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Peoples Trust prepaid cards class action lawsuit
April 19, 2019
8:32 am
canadian.100
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I suppose many of you already know about this, but I just happened to see this reference to a class action lawsuit against Peoples Trust for $100 million re illegal / unauthorized fees on their Prepaid Cards. A court date was scheduled for first week of April 2019. (The case seems to have been in progress for a few years.) No wonder the rates are among "the best" (as indicated by Loonie in another thread). I don't think I would touch this organization.........

https://goldblattpartners.com/experience/class-action-cases/post/bernstein-v-peoples-trust-company/

April 19, 2019
9:58 am
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I believe the class action refers to the Vanilla Prepaid Card ONLY - typically sold over-the-counter in grocery stores, convenience stores, gas bars, etc. and if you've ever taken the time to read the T&C on the back of the cardboard hanger you'd drop that card immediately - however, the card seems to be popular with the churners.

Peoples Trust provide Prepaid Cards to the likes of Stack, Koho, Mogo, and others, and they all seem to be popular with the RFD crowd irrespective of the lack of privacy issues in the T&C.

April 19, 2019
11:46 am
Norman1
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canadian.100 said

…No wonder the rates are among "the best" (as indicated by Loonie in another thread). I don't think I would touch this organization.........

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.

April 19, 2019
1:07 pm
canadian.100
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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.

April 19, 2019
1:22 pm
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You do have 7-months to use it up BEFORE the monthly fee kicks in - what would you be saving it for anyway?

April 19, 2019
4:11 pm
Loonie
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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.

April 19, 2019
4:37 pm
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Protecting people from themselves? - Jo Ann Barefoot

[...]

Even among mainstream consumers, there is a thorny question on how to assign “fault” when consumers have difficulties. People get hurt in their financial dealings for a range of reasons involving varying kinds of fault by them and by others. Sometimes they just make poor choices – spending, borrowing, or paying too much, saving too little, signing up for a financial product without studying it or comparing options – even though the financial products they’re using are completely fair. At the other end of the spectrum, sometimes people are intentionally preyed upon by unscrupulous providers that target and trick and exploit consumers who are vulnerable due to lack of education or sophistication, or are financially desperate. In between, there is a wide spectrum of scenarios in which people get into bad situations where the fault, if there is some, could be thought of as shared. Yes, the consumer could have done a better job of reading and understanding the product terms, but likewise the provider, knowing most people will not understand a complex product, could have made the terms more clear. Most of these situations have, at their core, the problem that the consumer does not thoroughly understand the product. Classic market forces often fail in consumer financial transactions because the “willing buyer and willing seller” do not have equal knowledge. The seller almost always has an advantage.

Most financial transactions live in this murky middle ground. Providers correctly meet legal requirements but offer complicated products they know most consumers don’t understand. Consumers largely ignore the disclosures and sign up without comprehending the product, based on their trust in the provider and generally being too busy to delve into detail. Buried in the product’s complexity are, often, features that work to the provider’s advantage. The consumer could theoretically have found these features and sought to negotiate them or to find another provider, but didn’t. Then something happens to bring this feature to the surface, and the consumer feels harmed. Whose fault is that?

[...]

https://www.jsbarefoot.com/blog/2014/5/27/protecting-people-from-themselves

April 19, 2019
5:33 pm
Doug
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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). sf-cool

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

April 19, 2019
5:43 pm
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Doug said

... prepaid credit cards ...  

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.

April 19, 2019
5:52 pm
Doug
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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. sf-cool

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

April 19, 2019
5:56 pm
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Doug said
I'm actually not really sure how those companies intend to turn a profit.
  

It's ultra-clear in all of the cardholder agreements of the cited cards offered through Fintechs that YOUR purchase data will be collected and monetized. If you don't agree with THEIR terms and conditions your application will be declined; if you want to opt out of the T&C at a later date your card will be forfeited.

April 19, 2019
6:00 pm
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Doug said

That's actually not correct. Common terminology refers to them as "prepaid credit cards".  

Can you provide us with a link that shows a Canadian Fintech i.e. STACK, Koho, Mogo using that "common terminology" in their literature because VISA sure doesn't and neither does Mastercard

https://www.visa.ca/en_CA/pay-with-visa/cards/prepaid-cards.html

https://www.mastercard.ca/en-ca/consumers/find-card-products/prepaid-cards.html

-------------------------------------

From CIBC's website -

Are CIBC prepaid cards the same as credit cards?

Prepaid cards are not credit cards. Unlike a credit card, which allows you to access a credit limit and pay the bill later, prepaid cards let you load what you need in advance. You use your own money, which you can load onto your card from a CIBC bank account or personal line of credit.

April 19, 2019
6:36 pm
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It depends on the perspective from which one looks at them.

To the consumer and issuing financial institution, they are not credit cards as no borrowing occurs when charges are made against them.

