More choice and better protection for users of electronic money

E-money is money that you have 'stored' electronically to spend later. Examples include pre-paid cards (such as holiday money cards or some gift cards) or online accounts used instead of credit or debit cards.

The new regulations introduce some important new protections for customers. Under the regulations:

• e-money issuers can not refuse to repay the full value of any unused e-money if you ask for it within six years from the end of your contract. In certain circumstances they can charge a fee but it should be made clear in the contract;
• all e-money issuers in the UK have to comply with our complaint-handling rules. If you complain to an e-money issuer and are not satisfied with their response you have the right to take your complaint to the Financial Ombudsman Service[1]; and
• any money that an e-money institution (that is an e-money issuer other than a bank or building society) holds for you overnight or longer has to be safeguarded so that it can be returned to you if the business collapses.

But there are a few things you should be aware of:

• e-money is not covered by the Financial Services Compensation Scheme[2] and the regulations do not require banks and building societies to safeguard the e-money they issue;
• some e-money isn’t regulated because it can only be used to pay for specific goods or services or to pay a limited number of third parties, for example, a gift card that can only be used to pay for goods at one retailer. The terms and conditions should make clear whether it is e-money, and who is the e-money issuer;
• the regulations allow smaller businesses to register to issue e-money rather than go through the full authorisation process which means we can’t do as many checks on the business.These businesses must say that they are registered rather than authorised.

Last updated: 1 May 2011