As consumer complaints surge, China’s top court has introduced new rules to curb prepaid service abuses and hold businesses accountable.
By He Qitong and Wu Yufei
Starting Thursday, new rules from China’s top court take effect to curb widespread abuses in the prepaid consumer sector, where sudden business closures, refund denials, and disappearing operators have routinely stranded customers without protection.
The Supreme People’s Court guidelines aim to clarify who bears responsibility when businesses fail to deliver prepaid services — a common model in gyms, beauty salons, training centers, and other service industries.
They target evasive practices such as shifting company names, using shell entities, or denying refund claims through vague contracts, all of which have fueled a surge in consumer complaints and legal disputes.
In recent years, the prepaid model has surged in popularity across China’s consumer services where customers pay upfront, often through memberships, in exchange for discounts. But when businesses shut down, change hands, or refuse refunds, consumers are often left with little recourse.
On Black Cat Complaint — a mediation platform launched by Sina, the parent company of microblogging site Weibo — nearly 4,000 grievances have been filed over prepaid services, mostly involving sudden closures, misleading contracts, or aggressive upselling.
And a China Youth Daily survey of over 2,000 respondents found that while 80% had purchased prepaid cards, nearly half ran into non-refundable policies, undelivered services, or businesses vanishing with their money.
The new guidelines, first issued March 14, close off several loopholes that businesses have long used to dodge responsibility, including switching brand names or operating through shell companies. Under the updated guidelines, licensed business entities remain liable for refunds, even if a different provider handled the service. Consumers can also pursue claims against franchisors when franchisees default.
Moreover, property lessors — such as shopping malls — must now vet tenants before leasing space. If they fail to conduct due diligence and a business disappears with customer funds, the property owner can be held accountable.
The rules also tighten accountability when businesses shut down. If a company accepts advance payments but fails to deliver due to operational issues, it must initiate timely legal liquidation. Ignoring refund requests may constitute fraud — punishable by triple compensation under China’s Consumer Rights Protection Law, or criminal charges in severe cases.
To better protect first-time buyers, a new “seven-day refund” rule allows consumers to claim a full refund if they haven’t used the product or service. Overreaching contract terms are now explicitly banned — including clauses that block cancellations or refunds, refuse to reissue lost prepaid cards, or allow one-sided changes to service terms. Any ambiguity will be resolved in favor of the consumer.
The new rules have struck a chord online, with a related hashtag drawing over 4.5 million views on microblogging platform Weibo. While many users welcomed the move, some called for stronger enforcement.
“When prepaid funds are effectively regulated, illegal practices will decline, and consumer rights will be better protected,” said Chen Yinjiang, deputy secretary-general of the Consumer Rights Protection Law Research Association. “Only then can this model deliver real economic and social value.”
(Header image: Visuals from Drogatnev/VectorStock/VCG, reedited by Sixth Tone)