The Ontario Superior Court recently certified a class-action lawsuit against Bell Mobility in which the plaintiff challenges the company's practice of putting expiry dates on its prepaid cell phone cards and its practice of treating any unused, outstanding balance as forfeited.1 Among other things, the plaintiff claims that the company's practices contravene Ontario's Consumer Protection Act, 2002 (the "CPA") and, in particular, its Gift Card Regulation.
It is important to note that this ruling does not decide the merits of the case, but allows the plaintiff's claim to proceed to trial as a class action to determine several issues involving the company's practices handling expiry dates and regarding Ontario's Gift Card Regulation. Bell Mobility estimated to the Court that there are approximately 1,040,400 people in the class – being persons who purchased prepaid cards branded Bell Mobility, Virgin Mobile and Solo Mobile, paid on a pay-per-use basis, with balances in their accounts at the end of an active period between May 4, 2010 and October 4, 2013 (the date the action was certified).
The lawsuit alleges that the prepaid phone cards and credits are "gift cards" and that the use of expiry dates is contrary to the Gift Card Regulation. The argument is essentially as follows: (i) the CPA stipulates that businesses cannot put expiry dates on gift cards; (ii) a prepaid cell phone plan is a gift card under the CPA – the consumer has prepaid for a voucher (which can take several forms and includes electronic credit) which the holder may apply to the purchase of goods or services; and (iii) as such, pursuant to the CPA, prepaid cell phone plans must be effective as though they had no expiry dates and Bell Mobility's practice of seizing the credit balances of its consumers constitutes a breach of contract.
Bell Mobility responded that it is not subject to the Gift Card Regulation, arguing alternatively that the prepaid plan for wireless services fits within the "one specific good or service" exemption set out in the Gift Card Regulation, and that the Canadian Radio-television and Telecommunications Commission (the "CRTC") has exclusive jurisdiction over wireless services. The defendant also pointed out that the Ontario government's website states that the Gift Card Regulation is not intended to apply to prepaid phone cards. To this, the plaintiff replied that the website is relevant but not determinative of a legal conclusion. On the issue of jurisdiction, the plaintiff argued that since there was no federal law in place during the relevant period, the provincial laws of general application continue to apply until any federal law which creates an operational conflict takes effect.
The class action will also address the allegation that the company seized unused balances on the date of expiry (rather than after the expiry date as stated in its service agreements and communications to its customers) and breached the phone card agreement, resulting in unjust enrichment of the company.
By certifying the claim as a matter that may continue to trial under Ontario's Class Proceedings Act, 1992, the court ruled that there appears to be a plausible claim and a factual basis to support hearing the matter as a class action.
It is worth noting that on June 3, 2012, the CRTC released The Wireless Code2 which establishes a mandatory code of conduct for mobile and wireless services providers, and would require providers to give prepaid card consumers seven days following the expiry date of the activated card to "top-up" their account without losing their remaining credit balances. The Code will come into effect on December 2, 2013.
We expect this case will be of great interest to the prepaid card community, including consumers and providers of prepaid payment products.
Footnotes
1Sankar v. Bell Mobility, 2013 ONSC 5916
2The Wireless Code (Telecom Regulatory Policy CRTC 2013-271)
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