


































Economics, Law and Policy 
ISSN 2576-2060 (Print) ISSN 2576-2052 (Online) 

Vol. 8, No. 2, 2025 

www.scholink.org/ojs/index.php/elp 

 
 

301 

Original Paper 

Research on Consumer Rights Protection in Prepaid 

Consumption 

Bing Liu
1
 

1
 Dalian Ocean University, Dalian, Liaoning, China 

 

Received: November 27, 2025  Accepted: December 10, 2025 Online Published: December 13, 2025 

doi:10.22158/elp.v8n2p301        URL: http://dx.doi.org/10.22158/elp.v8n2p301 

 

Abstract 

Prepaid consumption is widely adopted in industries such as catering, fitness, and beauty services. 

While offering convenience, it places consumers at a disadvantage due to information asymmetry, 

making their rights to fund security, autonomous choice, and informed consent vulnerable to 

infringement. This paper focuses on consumer rights protection in prepaid consumption, drawing on 

domestic and international theoretical insights and practical experience to propose three 

recommendations: First, refine the relevant legal framework by clarifying the legal status of prepaid 

consumption contracts and strengthening the consumer rights protection system; Second, establish a 

comprehensive regulatory mechanism covering market entry systems, model contract templates, fund 

security safeguards, and credit-based oversight. Third, optimize redress channels by expanding the 

scope of burden of proof reversal and refining punitive damages systems. These measures aim to foster 

a fairer, more transparent, and secure consumer environment, effectively safeguarding legitimate 

consumer rights. 

Keywords 

Prepaid consumption, Consumer rights and interests protection, Regulatory system 

 

1. Introduction 

In recent years, with the rapid advancement of internet technology and continuous innovation in 

consumption patterns, prepaid consumption has emerged as a new business model, rapidly gaining 

popularity across numerous service industries. From annual gym memberships and beauty salon 

packages to educational training courses, prepaid consumption has attracted a large number of consumers 

with its discounted prices and convenient services. However, this seemingly “win-win” consumption 

model also harbors numerous problems. Due to information asymmetry, consumers often find 

themselves at a disadvantage in prepaid consumption arrangements, bearing more obligations and risks. 



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Their rights to property security, autonomous choice, and informed consent face significant threats 

during the subsequent fulfillment of obligations by operators. Frequent occurrences such as business 

closures, service downgrades, and refund difficulties not only severely undermine consumers’ legitimate 

rights but also disrupt market order and hinder the development of the social credit system. 

 

2. Research Hypotheses 

Prepaid consumption offers significant convenience to both parties in transactions. Legal development 

should keep pace with economic growth. By better regulating prepaid consumption through legislation 

and protecting consumers’ legitimate rights and interests, we can further leverage the positive role of 

prepaid consumption in economic development. By enhancing merchants’ integrity in business 

operations and establishing a fair and equitable market environment, this approach will promote the 

sustained and healthy development of China’s prepaid consumption sector while diversifying 

consumption patterns. This will stimulate economic growth, stabilize the market economy order, and 

contribute to building a socialist society governed by the rule of law and advancing the development of 

a social credit system. 

 

3. Research Design 

From the perspective of protecting consumer rights in prepaid consumption, this paper first defines 

prepaid consumption, clarifies its legal nature and characteristics, and thoroughly examines the 

manifestations of consumer rights violations and existing issues in China’s prepaid consumption 

market. Subsequently, drawing on and refining relevant research experiences in consumer rights 

protection for prepaid consumption both domestically and internationally, it proposes recommendations 

for improving China’s legal framework for safeguarding consumer rights in prepaid consumption. 

Regulating prepaid consumption through legal frameworks to safeguard consumers’ legitimate rights 

and interests will help restore and enhance consumer confidence in the market, thereby contributing to 

social stability and harmony. 

 

4. Empirical Analysis 

4.1 Theoretical Overview of Prepaid Consumption 

4.1.1 Definition and Characteristics of Prepaid Consumption 

In recent years, prepaid consumption has rapidly gained popularity across various industries as an 

emerging consumption model. Academic circles generally share a consistent understanding of the 

concept of prepaid consumption, with no significant divergence or conflict observed. Although 

definitions vary slightly, they convey similar meanings. Scholar Lei Yuanzhi defines prepaid 

consumption as a model where consumers advance funds to operators to obtain prepaid vouchers, 

which they then use to acquire goods or services multiple times over a specified future period as agreed 

(Lei, Y. Z., 2021, pp. 78-80). Su Haopeng views it as a consumption pattern where operators collect a 



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predetermined amount from consumers in advance, issue vouchers of equal value, and subsequently 

provide products or services to consumers within the agreed timeframe (Su, H. P., 2013, pp. 1-7). 

Wang Jianwen defines it as a consumption model where consumers prepay a certain amount to 

operators. After receiving products or services as contractually agreed, operators directly deduct 

corresponding amounts from the prepaid funds, typically using prepaid consumption cards as vouchers 

(Wang, J. W., 2012, pp. 146-155). Xiong Wumin defines prepaid consumption as a scenario where 

consumers prepay consumption costs to operators, with both parties agreeing to enjoy products or 

services periodically or in installments (Xiong, W. M., 2010, p. 3). 

