Consumer Alert ： Updated Rules on Prepaid Contract Disagreements

Consumer Alert: Updated Rules on Prepaid Contract Disagreements

Supreme People's Court Interpretation on the Application of Law in Civil Dispute Cases Concerning Prepaid Consumption has came into effect on May 1, 2025. We have compiled the following key points to help you protect your rights and interests in case of disputes with businesses.

Article 1: This interpretation applies to disputes arising from businesses in the fields of retail, accommodation, catering, fitness, travel, haircuts, beauty treatments, training, elderly care, tourism, and other consumer - related areas. These disputes occur when a business receives prepayments and then provides goods or services to consumers on multiple occasions or continuously.

Article 4: If a business allows others to use its business license or otherwise permits others to use its name to conclude prepaid consumption contracts with consumers, and consumers request the business to bear civil liability, the people's court shall not support the business's defense that it is not the actual operator.

Article 6: If a shopping mall site lessor fails to require the lessee (the business operating on the mall site) to provide business qualification certificates and business licenses, which results in an unqualified business leasing the site, collecting prepayments from consumers, and causing losses to consumers, the people's court shall support consumers' requests for the site lessor to bear civil liability based on its fault. After the site lessor assumes the compensation liability, the people's court shall support its claim for reimbursement from the lessee.

(Explanation: The above two articles stipulate the legal responsibilities of businesses that lend their business licenses or lease their business sites.)

Article 9: Consumers may, in accordance with laws such as Article 26 of the Law on the Protection of Consumers' Rights and Interests and Article 497 of the Civil Code, claim that the following standard clauses provided by businesses are invalid, and the people's court shall support such claims:

(1) Excluding consumers' rights to terminate the contract or request the return of prepayments according to law;

(2) Unreasonably restricting consumers from assigning the creditor's rights of prepaid consumption contracts;

(3) Stipulating that consumers cannot reissue a lost registered prepaid card;

(4) Stipulating that the business has the right to unilaterally change the contract's essential elements, such as the price, type, quality, and quantity of the goods or services provided;

(5) Exempting the business from its liability for defective guarantees of the goods or services provided or its liability for compensating consumers for losses;

(6) Stipulating dispute - resolution methods that unreasonably increase the cost of consumers' rights - protection;

(7) Other situations that exclude or restrict consumers' rights, reduce or exempt the business's liability, or increase consumers' liability, which are unfair and unreasonable to consumers.

Article 13: The people's court shall support consumers' requests to terminate prepaid consumption contracts under the following circumstances:

(1) The business changes its business location, causing significant inconvenience to consumers in receiving goods or services;

(2) The business transfers the obligations of the prepaid consumption contract to a third party without the consent of consumers;

(3) The business promised to provide unlimited - access services within the contract - agreed period but fails to do so;

(4) Other circumstances where consumers have the right to terminate the contract as stipulated by law or in the contract. After the conclusion of a prepaid consumption contract, if significant changes occur to the fundamental conditions of the contract, such as the consumer's health, which were unforeseeable at the time of contract conclusion and do not fall within the scope of business risks, and continued performance of the contract is obviously unfair to the consumer, the consumer may renegotiate with the business. If an agreement cannot be reached within a reasonable period, the consumer's request to the people's court to change or terminate the prepaid consumption contract shall be supported.

(Explanation: Many unfair regulations imposed by businesses on consumers are invalid.)

Article 17: When a prepaid consumption contract is terminated, declared invalid, revoked, or determined not to be in effect, if a consumer requests the return of prepayments, the interest shall be calculated from the date when the contract is terminated, declared invalid, revoked, or determined not to be in effect. If the parties have made more favorable agreements on the starting time of calculating the interest on the return of prepayments, or if there are other legal provisions, such agreements or legal provisions shall prevail.

Article 22: If a prepaid consumption contract stipulates that the business shall provide unlimited - access services to the consumer within the performance period, and the consumer requests to calculate the prepayments to be returned based on the ratio of the remaining performance period to the total performance period after the contract is terminated, the people's court shall support such a request.

Article 23: If a business terminates its operation after receiving prepayments, fails to provide goods or services as agreed, and maliciously evades consumers' requests for refunds, the people's court shall support consumers' requests for the business to bear punitive damages. If the business's behavior is suspected of a criminal offense, the people's court shall transfer the criminal clues to the public security organs.

(Explanation: Businesses may be required to pay double compensation to consumers or bear criminal liability. )