OTTAWA – There are rules which say pre-paid retail gift cards and pre-paid credit cards can not expire, but pre-paid phone cards are exempt from that legislation – and that’s a “scandalous” oversight, a consumer group has told the federal government.
Currently, prepaid wireless phone cards are exempt from both provincial and federal legislation which ban expiry dates on retailer gift cards and prepaid credit cards. However, one consumer advocacy group has been working to see that changed and is now demanding Prime Minister Stephen Harper’s cabinet intervene in the matter.
“Prepaid wireless, pay-per-use accounts should not be exempt from legislation that has banned expiry dates on retailer gift cards, and should be subject to the same prohibition of expiry as was legislated for prepaid credit cards because, fundamentally, all three payment methods are the same,” said Celia Sankar, executive director of DiversityCanada Foundation, a not-for-profit consumer advocacy group based in Elliot Lake, Ont. “In all cases, consumers hand retailers or banks cash up front in order to use that cash for future purchases of goods and services selected from among a variety of goods and services on offer.”
At issue here are the “top-up” cards which prepaid wireless customers (who are most often low-income or fixed-income Canadians like seniors) purchase to add funds to their pay-per-use accounts, which can then be used for making phone calls, sending text messages or downloading apps on a pay-per-use basis. These top-up cards, once activated, currently expire after a certain period of time, such as 30 days for a $15 or $20 card or 60 days for a $25 or $50 card, depending on the terms offered by various wireless providers. Prepaid customers can keep their pay-per-use accounts active by continually topping up before the expiry date; otherwise all unused funds in customer accounts expire and are claimed by the wireless service provider.
“Expiry dates on prepaid wireless cards is not what is at issue. Prepaid wireless cards constitute only one method that a prepaid wireless, pay-per-use customer can use to ‘top up’ or add funds to his or her prepaid wireless, pay-per-use account,” Sankar wrote via e-mail, adding that customers can also top up their accounts by phoning the cell phone provider or visiting its website and using their credit card to add funds.
(Cartt.ca conducted interviews with Sankar via telephone and e-mail for this story.)
“It is unfair for a supplier to claim the cash it holds on behalf of consumers ‘expires’, and therefore becomes the supplier’s property.” – Celia Sankar, DiversityCanada
“What is at issue is the expiry dates that wireless service providers place on the cash deposited by consumers into their prepaid wireless accounts in order to purchase pay-per-use wireless services,” she added. “It is unfair for a supplier to claim the cash it holds on behalf of consumers ‘expires’, and therefore becomes the supplier’s property.”
For almost two years, DiversityCanada has been raising the issue of prepaid wireless account expiry with the CRTC. Early in 2013, it participated in the Wireless Code hearing and when it was finalized in June 2013, the Code included a stipulation in Section J which said “a service provider must keep open the accounts of customers with prepaid cards for at least seven calendar days following the expiration of an activated card, at no charge, to give the customer more time to ‘top up’ their account and retain their prepaid balance.”
DiversityCanada subsequently submitted a “review and vary” Part 1 Application to the CRTC in September 2013, asking that Section J of the Wireless Code be rescinded and a new hearing be held on the subject of prohibiting prepaid wireless account expiry, a request which was denied by the Commission in March 2014.
In response, the group followed up in June 2014 by submitting a petition to the Governor-in-Council, asking for a review of the CRTC’s decision to deny the review and vary. In August, the GIC asked for contributions from interested parties, which generated submissions in early September from the Canadian Wireless Telecommunications Association (CWTA), Telus and SaskTel. As of yet, the GIC has not issued a decision regarding DiversityCanada’s petition.
DiversityCanada’s petition was jointly submitted with the National Pensioners Federation (NPF), an organization that represents one million seniors across Canada. On September 30, the two consumer groups jointly submitted a follow-up letter and appendix to their petition, in response to the comments submitted by CWTA and Telus earlier in September. These two additional documents have not been published on Industry Canada’s web site as of yet. However, Sankar shared their contents with Cartt.ca.
The petitioners’ follow-up letter now asks the GIC to consider exercising its own powers to resolve the matter: “The Petitioners submit that the Governor-in-Council should find that the issues raised in this Petition fall outside the specialized jurisdiction of the Commission, and that the matter requires the introduction of legislation to protect Canadian consumers.”