In summary, prepaid consumption refers to a new consumption model where consumers prepay a 

certain amount of funds to operators as prepayments or top-ups to obtain future products, services, or 

benefits in installments or at scheduled intervals. 

4.1.1.1 Prepaid 

This is the core characteristic of prepaid consumption, which differs significantly from the common 

instant transaction model—where payment is made and goods are received immediately upon purchase. 

The key feature of prepaid consumption lies in its advance payment nature, meaning consumers must 

pay a certain amount to the merchant before actually enjoying the goods or services. This prepayment 

serves as the access credential for the consumption service and simultaneously constitutes the valid 

basis for establishing the consumption contract between both parties (Shi, X. Y., & Zhong, Y., 2015, pp. 

42-46). 

4.1.1.2 Using Prepaid Cards as the Medium 

Once consumers prepay merchants, they receive a prepaid card serving as tangible proof of the 

transaction contract—the physical medium establishing the contractual relationship between consumer 

and merchant. These cards typically manifest as magnetic stripe savings cards (e.g., public transit cards) 

or chip-embedded cards (e.g., electricity cards, gas cards). Using these cards eliminates the need for 

cash or bank card payments at the point of sale, thereby enhancing the security of funds. Moreover, a 

significant advantage of prepaid cards lies in their rechargeable nature. When the balance is depleted, 

consumers can easily top up the card, greatly increasing flexibility and convenience. 

4.1.1.3 Asymmetry of Rights and Obligations 

In prepaid consumption arrangements, consumers often find themselves in a relatively disadvantaged 

position. Once prepayments are made, control over the funds transfers to the merchant, leaving 

consumers vulnerable to risks such as merchant default or substandard service quality. This asymmetry 

necessitates special legal protections for consumer rights. 

4.1.1.4 Financial Nature 

First, after collecting prepaid funds from consumers, merchants typically invest these funds into other 

business sectors to generate profits, thereby serving a financing function. Second, consumers use 

prepaid vouchers as substitutes for cash in transactions, demonstrating certain monetary functions such 

as circulation and payment capability. 



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4.1.2 Legal Provisions on Consumer Rights Protection in Prepaid Consumption 

4.1.2.1 The Contract Section of the Civil Code Protects Consumer Rights in Prepaid Consumption 

Although the Civil Code does not explicitly include a specific provision on “prepaid consumption,” it 

incorporates a series of fundamental principles and regulations applicable to prepaid consumption 

contracts, thereby indirectly safeguarding consumers’ legitimate rights and interests in such 

transactions. Notably, Article 563 in the Contracts Section enumerates several grounds for contract 

termination. These include situations where one party delays performance of a principal obligation and 

fails to perform within a reasonable period after receiving notice, or where one party’s delay in 

performing obligations or other breaches of contract render the contract purpose unattainable. This 

provision offers consumers a legal basis when merchants fail to deliver promised goods or services. 

Additionally, Article 577 stipulates that if a party fails to perform contractual obligations or performs 

them in a manner inconsistent with the agreement, they shall bear liability for breach of contract, 

including continued performance, remedial measures, or compensation for losses. This provides a legal 

avenue for redress when merchants fail to deliver goods or services as agreed in prepaid consumption 

scenarios. Although these provisions in the Contracts Section do not explicitly mention prepaid 

consumption, they collectively form the foundational legal framework safeguarding consumers’ 

legitimate rights and interests in such transactions. 

4.1.2.2 The Consumer Rights Protection Law of the People’s Republic of China Safeguards Consumer 

Rights in Prepaid Consumption 

Article 2 of the Consumer Rights Protection Law of the People’s Republic of China clearly defines the 

concept of a consumer, while also granting consumers certain legal rights and protections. Analyzing 

the commonalities among consumers reveals three core characteristics: First, consumers constitute a 

segment of society as members of the social collective. Second, from a behavioral perspective, 

consumers actively participate in the process of purchasing goods, using products, or enjoying services. 

Third, at the motivational level, consumer actions aim to satisfy personal life needs. Applying these 

characteristics to prepaid consumers shows they similarly belong to the social collective, engage in 

purchasing and using goods or services, and act primarily to meet their own life consumption needs. 

Prepaid consumption establishes a service contract relationship between consumers and merchants. 

Although payment occurs in advance, this prepayment behavior essentially constitutes a commitment 

and arrangement for future contract fulfillment. It remains a type of civil legal relationship, with 

consumers still being one of the contracting parties. This demonstrates that while prepaid consumption 

may be innovative in form, it fundamentally remains within the realm of consumer affairs. Furthermore, 

Article 53 of the Consumer Rights Protection Law stipulates: “Where an operator provides goods or 

services through advance payment, it shall provide them as agreed. If not provided as agreed, the 

operator shall either fulfill the agreement according to the consumer’s request or refund the advance 

payment; it shall also bear the interest on the advance payment and any reasonable expenses the 

consumer must pay.” Thus, consumers in prepaid consumption are protected under the Consumer 



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Rights Protection Law of the People’s Republic of China. 

4.1.2.3 Administrative Measures for Single-Purpose Commercial Prepaid Cards (Trial) Protect 

Consumers’ Legitimate Rights and Interests 

The Administrative Measures for Single-Purpose Commercial Prepaid Cards (Trial) is a significant 

regulatory framework introduced by the Ministry of Commerce in 2012. It aims to further standardize 

the commercial prepaid card market, particularly for single-purpose prepaid cards restricted to use 

within the issuing enterprise or its affiliated entities, thereby effectively safeguarding consumer rights. 

