New regulations on prepaid consumption effective May 1

The Supreme People’s Court issued a notice addressing critical issues regarding prepaid consumption March 14. The notice, to be effective May 1, targets problems such as business owners running away with prepaid funds, unconscionable contract clauses, and refusal to issue refunds.

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The new regulations aim to protect consumers in the increasingly common practice of prepaid consumption across various sectors, including retail, accommodation, dining, fitness and travel, among others. However, disputes resulting from one-time payments for goods and services, as well as issues related to multi-purpose prepaid cards, are not included in this interpretation.

The notice clarifies the responsibilities of business operators, making it clear that even without a signed prepaid contract, they are accountable if they allow others to use their business license or to be involved in the prepaid contracts on their behalf. This provision addresses the challenges of identifying responsible parties in cases where the business's name does not align with its operations. It also requires landlords of commercial property to vet the qualifications of their tenants and accept liability for any unlawful actions. Should an operator collect advance payments and subsequently cease operations while evading refund requests, they may be prosecuted for fraud, facing punitive damages as a result. Consumers are urged to stay informed about the operators they engage with and to retain evidence of their transactions to aid in any potential disputes.

Futhermore, the interpretation declares that unjust clauses, such as “no refunds,” “no replacements for lost cards,” and limitations on card transfers, invalid. Consumers transferring prepaid cards need only to inform the operator for the transfer to take effect. In cases where an operator's relocation significantly inconveniences consumers or if they fail to deliver services as promised, consumers are entitled to terminate the contract and demand a full refund within seven days of payment.