To the merchant and financial institutions, charges made against them are processed as if the charges were against a Visa/MasterCard credit card. That's in contrast to charges made against an Interac/Visa/MasterCard debit card.

April 19, 2019
11:46 pm
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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. sf-smile

April 20, 2019
1:49 am
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If even one of the first three offenders did what they ought, the fourth, the consumer, would not be vulnerable. That's why we have protective legislation, so that the consumer doesn't have to spend all their time watching out for fine print they can't find or read and watching out for scams.

Life would be more pleasant if we were relieved of this responsibility. I don't think they'd sell enough of these things to make it worth their while if it were widely known what they were getting.

I don't find it reasonable to keep blaming the consumer for everything that is put in front of them that they might get sucked into, although that is often a popular theme on this forum. I expect government to get rid of predatory practices like this so that I can get on with my life. They haven't the guts to say NO! It takes forever to get even the mildest of consumer protections in place.

I was once given a red envelope by someone I was working with in a professional capacity. This was about 40 years ago. I had no idea what it was about at that time and didn't open it until th donors had departed.

April 20, 2019
5:08 am
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Norman1 said
It depends on the perspective from which one looks at them.
  

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.

April 20, 2019
6:55 am
Doug
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Top It Up said

Can you provide us with a link that shows a Canadian Fintech i.e. STACK, Koho, Mogo using that "common terminology" in their literature because VISA sure doesn't and neither does Mastercard

https://www.visa.ca/en_CA/pay-with-visa/cards/prepaid-cards.html

https://www.mastercard.ca/en-ca/consumers/find-card-products/prepaid-cards.html

-------------------------------------

From CIBC's website -

Are CIBC prepaid cards the same as credit cards?

Prepaid cards are not credit cards. Unlike a credit card, which allows you to access a credit limit and pay the bill later, prepaid cards let you load what you need in advance. You use your own money, which you can load onto your card from a CIBC bank account or personal line of credit.  

That's the danger in relying only on public websites, Top It Up. sf-cool

With respect, I would request deference to my first-hand banking industry experience. What I can tell you is that in HSBC's internal training and operations manuals, as well as their core banking system, they do describe "prepaid credit cards".

The reason they likely do not describe them in the T&C as "prepaid credit cards" as they don't want people thinking they will help to rebuild credit history (they don't). However, I can assure you that government regulators and the banks themselves describe them internally as "prepaid credit cards. 🙂

Cheers,
Doug

April 20, 2019
6:59 am
Doug
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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

April 20, 2019
7:09 am
Doug
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Loonie said
If even one of the first three offenders did what they ought, the fourth, the consumer, would not be vulnerable. That's why we have protective legislation, so that the consumer doesn't have to spend all their time watching out for fine print they can't find or read and watching out for scams.

Life would be more pleasant if we were relieved of this responsibility. I don't think they'd sell enough of these things to make it worth their while if it were widely known what they were getting.

I don't find it reasonable to keep blaming the consumer for everything that is put in front of them that they might get sucked into, although that is often a popular theme on this forum. I expect government to get rid of predatory practices like this so that I can get on with my life. They haven't the guts to say NO! It takes forever to get even the mildest of consumer protections in place.

I was once given a red envelope by someone I was working with in a professional capacity. This was about 40 years ago. I had no idea what it was about at that time and didn't open it until th donors had departed.  

Well said, Loonie. I, too, would like to see provincial governments extend their regulatory reach to multi-merchant gift cards issued by a shopping centre and to prepaid Visa and MasterCard credit cards. However, I do agree with Norman in the sense that, as far as I recall, disclosure statements were properly provided in 2010. I suspect that the lead plaintiff attempted to get those fees reimbursed; Peoples Trust, I'm assuming, said, "no," and hence why she's agreed to be the lead plaintiff. It's quite possible this law firm sought her out; interestingly, an Ontario-based law firm sought me out on an HSBC class action lawsuit a few years ago based on my comments on blogs and on these very forums that I held HSBC shares that I'd acquired through an employee stock option plan. Although he said, when I queried as to being potentially liable for HSBC's legal costs if the case was unsuccessful, that Ontario's Class Proceedings Fund would fully cover those costs (not sure if that's entirely true or not) and that I need not worry, I did agree to sign a written affidavit stating how I'd acquired my shares and to confidentially provide him with internal HSBC marketing materials on HSBC's Sharesave employee stock option program (to help to establish a nexus of UK-listed HSBC Holdings plc marketing its shares to Canadians in order to give the Canadian courts jurisdiction, I'm assuming). I didn't end up getting the affidavit returned to him in time, so it wasn't ultimately used. Not sure what the outcome was (believe it was related to HSBC's involvement in the foreign exchange rate manipulation based on LIBOR, EURIBOR, etc.).

Cheers,
Doug

April 20, 2019
7:09 am
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Doug said

With respect, I would request deference to my first-hand banking industry experience.  

NOT a chance - the evidence is rock solid in support of the Prepaid Card terminology - your comments are nothing more than disputatious.

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