These measures mandate that card issuers or sellers proactively fulfill their information disclosure 

responsibilities at the point of sale. They must not only prominently display detailed card terms and 

conditions at their business premises—including but not limited to usage rules, validity periods, 

recharging and spending procedures, loss replacement processes, refund conditions, and any applicable 

service fees—but also enter into written agreements with consumers prior to card purchase. These 

agreements must clearly document the rights and obligations of both parties in the prepaid transaction. 

This agreement serves as a crucial step in ensuring consumers are fully informed. It covers quality 

guarantees, quantity, and pricing of services or goods; consumers’ rights to request card cancellation or 

refunds under specific conditions; and the allocation of liability and dispute resolution mechanisms in 

case of breach. To achieve genuine fairness and transparency, businesses also bear the responsibility to 

thoroughly explain the agreement’s contents to consumers, ensuring they fully understand and agree to 

all terms before purchasing the card. This prevents any form of information asymmetry or misleading 

practices. Through this institutional design, the Administrative Measures for Single-Purpose 

Commercial Prepaid Cards (Trial) establishes a robust framework for protecting consumer rights. It not 

only enhances market transparency but also strengthens oversight and constraints on prepaid card 

issuers, laying a solid foundation for creating a healthier, more orderly prepaid consumption 

environment. 

4.2 Manifestations of Consumer Rights Violations in Prepaid Consumption in China and Existing 

Issues 

4.2.1 Manifestations of Consumer Rights Violations in Prepaid Consumption in China 

4.2.1.1 Operators Breaching Contracts or Disappearing Infringe Upon Consumers’ Right to Property 

Safety 

In consumer transactions, the fundamental expectation is to obtain the anticipated goods or services. 

Under the prepaid consumption model, this process is reversed: consumers must pay in advance before 

they can enjoy the goods or services (Wen, H. S., & Mao, W., 2023). Unfortunately, this model is often 

exploited by unscrupulous businesses as a fraudulent tactic. They promote prepaid cards or 

memberships through enticing sales strategies, only to abruptly cease operations and vanish once 

consumers’ prepayments are received. For instance, Ms. Zhang purchased a two-year gym membership 

at a facility named “Healthy Living,” prepaying RMB 5,000. The gym promised state-of-the-art 

equipment, diverse group classes, and professional personal training services. After several months of 



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use, Ms. Zhang noticed frequent coach turnover, a significant reduction in group classes, and a 

noticeable decline in service quality. When she requested service improvements, the gym responded 

with dismissive attitudes and made no tangible changes. Months later, due to a job transfer requiring 

her to relocate from the area, Ms. Zhang applied for a refund of her unused membership fees. However, 

the gym refused the refund, citing a clause in the contract stating “no refunds once sold.” Shortly 

thereafter, the gym abruptly closed due to poor management, and its operators became unreachable. Ms. 

Zhang and numerous other members were unable to recover their prepayments, with the total amount 

involved reaching hundreds of thousands of yuan. In this case, the prepaid operator’s actions violated 

consumers’ right to property security. Their breach of contract and sudden disappearance ultimately left 

consumers’ rights unprotected. 

Even in non-fraudulent scenarios, businesses may cease operations due to poor management, 

restructuring, or transformation, rendering prepaid funds unrecoverable. This indirectly infringes upon 

consumers’ right to property security and causes substantial economic losses. 

4.2.1.2 Businesses Abusing Standard Form Contracts Infringe Upon Consumers’ Right to Make 

Independent Choices 

Under the prepaid consumption model, businesses often issue prepaid cards on a large scale to quickly 

recover funds and attract more customers. Given the high time and cost expenditures involved in 

individually contracting with numerous consumers, businesses typically opt for pre-set, fixed-term 

standard form contracts. While this approach enhances efficiency, it has also sparked extensive 

discussions and disputes regarding “standard terms” and even “unfair terms.” These standardized 

contracts frequently prioritize protecting merchant interests, potentially containing unfair restrictions or 

exemption clauses. This undermines consumer rights to some extent, increasing consumer passivity and 

risk in transactions. 

Merchants abuse prepaid consumption standard form contracts to infringe upon consumer rights. 

Instead of fully negotiating with consumers, they establish rights and obligations through vaguely 

worded “membership cards.” While heavily promoting price discounts for consumers, these 

“membership cards” often restrict consumer rights. Common clauses include: “No refunds after 

expiration,” “The store reserves final interpretation rights regarding membership cards,” “Lost 

shopping cards will not be replaced,” and “Once issued, this card is non-refundable and 

non-replaceable.” Such standard terms limit consumers’ autonomy in choice while increasing their 

obligations, liabilities, and risks (Xu, H. Y., 2022, pp. 88-91). 