“We look forward to the Harper Government similarly taking decisive action to put consumers first by banning the illegitimate practice whereby telecom companies seize prepaid wireless consumers’ cash balances.” – Sankar
In light of the federal government’s recent interventions in various telecom matters on behalf of consumers, such as the introduction of legislation to end paper billing practices, DiversityCanada is hopeful it will step in to address the issue of prepaid wireless account expiry, too, especially since those affected are people who can least afford to lose the money.
“As of May this year, the government banned banks from placing expiry dates on cash balances in the accounts of prepaid credit card holders. We look forward to the Harper Government similarly taking decisive action to put consumers first by banning the illegitimate practice whereby telecom companies seize prepaid wireless consumers’ cash balances and claim the money ‘expired’,” Sankar told Cartt.ca.
In their written submissions to the GIC in September, CWTA, Telus and SaskTel all supported the CRTC’s original decision regarding expiration of prepaid wireless cards, and called for DiversityCanada’s petition request to be dismissed. CWTA and Telus both argued in their submissions that prepaid wireless cards are not the same as retailer gift cards, because as soon as a wireless card is activated, the customer is receiving service in the form of access to the wireless network.
“In fact prepaid wireless service cards are dissimilar, in that by using a prepaid card a consumer is purchasing access to wireless services, so that once activated the service purchased through the card has been rendered,” Telus wrote in its comments, which were submitted by Stephen Schmidt, chief regulatory legal counsel for telecom policy and regulatory affairs.
Telus continued in its submission: “In reality, in the ‘pay-per-use’ or pay-as-you-go model, a customer deposits money into (an) account that allows the customer to draw upon it to pay for usage over a specified period of time… There is no doubt about the time frame in which customers are paying for their access to wireless services.”
“To maintain active service with us, customers who use pay-as-you-go service need to top-up every month… If someone only paid for service every few months or years, we would have no way of maintaining their phone number and active account.” – Telus
Telus regulatory officials were unavailable for a phone interview. However, a media relations representative did provide the following statement via e-mail: “To maintain active service with us, customers who use pay-as-you-go service need to top-up every month. This keeps their service, and their phone number, active with us. If someone only paid for service every few months or years, we would have no way of maintaining their phone number and active account.”
In its submission to the GIC, CWTA wrote that the terms of pre-paid cards are made plain when purchased. “Pre-paid wireless service is fundamentally different from an ordinary retail gift card. In the retail gift card situation, the retailer does not provide value until the card is redeemed… In sharp contrast, in the pre-paid wireless phone service situation, the ongoing value is the network connectivity that occurs when the balance from a card is applied to the wireless service account.”
In a telephone interview, CWTA’s director of regulatory affairs, Kurt Eby, expanded on the industry association’s position regarding DiversityCanada’s call for the prohibiting of the practice of expiring prepaid wireless service accounts.
“It’s just the same as if you had home phone and no one phoned you for a month, you don’t get your money back and you wouldn’t argue that you didn’t get value.” – Kurt Eby, CWTA
“The minute you activate (a prepaid wireless card), you are availing yourself of a service. You need to activate it to get access to the telecom network and to be able to receive a call, which is in itself a service. It’s just the same as if you had home phone and no one phoned you for a month, you don’t get your money back and you wouldn’t argue that you didn’t get value,” Eby said.
Sankar pointed out there are two prepaid wireless service business models — monthly plan and pay-per-use. DiversityCanada and NPF are not including prepaid monthly plans as part of the ban they are seeking, Sankar said. “With prepaid wireless services under a monthly plan, there is a straightforward contract that consumers pay a set fee in advance to receive clearly defined access to the wireless network,” Sankar wrote via e-mail.
With the pay-per-use business model, “consumers do not purchase anything until they actually use the services… or they actually purchase goods,” Sankar wrote. “It is incorrect of wireless services providers to argue that the cash in consumers’ prepaid wireless, pay-per-use accounts constitutes payment for access to the network,” Sankar said.
“The wireless services providers’ claim is quite scandalous, in my view, because it suggests they are advertising these services to consumers as being prepaid, pay-per-use services when, in fact, these companies do not deem themselves to be offering prepaid wireless services on a pay-per-use basis.
“Prepaid wireless services are viewed as the least expensive means to obtain wireless services, so these services are used by vulnerable consumers, including those on fixed incomes, such as pensioners, persons receiving disability benefits, and the unemployed,” said Sankar. “It’s also popular with youth newcomers, and minimum-wage workers. They can least afford to lose their funds or have their wireless services cut off, so they are hit hard when the phone companies seize their cash balance and shut down their account.”
All of the publicly available documents related to DiversityCanada/NPF’s petition to the Governor in Council can be viewed here.
