Shanghai has been investigating beauty salons and gyms since July amidst a surge in complaints over prepaid cards issued by them.
The Shanghai Commission of Commerce said the city would tighten supervision and punish irresponsible prepaid card issuers.
"Prepaid card has become a common business practice," said Chen Wei, a commission official. "It has become a source of problem that puts many people's money at risk."
The Shanghai Consumer Rights Protection Commission received more than 7,000 complaints about prepaid cards last year, compared with 5,800 in 2012. For complaints about loss of money due to the abrupt closure of prepaid card issuer, half of them involved beauty salons (including hairdressers) and gyms.
The initial results of the investigation found there were 17,237 beauty salons in the city, out of which 30 percent of them issued prepaid cards.
"The investigation enables us to get a clearer picture of how large the size of prepaid cards issuers is and how serious the problem may be," said Fan Lingen, executive vice chairman of the Shanghai Single Purpose Prepaid Card Association.
The association was established in 2014 after the city insisted that all prepaid card issuers should be registered with them. But it proved unsuccessful because only 366 registered with the association from the estimated more than 100,000 such firms.
After the investigation, unregistered issuers will be asked to register, and the association will rate them in terms of credibility.
Prepaid cards are popular among businesses such as gyms, massage chains, and hair and beauty salons. The existing protection scheme requires them to deposit 400,000 yuan ($59,839) in banks as reserves, but this can be withdrawn any time, hence proving ineffectual.
"People had better not put too much money into prepaid cards to contain risks," Chen said yesterday.