4.2.1.3 Business Operators Disclosing Consumers’ Personal Information Infringes Upon Consumers’ 

Privacy Rights and Personal Information Rights 

During the process of applying for membership cards, consumers are often required by businesses to 

submit personal information for the creation of customer profiles, enabling personalized service 

experiences. However, some businesses neglect to properly manage the personal information files 

submitted by consumers, leading to data breaches. Furthermore, driven by the lure of substantial profits, 



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certain merchants violate contractual agreements by selling users’ personal information for private gain, 

thereby infringing upon consumers’ privacy rights and personal information rights (Jia, Y. W., 2022, 

pp. 19-21). Currently, within China’s legal framework for protecting consumer privacy rights, there 

remains a lack of direct and comprehensive specialized legislation. Protection primarily relies on 

general provisions found in relevant regulations such as the Consumer Rights Protection Law and the 

Administrative Measures for Single-Purpose Commercial Prepaid Cards. While these existing legal 

documents mention safeguarding consumers’ personal and property safety, their provisions regarding 

the definition of privacy rights, protective measures, and liability for infringement remain rather 

general. They fail to provide sufficiently detailed guidance and constraints, making it difficult to 

establish robust legal support in practice. This leaves gaps in the protection of consumers’ privacy 

rights. 

4.2.1.4 Business Operators Lacking Integrity Violate Consumers’ Right to Know 

The right to know empowers consumers to obtain, in accordance with legal provisions, all truthful 

information regarding goods they intend to purchase or use and services they intend to receive. This 

right forms the foundation for consumers to ensure their choices meet personal life needs, as 

comprehensive understanding of product or service details is a prerequisite for determining whether 

such offerings align with consumption demands (Wang, B., 2014, pp. 106-109). Article 8 of China’s 

Consumer Rights Protection Law explicitly stipulates consumers’ right to know. However, in actual 

commercial activities, some businesses, in order to attract customers, tend to employ exaggerated 

marketing tactics. They emphasize the alluring aspects of prepaid consumption schemes while 

downplaying or concealing potential flaws in goods and services. This approach stimulates consumers’ 

purchasing desires and achieves rapid sales growth. However, many consumers, lacking sufficient legal 

knowledge, overlook the importance of formal written contracts during transactions. This often leaves 

them vulnerable to infringement of their rights without effective legal recourse. In such cases, 

businesses frequently circumvent strict legal obligations when fulfilling contracts, arbitrarily altering 

original promises or promotional claims, thereby severely violating consumers’ right to know. 

4.2.2 Existing Issues in Prepaid Consumption That Compromise Consumer Rights in China 

4.2.2.1 Legal Regulations Protecting Consumer Rights in China’s Prepaid Consumption Sector Remain 

Inadequate 

Although the Consumer Rights Protection Law aims to safeguard consumers’ legitimate rights and 

interests, it does not establish specific and detailed rules for the particular domain of prepaid 

consumption, merely mentioning it in Article 53. However, this provision faces challenges in practical 

implementation due to its overly general wording. Particularly problematic is the “in accordance with 

the agreement” principle, which proves difficult to implement in practice. Prepaid consumption 

contracts often lack standardization, featuring incomplete terms, unfair clauses, and sometimes no 

formal written contract at all. This makes it challenging to identify precise contractual terms and 

supporting evidence when applying the “in accordance with the agreement” principle, significantly 



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complicating its enforcement and rendering it virtually ineffective at times. 

Prepaid consumers inherently possess all fundamental characteristics of traditional consumers. 

Theoretically, provisions in the Consumer Rights Protection Law regarding consumer rights, operator 

obligations, and liabilities should equally apply to prepaid consumption contracts. However, existing 

clauses predominantly focus on post-incident remedies, failing to sufficiently prioritize consumer rights 

protection. Concurrently, the definition of operator responsibilities lacks sufficient detail, significantly 

limiting the effectiveness and rigor of legal safeguards for prepaid consumers. 

Specialized regulations like the “Measures for the Administration of Single-Purpose Commercial 

Prepaid Cards (Trial)” have played a regulatory role. These measures establish specific requirements 

for the issuance, usage, redemption, and related fund management of prepaid cards, aiming to regulate 

the single-purpose prepaid card market and protect cardholders’ rights. However, the implementation 

effectiveness and binding force of these measures are constrained by their “trial” nature and regulatory 

hierarchy. This implies that their provisions may be incomplete, penalties for violations may be 

insufficient, and enforcement efficiency may be inadequate. Consequently, they struggle to cover all 

entities and behaviors within the prepaid consumption market, particularly emerging business models 

and new formats that leverage internet platforms for prepaid sales. 

4.2.2.2 China’s Regulation of Prepaid Consumption Is Inadequate 

Although administrative oversight theoretically offers greater flexibility and practicality than 

legislation, enabling swift strategy adjustments in response to market shifts, this advantage has not been 

fully leveraged in China’s prepaid consumption sector. Government regulatory frameworks often lag 

behind market developments, resulting in regulatory systems that fail to adapt promptly to market 

changes and creating regulatory blind spots. The traditional administrative management model 

prioritizes approvals while placing relatively less emphasis on oversight. Regulatory gaps emerge due 

to information asymmetry, policy lags, and high oversight costs. Simultaneously, unclear delineation of 

regulatory responsibilities leads to insufficient coordination among regulators and limited effectiveness. 

This is particularly evident in high-frequency incidents, where overlapping jurisdictions and ambiguous 

accountability become especially pronounced (Zhao, L. L., 2023, p. 78). Meanwhile, the prepaid 

consumption model is characterized by diversity and complexity, while government regulatory 

measures tend to be relatively limited, making it difficult to address various complex and emerging 

risks. This hinders the government’s ability to effectively identify and control risks during the 

regulatory process, thereby exacerbating regulatory gaps. 

