Regulatory Recap: Issues Impacting the Future of Prepaid

As part of its mission, the CPPO works to advocate for a positive environment in which prepaid payments can responsibly grow and flourish in Canada. Open-loop prepaid products are a valuable financial tool offering benefits to consumers, businesses and governments, which is why we’ve continued to track key regulatory issues worth following. 

Below is a recap of recent regulatory matters we’ve been following and taking action on. Continue to follow the CPPO’s updates each month to learn progress on these issues as they relate to the prepaid community. 

Ontario Prepaid Product Regulations

CPPO is beginning its advocacy efforts to create a consistent national regulatory model for open-loop prepaid products through engagement in the Ontario Ministry of Government and Consumer Services’ consultation on proposed changes to the province’s Consumer Protection Act. As an initial step, CPPO submitted a response, including proposed draft amendments to Ontario’s Gift Card Regulation.

In October, the CPPO met with senior public servants at Ontario’s Ministry of Government and Consumer Services to discuss the proposal to streamline the regulation of open-loop products. The CPPO will be following up with officials as they undertake changes to the province’s Consumer Protection Act over the coming year.

The CPPO also met with the Office of the Minister of Government and Consumer Services to discuss the proposal to harmonize the regulation of open-loop products. CPPO is also working to schedule meetings with representatives from the Office of the Premier.

Saskatchewan Prepaid Product Regulations

In July, CPPO submitted a letter to the Minister of Justice and Attorney General on the regulation of open-loop prepaid products in the province. In follow-up, CPPO met with Denny Huyghebaert, the Executive Director of the Consumer Protection Division at the Financial and Consumer Affairs Authority of Saskatchewan (FCAA) on August 12, 2021. The meeting was positive, with Huyghebaert committing to brief the Minister’s Office and the Chair of the Financial and Consumer Affairs Authority regarding the modernization of regulations and how it could be included in the fall legislative calendar.

The CPPO remains in communication with the FCAA and is working with members to provide material for a letter writing campaign this fall to exert additional pressure on the government to take action. 

Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA)

On June 1, 2021 new regulations under Canada’s PCMLTFA regime took effect. Under the Regulations, the new definitions of “prepaid payment product account” (PPPA) and “prepaid payment product” (PPP) are broadly drafted. The effect is that the Regulations apply to any PPP that is tied to an account that permits funds that total C$1,000 or more to be added to the account in a 24-hour period or a balance of funds of C$1,000 or more to be maintained in the account. This approach is inconsistent with international best practices and creates compliance challenges for prepaid programs operated in Canada.

The CPPO began engagement this fall with Finance Canada and Public Safety Canada advocating for an amendment to the regulations to clarify the provisions covering prepaid payment products and positioning prepaid as an important consideration as the new Financial Crimes Agency is established. 

Ontario 2021 Fall Economic Update

The Ford government released its 2021 Fall Economic Update on November 4, 2021. It represents a shift in priorities from a government that has been focused on the immediate impact of the COVID-19 pandemic, to one that is looking towards growing the economy for the longer term. Of note for CPPO, the update includes modernizing financial services where the government is advancing on:

  • Fulfilling its commitment to implement the seven recommendations stemming from the 2019 review of the Mortgage Brokerages, Lenders and Administrators Act, 2006. 
  • implementing a new legislative framework for credit unions, as introduced with the Credit Unions and Caisses Populaires Act, 2020.
  • Empowering the Financial Services Regulatory Authority of Ontario (FSRA) to develop a whistleblower protection program to allow FSRA to better identify misconduct and proceed with enforcement investigations.
  • Proposing changes to allow FSRA to establish clear market conduct requirements in relation to the design, marketing, sales, issuance and administration of segregated funds to improve consumer protection.

The Economic Update also highlights measures to fight financial crimes and tax evasion. The government is proposing legislative amendments to the Business Corporations Act to enact beneficial ownership information requirements to detect the use of corporations for tax evasion, money laundering, or other illicit financial activities.  

Disbursement of Federal Government Benefits

In May, CPPO published a whitepaper, “Modernizing Canadian Government Benefits and Tax Refund Delivery”, that highlights why prepaid solutions are needed to offer modernized, digital-first government payments to Canadians. 

The whitepaper was distributed to key government stakeholders to maintain momentum on the government’s RFI on alternate payment methods which was launched in Fall 2020. The CPPO is re-engaging key federal government stakeholders following the federal election to advocate for the adoption of prepaid as a government disbursement tool.

The CPPO has also met with policy advisors in the Office of the Minister of Digital Government and the Office of the Minister of Public Services and Procurement, which has allowed the CPPO to continue to make the case for a political mandate for prepaid adoption. The meetings will also enable the CPPO to continue engagement with government officials. The CPPO is continuing research efforts to better understand and identify gaps with the federal government’s continued use of paper-based cheques to deliver benefits.

Future discussions are expected around where cloud solutions in financial services fit into the above issues. The pandemic has accelerated the conversations to modernize government payment mechanisms through innovative methods that are cost-effective and provides greater access for all consumers. This has a direct impact on prepaid industry as there is the potential for prepaid to play a larger role in providing an equitable platform to innovative government departments.