News

Legislative Background

To address the issues surrounding prepaid consumption, the Supreme People's Court of China released a draft interpretation on June 6, 2024, aimed at regulating prepaid consumption practices and soliciting public feedback. This draft interpretation seeks to protect consumer rights by addressing refund and card transfer standards, responding to long-standing consumer concerns.

Key Provisions Explained

Article 21: Refunds Not Caused by Consumers

Refunds due to non-consumer reasons, such as merchant default, operational issues, or external factors, will be calculated based on:

1. Discounted goods/services at their discounted price.

2. Goods/services with promotional value proportionally calculated.

Example: If a consumer prepaid ¥1000 for a discounted service but used only ¥300 worth, the remaining refund would be ¥700.

Article 22: Refunds Caused by Consumers

Refunds due to consumer actions, such as personal cancellation or breach of contract, will be calculated at the original price unless deemed unreasonable by the court.

Example: If a consumer paid ¥1000 at a discount but requested a refund after using half, the services used would be valued at the full price of ¥1000, leaving no refund due.

Article 23: Consumer Payment Responsibility

Consumers' payment responsibility is limited to their prepaid amount. Merchants cannot demand additional payment beyond the prepaid amount, even if the original price exceeds it.

Example: If a consumer prepaid ¥500 for services valued at ¥1000, they are only responsible for the ¥500 prepaid amount.

Legislative Analysis

Prepaid consumption disputes have been inadequately addressed by existing laws, leading to long, costly, and difficult consumer rights protection processes. The introduction of this draft interpretation signifies a significant step towards regulating prepaid consumption, fulfilling public expectations, and promoting the rule of law in China's market economy.