Due to limitations in regulatory resources and capabilities, governments often struggle to respond 

swiftly and effectively when overseeing the vast and complex dynamics of the prepaid consumer 

market. This creates opportunities for some businesses to evade regulation. They exploit existing 

regulatory loopholes to engage in illegal and non-compliant practices—such as misappropriating 

prepaid funds, making exaggerated claims, and providing substandard services—while evading 

appropriate legal consequences. This situation not only condones unfair business practices but also 



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further exacerbates the risk environment inherent in the prepaid consumption model, severely 

undermining the legitimate rights and interests of consumers. 

4.2.2.3 Challenges in Consumer Rights Protection for Prepaid Services in China 

In disputes over prepaid consumption, consumers theoretically have the right to seek legal recourse, 

demanding that businesses fulfill contractual obligations or compensate for losses. However, in practice, 

most transactions rely on verbal agreements rather than formal written contracts, making it difficult for 

consumers to gather sufficient evidence and creating significant obstacles to legal redress. Even when 

consumers attempt legal proceedings, they are often deterred by lengthy litigation, cumbersome 

procedures, and the high burden of proof. 

Moreover, individual consumers face a significant power imbalance when confronting larger, 

resource-rich businesses, often finding themselves in a disadvantaged position where equal dialogue is 

difficult. They frequently feel powerless to defend their rights. Consumers often pin their hopes on 

intervention by administrative regulators or industry associations for swift resolution. However, 

mediation by industry associations tends to be lenient, frequently concluding with consumer 

concessions rather than fundamental safeguards for consumer rights. As for administrative oversight, 

while theoretically authoritative and enforceable, regulatory mechanisms are often inadequate and 

responsibilities poorly defined. In practice, regulatory bodies frequently respond slowly to consumer 

disputes, sometimes even passing the buck. This makes it difficult for consumers to obtain timely and 

effective assistance. 

Consumers in the prepaid consumption sector face multiple challenges, including limited avenues for 

rights protection, difficulties in providing evidence, weak individual bargaining power, unsatisfactory 

mediation outcomes, and inadequate administrative oversight. 

In summary, as an increasingly prevalent lifestyle consumption model, prepaid consumption brings a 

series of complex issues alongside its widespread adoption. These challenges primarily manifest in the 

unclear delineation of rights and obligations between consumers and businesses within the prepaid 

model. Compounded by imperfect legal frameworks and market oversight mechanisms, this leads to a 

series of difficulties including business breaches of contract, consumer rights violations, privacy 

breaches, and consumer rights protection hurdles.  

4.3 Recommendations for Improving Consumer Rights Protection in Prepaid Consumption in China 

4.3.1 Improve the Legal System for Protecting Consumer Rights in Prepaid Consumption 

In prepaid consumption, the vulnerability of consumer rights to infringement is a prominent issue. This 

stems largely from the fact that existing laws and regulations, such as the Civil Code and the Consumer 

Rights Protection Law, provide only general principles regarding prepaid consumption contracts. 

Furthermore, the few relevant departmental rules and regulations are rather vague and lack specific 

operational details. Therefore, strengthening and improving the legal framework within the prepaid 

consumption sector has become both an urgent and critical task for effectively safeguarding consumer 

rights. 



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4.3.1.1 Clarify the Legal Status of Prepaid Consumer Contracts 

The Contract Section of China’s Civil Code stipulates nineteen types of typical contracts, including 

sales contracts and gift contracts. Prepaid consumption contracts are not included among them. 

Therefore, prepaid consumption contracts must be governed by the general provisions of the Contract 

Section of the Civil Code as unnamed contracts. Specific implementation details and the delineation of 

rights and obligations lack explicit provisions. To effectively safeguard consumers’ legitimate rights 

and interests through a sound legal framework for prepaid consumption, the primary step is to establish 

the clear legal status of prepaid consumption contracts. 

Some scholars contend that although prepaid consumption represents a novel consumption model 

distinct from traditional immediate payment consumption, prepaid consumption contracts essentially 

fall within the category of sales contracts. They argue that there is no need to treat prepaid consumption 

contracts as an independent contract type, but rather they can be thoroughly explored and regulated as a 

special case within sales contracts. However, compared to traditional sales contracts, prepaid 

consumption contracts involve more complex legal relationships that cannot be fully encompassed by 

the existing legal framework for sales contracts. In practice, defining the nature of prepaid funds—such 

as whether they constitute a deposit, advance payment, or guarantee for service commitments—often 

poses legal challenges, highlighting the distinctions between prepaid consumption contracts and 

standard sales contracts. Therefore, categorizing prepaid consumption contracts merely as a 

subcategory of sales contracts may prove insufficient to address their unique legal issues and 

challenges. 

Therefore, we should transform prepayment consumption contracts from non-standard contracts into 

standard contracts. A separate chapter should be established for prepayment consumption contracts, 

clearly defining their characteristics, legal nature, classification, and the rights and obligations of the 

parties involved. Mandatory regulations should be employed to protect the legitimate interests of both 

parties, thereby clarifying the legal status of prepayment consumption contracts. 

