standpoint. Lots of people buy them as gifts, but the recipient (and probably the donor) isn't aware of the conditions. Grandparents with reduced vision who don't know what their grandkids might want are particularly vulnerable.
In Ontario at least, they did make it illegal for gift cards to expire some time ago, but Peoples has weasel-worded their way around this by claiming they don't expire, but in effect they do because of the so-called service charges. What service? However, I don't expect any improvement in legislation in the foreseeable future since we are now solely committed to being "open for business" to do whatever it wants.

If the majority of purchasers understood what they were getting, they would never buy them; and that would be the end of them.
I fault, in this order, Peoples Trust who created them, the govt that fails to adequately regulate and control them or educate the public on the difference between these and gift cards, the stores that sell them, and the people who buys them.

I did enjoy the 3% TFSA from Peoples for several years while it lasted, when nobody else was coming close to that rate, but that's all I ever got from them. I wasn't happy with the way they operated at the time.

If Peoples has raised its rates to pay for the class action and its lawyers, where are they going to invest it in order to continue to make a profit? - more prepaid cards?? - a huge part of their business. Reminds me of certain ponzi schemes.

Brought to you by the same folks who own the West Edmonton Mall - or at least they did last time I looked.

I wouldn't mind seeing further regulatory protections to prohibit charging monthly fees, but, that being said, this isn't that much different than banks and credit unions that charge monthly fees on chequing accounts.

Yes, People Trust Company does also provide the card issuance and back office servicing of the prepaid credit cards issued by Stack, Koho, Mogo, and the like, and I suspect they do pretty well in that business in that they essentially get to charge those companies servicing fees and those companies, in turn, do not pass them on to consumers. I'm actually not really sure how those companies intend to turn a profit. 😉

Peoples Trust will likely settle, but even if they don't, I would be surprised if they end up having to pay more than $25 million. $100 million - that's Loblaw penalty territory on a lot bigger scandal (i.e., leading an organized bread products cartel).

I wouldn't be surprised to see Vancity Community Investment Bank (formerly Citizens Bank of Canada), which is owned by Vancouver City Savings Credit Union, to be served with a similar class-action lawsuit. (Their fees are even worse!) Canada Post Corp., too, might even be served as with a lawsuit as a co-defendant as they now charge "load fees" to load or reload prepaid credit cards at their postal outlet and they also offer co-branded prepaid credit cards.

Cheers,
Doug

Top It Up said

For the record, there is no such thing as a prepaid credit card - they are just Prepaid Cards that can only be used if you have a positive balance on the card, to cover your intended purchase.  

That's actually not correct. Common terminology refers to them as "prepaid credit cards". Even FINTRAC, the anti-money laundering agency, refers to the term "prepaid credit card" for the purposes of types of Type B identification and the like.

Basically, there's:

- Major credit cards (on networks like Visa, MasterCard, American Express, Discover, and the like)
- Department store credit cards (usable only at certain stores; not on a major credit card network; includes non-department store credit cards, like gas stations or co-ops)
- Prepaid credit cards (on networks like Visa and MasterCard)
- Stored value cards (these are like gift cards, usable only at certain stores or a network of stores; not on a major card network; these are the type of card where fees and expiry dates are generally prohibited by law in all of Canada's provinces now)
- Visa Debit or MasterCard Debit cards (linked to one's bank account)

Having a credit balance on a major credit card is also possible, but that doesn't make it a prepaid credit card. The two are separate, though the difference is modest.

Cheers,
Doug

Loonie said

In Ontario at least, they did make it illegal for gift cards to expire some time ago, but Peoples has weasel-worded their way around this by claiming they don't expire, but in effect they do because of the so-called service charges. What service? However, I don't expect any improvement in legislation in the foreseeable future since we are now solely committed to being "open for business" to do whatever it wants.
…

Financial institutions issuing general use prepaid MasterCard, Visa, or AMEX cards were not covered by the Ontario Consumer Protection Act changes. According to Ontario: Buying or using gift cards, that expiry prohibition only applies to dollar-denominated gift cards from a retailer.

As well, dollar-denominated gift cards from a mall are allowed to have up to $2.50/month dormancy fee after 18 months.

I fault, in this order, Peoples Trust who created them, the govt that fails to adequately regulate and control them or educate the public on the difference between these and gift cards, the stores that sell them, and the people who buys them.

I fault the people who buy them because they consider it to be "bad etiquette" to gift money itself instead of something that was purchased with money.

I've met people from non-Western cultures who seem to have no "etiquette" problem giving cash for gifts in bright red envelopes.

Top It Up said

But it doesn't change the reality of how the issuing institutions refer to and market/sell the product - they are referred to as a prepaid card as in CIBC Smart Prepaid Visa card, Mogo Platinum Prepaid Visa card, KOHO Visa Prepaid card, STACK Prepaid MasterCard card, Cash Passport Prepaid MasterCard, Canada Post Prepaid Reloadable Visa card, etc.  

Yes, but those are just marketing terms for the names of products. I'm speaking in both a legal/regulatory and in a generic sense. Norman is correct that the banks do refer to them as "prepaid credit cards," but they're not credit cards in terms of building credit history. There's nothing inaccurate, either, about them being called "prepaid credit cards". Technically, you could even call a prepaid credit balance on a regular, major credit card as a "prepaid credit card". The difference there, though, is that you'll still show you're making regular "payments" to your credit card, which would positively affect your score (or maintain your score).

Cheers,
Doug