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January 30, 2015

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Prepaid card issuers may need insurance

COMPANIES may have to take out insurance if they sell prepaid services cards to the public, city officials said yesterday.

This would provide protection for customers currently left out of pocket if the company involved goes bust.

An existing protection scheme requires companies to leave a 400,000 yuan (US$6,400) deposit in banks as reserves. But as this can be withdrawn at any time, it is regarded as ineffectual.

Prepaid cards are popular among businesses such as gyms, massage chains and hair and beauty salons.

In future, companies may have to buy insurance if they want to issue prepaid cards, said Chen Wei from Shanghai Commerce Commission’s market regulation department.

Chen was speaking at the sidelines of the annual session of the Shanghai People’s Congress.

“The involvement of insurance companies is a market-based approach,” said Chen. “With this, consumers can find a way to recoup their losses.”

Chen said insurance products must be carefully designed to minimize risk for the insurance companies.

Detailed plans are being drawn up.

According to the Shanghai Consumer Rights Protection Commission, it received more than 7,000 complaints about prepaid cards last year — compared to 5,800 in 2012.


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