4.3.1.2 Improve the Consumer Rights Protection System 

In prepaid consumption, consumers invariably find themselves in a disadvantaged position relative to 

operators. Following the Civil Code’s clarification of the legal status of prepaid consumption contracts, 

to further strengthen consumer protection in such transactions, specific provisions targeting prepaid 

consumption could be added or refined within the Consumer Rights Protection Law of the People’s 

Republic of China. This would achieve more comprehensive and preferential safeguards. 

First, safeguarding consumers’ right to property security must be prioritized. This entails establishing 

clear oversight mechanisms for funds in prepaid consumption, creating dedicated escrow accounts or 

third-party custodians. Businesses should be required to deposit a portion of prepaid funds into these 

accounts to prevent arbitrary diversion of consumer prepayments and ensure capital security. 

Introducing commercial insurance would further protect consumer prepayments, enabling 

compensation through insurers should businesses fail to fulfill service commitments. 



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Second, some operators in prepaid consumption, seeking rapid capital turnover and customer attraction, 

often rely on pre-formatted standard-form contracts. The non-refundable balance clauses within these 

contracts significantly restrict consumers’ autonomy and may constitute coercive transactions (Zheng, 

L., & Xiong, Y., 2012, pp. 21-24). To fully safeguard the autonomy of prepaid consumers, they should 

be granted the right to unilaterally terminate contracts. Article 563 of the Civil Code provides the legal 

basis for terminating general contracts, but given the unique nature of prepaid consumption contracts, 

relevant provisions should be explicitly refined. Therefore, the law should explicitly state that during 

the validity period of a prepaid consumption contract, consumers have the right to unilaterally 

terminate the contract based on personal will. Particularly when a consumer refuses to continue 

receiving services, this should be deemed as the contract losing the prerequisite for continued 

performance. This measure ensures consumers’ autonomy in decision-making during contract 

execution, deepening and implementing the principle of freedom of contract. 

Additionally, compared to the operator’s dominant position in controlling information, greater 

emphasis should be placed on protecting the personal privacy rights of prepaid consumers who are in a 

disadvantaged position. Primarily, the scope and boundaries of protecting prepaid consumers’ personal 

information must be defined. This includes not only basic personal information but also details related 

to prepaid card usage, balance status, consumption history, associated device information, and payment 

methods. Second, prepaid consumers have the right to know how operators collect and use their 

information, and operators must obtain explicit consumer consent before performing such operations. 

To this end, legislation must explicitly stipulate operators’ confidentiality obligations and mandate the 

inclusion of confidentiality clauses in contracts for any transaction involving the processing of 

consumer personal information. These clauses must detail the operator’s confidentiality responsibilities, 

the specific confidentiality measures implemented, and the concrete legal consequences of breaching 

confidentiality obligations. This ensures consumers’ information security and privacy receive full 

protection within the legal framework. 

Ultimately, the very premise of prepaid consumption rests on consumers’ high trust in merchants when 

making advance payments. This model inherently involves long-term contractual commitments. 

However, as time progresses, information asymmetry between consumers and operators intensifies, 

making it crucial to deepen consumers’ right to know. This requires not only access to basic details 

about goods or services, but also extends to fundamental information about the business’s operations 

and any changes that may impact consumers’ transactions—provided such information does not 

constitute trade secrets. Furthermore, since consumers’ right to know in prepaid consumption is 

dynamic, the information they require should also be dynamic, covering the period from the signing of 

the consumption contract until its complete fulfillment. 

4.3.2 Establishing a Regulatory Model for Consumer Rights Protection in Prepaid Consumption 

Establishing a regulatory framework for protecting consumer rights in prepaid consumption is a 

comprehensive process. It manifests in four key areas: market entry systems, model contract templates, 



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financial safeguards, and credit-based oversight. These elements collectively ensure end-to-end 

supervision of prepaid consumption practices to safeguard consumers’ legitimate rights and interests. 

4.3.2.1 Establish a Prepaid Consumption Access System 

The prepaid card issuance approval process, as the primary link in the regulatory chain for prepaid 

consumption, holds undeniable significance. A rigorous issuance approval mechanism acts as a 

screening net, effectively blocking enterprises with inadequate qualifications or poor credit from 

entering the market. This ensures that only operators who have undergone strict scrutiny and possess 

strong risk-bearing capacity and sufficient solvency can obtain the qualification to issue prepaid cards. 

This step forms the foundation for building a secure prepaid consumption environment, playing a vital 

role in safeguarding consumer rights and promoting healthy market development. 

Under China’s current legal framework, the issuance of multi-purpose prepaid cards requires approval 

from the People’s Bank of China, while single-purpose prepaid cards fall under the supervision of the 

Ministry of Commerce. Relevant management measures stipulate requirements for issuers’ 

qualifications, filing timelines, and necessary documentation. However, existing regulations still lack 

specifics regarding the application procedures for card issuance qualifications and the review methods 

of competent authorities. This results in difficulties in comprehensively addressing the complex 

situations of various card issuers in practice, particularly the diverse prepaid card issuance needs of 

enterprises of different scales. The legal norms appear rather brief and insufficient to address all 

practical challenges. 

