Flaherty Warns to Respect Voluntary Code

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Federal Finance Minister Jim Flaherty warned companies and banks that if they do not comply with a proposed voluntary code of conduct for the credit and debit card markets, he will be bring down the “hammer” of regulation.

The code, which is designed to address merchants’ claims they are being unfairly treated, draws more cautious responses from credit card companies and banks.

Critics worry that a voluntary code might not be enforceable, however on Thursday, Flaherty made it clear he will get tough if he has to.

Flaherty also noted that in the event they are unsuccessful with the voluntary code, then they can create an involuntary code, they have the power to do it.

The long awaited code contains proposals that give merchants more influence in dealing with global credit card giants, payment processors and big banks over card fees.

Credit card companies expressed their concern about the impact of the code on the market competition.

Visa has made it clear that it is disappointed with the code giving merchants the ability to supersede consumer choice at the point of sale, which significantly undermines the introduction of competition in debit.

The proposed code could mean that Visa’s new chip card readers, which accepts its debit cards may have to be reprogrammed and 2.5 million Bank of Montreal MasterCard Maestro debit cards already on the market have to be reissued.

It has not been clear who will bear the costs.

The Interac Association is welcoming the code, but it has said it would work with the government to fill in the details.

The Canadian Bankers Association said that most of the measures do not apply to banks, but it has still cautioned that customers are best served by an open competitive marketplace.

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