A recent decision out of British Columbia drew attention to a novel situation: are prepaid cash cards issued by a financial institution deposit accounts?
All Trans Financial Services Credit Union Limited sold prepaid Visa and Mastercards to customers, who could then use the payment cards wherever Visa and Mastercard were accepted. When the Financial Institutions Commission (FIC) investigated, they determined that this was an unauthorized deposit business, contrary to s.81 of the Financial Institutions Act. The FIC ordered All Trans to cease selling these prepaid cards within 30 days of the release of the order. All Trans appealed to the BCSC, where the order was overturned.
This decision is currently under appeal. As noted in commentary by Robert Dawkins and D. Ross McGowan of Borden Ladner Gervais: Prepaid Cards: Deposit Accounts? Or Something Else?
… The decision on appeal may have a significant impact on financial institutions seeking to use creative FinTech approaches to expand their reach and service offerings, as well as FinTech start-ups. Careful consideration to program design is critical to ensure that issuers and program managers structure their card products to meet the regulatory needs for their specific goals.
Deposit Accounts – Payment Cards (The Lawyers Daily)