Therefore, establishing a comprehensive and meticulous issuance approval mechanism is particularly 

urgent, aimed at rigorously screening card issuers to enhance the integrity and financial performance 

capabilities of the prepaid consumption industry. Specific strategies should include: When applying for 

an issuance license, card issuers must submit a comprehensive application report to the regulatory 

authority. This report must detail the company’s basic information, such as its name, credit status, 

business scope, and registered capital, along with its prepaid card issuance plan, including the planned 

number, total amount, and types of cards to be issued. Competent authorities must conduct thorough, 

substantive reviews of applications to ensure compliance with all statutory standards, followed by 

registration through legal procedures. Crucially, registration information should be publicly disclosed 

to broaden consumer access to data, empowering them to make informed choices. This approach 

effectively mitigates financial loss risks, curbs fraudulent activities, and fosters a secure and reliable 

consumer environment. 

4.3.2.2 Model Contract for Prepaid Consumption 

In prepaid consumption, certain standard terms set by merchants often place consumers at a 

disadvantage. It is essential to restrict the application of standard terms in prepaid consumption 

contracts, prevent the abuse of such terms, and standardize model texts for prepaid consumption 

contracts. Taiwan’s Regulations on Matters to Be Included and Prohibited in Standardized Contracts 

for Commodity (Service) Vouchers specifically targets standard clauses in prepaid consumption 



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contracts. It enumerates eight prohibited clauses tailored to address prominent issues in market practice 

and the unique characteristics of such contracts. These provisions are highly targeted and practical, 

aiming to shield consumers from unfair contract terms. Therefore, China can draw upon these 

provisions to regulate the use of standard clauses in prepaid consumption contracts. This includes 

promoting standardized contract terms, strengthening oversight and regulation of standard contracts, 

enhancing operators’ credit ratings and guarantee requirements, and encouraging greater participation 

from financial institutions like banks in the supervision and services related to prepaid consumption 

(Zhao, L. L., 2024). 

4.3.2.3 Safeguarding Funds in Prepaid Consumption 

In prepaid consumption, instances of merchants absconding with funds occur frequently, infringing 

upon consumers’ property rights. Therefore, regulatory oversight of prepaid funds must be 

strengthened to safeguard capital security in such transactions. A risk guarantee fund system should be 

established, mandating operators to pre-deposit a specified percentage of funds with regulatory 

authorities. This ensures immediate compensation for consumers’ legitimate rights should businesses 

suddenly cease operations or abscond. Additionally, building a robust debt fulfillment guarantee 

mechanism is crucial for the prepaid consumption market, involving the creation of an effective 

guarantee system. Specific implementation plans could explore involving third-party guarantee 

companies or establishing a dedicated prepaid consumption guarantee fund to provide robust protection 

for consumer prepayments. Building upon this foundation, supervision and review of participating 

guarantee institutions should be strengthened to ensure their capital adequacy ratios and guarantee 

effectiveness are authentic and reliable, thereby maintaining the stability of the prepaid consumption 

market and consumer confidence. 

4.3.2.4 Establish an Effective Credit Supervision Mechanism 

Due to the lack of an effective credit supervision mechanism, some businesses may exploit the prepaid 

consumption model to engage in fraudulent activities. It is imperative to establish and improve a robust 

credit supervision mechanism to impose severe penalties on dishonest merchants (Liu, T. Y., 2021, pp. 

138-140). During the regulatory process, a comprehensive oversight chain should be established to 

cover the entire operational lifecycle of market entities, encompassing preemptive prevention, 

mid-term monitoring, and post-incident handling. This chain integrates multiple measures such as 

credit assessment, continuous supervision, and penalties for dishonesty to ensure merchant compliance 

while fully protecting consumer rights. First, implement a tiered credit classification management 

system: Based on existing laws, regulations, and local rules, industry regulators at all levels should 

incorporate prepaid consumption activities into their credit management frameworks, implementing 

stratified classification management of business credit. This approach not only expands the application 

scope of credit systems but also promotes the practical use of credit evaluation results in regulatory 

scenarios. Second, promote transparency in industry integrity commitments: Collaborate with industry 

associations and societal resources to encourage prepaid service providers to publicly pledge honest 



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operations. Simultaneously, issue risk warnings for prepaid top-ups to guide consumers toward rational 

recharging, fostering a market atmosphere of integrity. Finally, clarify and strengthen operator 

responsibilities: Enhance the disclosure of credit information for prepaid consumption operators, 

including service evaluations and customer complaint records, to improve transparency. By analyzing 

complaint hotspots and issues within the prepaid consumption sector, promptly identify emerging risks. 

Utilize cross-departmental rapid response mechanisms to effectively prevent and resolve potential 

problems, thereby safeguarding market order and social stability. 

4.3.3 Improving Consumer Remedies in Prepaid Consumption 

Currently, the consumer rights protection mechanism in China’s prepaid consumption market remains 

inadequate. When facing infringement, consumers often encounter difficulties in filing lawsuits and 

providing evidence, significantly increasing the cost of seeking redress through judicial channels. To 

ensure consumers can effectively exercise their right to sue and maximize judicial fairness, it is 

imperative to improve existing consumer rights remedies. 

