Flaherty Unveils Credit Card and Debit Card Code of Conduct

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Finance Minister Jim Flaherty has finally unveiled his long awaited proposed voluntary code of conduct for Canada’s multibillion-dollar credit and debit card industries. Within the proposed voluntary code of conduct, you will find a number of measures that will address the complaints brought forward by merchants.

Flaherty noted that the proposed code is intended to promote fair business practices and ensure that merchants and consumers both understand the costs and benefits of credit and debit cards.

It was also noted that the government supports efforts that encourage a competitive environment which provides fair pricing practices, innovation and a safe and secure payment system for both merchants and consumers.

With that said, the code’s provision not only applies to Visa, MasterCard and the Interac Association, but also to financial institutions that issue debit and credit cards as well as payment processors.

Among the proposal, merchants will be allowed to cancel their contracts without penalty, following notification of a fee change.

There is also a requirement of having a minimum of 90 days notice of any fee changes that are related to either credit or debit.

The code ensures that merchants who accept credit card payments are under no obligation to accept debit card payments from the same payment network, and vice versa. This means that merchants can opt to accept only credit or debit payments from a particular network if they do not want to accept both.

Bank can only issue premium credit cards to consumers who apply for or consent to them. New premium cards, such as the Infinite Visa Card has been issued to consumers on an unsolicited basis.

The problem with premium cards for merchants is that it costs more to process at a time when many merchants were hit hard by the recession.

The code also requires that there is an increased transparency and disclosure by debit and credit card networks and payment processors, with respect to the fees that merchants pay to accept plastic.

In the code, it allows business owners to provide discounts for different methods of payments.

In the case of co-badged cards, debit cards that offer competing domestic debit offerings such as Interac and Visa Debit or MasterCard Maestro, the merchant has to decide on which debit payment network is used.

It has also been noted by Flaherty that it is required that co-badged cards are fairly branded. This means that one network’s logo cannot be given preferential treatment over another.

Flaherty is putting the code out for a 60 day public consultation period.

The code is mean to serve as a complement to Flaherty’s new credit card regulations, which are set to take effect next year.

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