4.3.3.1 Expand the Application of the Reversal of the Burden of Proof 

According to Article 64 of the Civil Procedure Law of the People’s Republic of China, it is evident that 

China generally adopts the principle of “he who asserts must prove” in civil litigation. However, this 

burden of proof is highly disadvantageous to consumers in prepaid consumption arrangements, who are 

often in a disadvantaged position. They frequently face greater risks of losing lawsuits due to an 

inability to meet the burden of proof. Therefore, the application of the reversal of the burden of proof 

should be expanded in the field of prepaid consumption to meet the needs of redressing the rights of 

prepaid consumers. Business operators bear the responsibility to clearly present and explain the terms 

of their standard form contracts to consumers. This is a fundamental requirement for ensuring 

transaction transparency and fairness. In the event of a consumer dispute, particularly concerning the 

validity of standard form clauses, the burden of proof should rest with the business operator to 

demonstrate that they fully fulfilled their duty to disclose and explain the terms during the contract 

formation stage. Similarly, in cases involving the leakage of consumer personal information, operators 

must also demonstrate that they have implemented reasonable protective measures to safeguard such 

data. By imposing a heavier burden of proof on operators in prepaid consumption disputes, we can not 

only effectively deter potential unfair commercial practices but also promote a balanced distribution of 

rights and obligations between parties. This approach provides stronger judicial protection for prepaid 

consumers and ensures a fair and reasonable dispute resolution mechanism. 

4.3.3.2 Improve the Punitive Damages System 

Article 55 of the Consumer Rights Protection Law of the People’s Republic of China stipulates that 

when operators engage in fraudulent conduct, they shall compensate consumers for their losses at the 

consumers’ request. However, it does not explicitly establish the principle of punitive damages in the 

prepaid services sector. Moreover, the prerequisite for compensation under this provision is the 

operator's fraudulent conduct, which is clearly insufficient to protect consumers’ legitimate rights and 



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interests in prepaid consumption. Compensation standards exceeding actual losses should be 

established based on factors such as the severity of the merchant’s fault, the extent of consumer harm, 

and societal impact. This would increase the cost of illegal conduct and effectively deter unscrupulous 

operators. Furthermore, the scope of application should be broadened beyond fraud. Serious violations 

of consumer rights—such as gross breaches of contract, intentional concealment of critical information, 

or provision of false advertising—should also fall under the purview of punitive damages. 

4.3.3.3 Improve the Dispute Resolution Mechanism 

First, establish a Prepaid Consumption Dispute Mediation Center as the primary platform for resolving 

disputes between consumers and businesses. This center should be staffed with a mediation team 

comprising experts from multiple fields, including law, commercial mediation, and psychology, to 

ensure the professionalism and impartiality of the mediation process. This will enable swift and fair 

resolution of disputes between consumers and businesses, reduce the cost of consumer rights protection, 

and enhance the efficiency of dispute resolution. Second, optimize court litigation procedures by 

establishing a fast-track system for small-value prepaid consumption disputes. This system should 

provide convenient case filing services, allowing consumers to swiftly submit lawsuit materials through 

an online filing system, thereby reducing on-site waiting times. Cases will be assigned to judges 

specializing in small claims, processed under simplified procedures to minimize unnecessary court 

formalities and accelerate adjudication. Judges will issue rulings within a short timeframe to ensure 

consumers receive timely legal remedies. Furthermore, the expedited small claims channel will 

establish a corresponding enforcement mechanism to ensure court judgments are swiftly executed, 

effectively protecting consumer rights. By establishing specialized mediation bodies and streamlining 

small claims procedures, an efficient and convenient dispute resolution system for prepaid consumption 

can be built. This will effectively alleviate the difficulties consumers face in protecting their rights and 

promote the healthy development of the market. 

 

5. Conclusion 

In recent years, prepaid cards have gained significant favor among merchants due to their ability to 

accelerate cash flow and stabilize customer bases. They have also attracted numerous consumers 

through advertised promotional benefits. Unlike traditional instant-exchange consumption models, 

prepaid consumption innovatively separates monetary payment from goods acquisition. Particularly in 

recent years, with the integration of internet third-party platforms and mobile payment technologies, 

this model has further evolved, showcasing a new consumption form that merges online and offline 

channels. This signals immense development potential and expansion space within the prepaid 

consumption sector. However, due to incomplete laws and regulations in China, inadequate oversight 

of prepaid consumption, and difficulties for consumers in protecting their rights, operators in this sector 

face insufficient constraints. This has led to violations of consumers’ legitimate rights and interests, 

including the right to property security, freedom of choice, personal privacy, and the right to know. 



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This thesis focuses on safeguarding consumers’ legitimate rights and interests in prepaid consumption. 

drawing on consumer protection experiences from the United States and Japan. It proposes optimizing 

the legal framework for consumer rights protection by clarifying the legal status of prepaid 

consumption contracts and strengthening special protective measures for consumers. A regulatory 

model for consumer rights protection is constructed through establishing an access system for prepaid 

consumption, standardizing contract texts, and implementing effective credit supervision mechanisms. 

and by enhancing redress avenues for consumers through the introduction of a reversal of the burden of 

proof in prepaid consumption cases and the refinement of compensation mechanisms. These three 

measures form the basis for recommendations to improve consumer rights protection in China’s 

prepaid consumption sector. It is hoped that these measures will better safeguard the legitimate rights 

and interests of consumers in prepaid consumption, promote the stability of China’s prepaid 

consumption market order, thereby contributing to the sound operation of the market and supporting 

economic development. 

 

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