The long-awaited update to the Code of Conduct for the Credit and Debit Card Industry (updated Code) was released earlier today by the Canadian federal government. Together with the updated Code, the government also released a consultation paper titled Balancing Oversight and Innovation in the Ways We Pay: A Consultation Paper, which seeks views on the oversight of national payment systems.
The stated purpose of the updated Code is identical to the original code and summarized as follows: (i) ensuring that merchants are fully aware of the costs associated with accepting credit and debit card payments thereby allowing merchants to reasonably forecast their monthly costs related to accepting such payments; (ii) providing merchants with increased pricing flexibility to encourage consumers to choose the lowest-cost payment option; and (iii) allowing merchants to freely choose which payment options they will accept.
The updated Code will have implications for all participants in the credit and debit card industry – payment networks, card issuers, acquirers and merchants. Given the growing importance of mobile payments and mobile wallets, the updated Code includes a number of new elements applicable to mobile payments, wallets and devices.
Participants in the debit and credit card market have 30 days to review and adopt the updated Code of Conduct. As was the case with the original code, certain elements of the updated Code will be implemented on a staggered basis. Most elements of the Code will come into force within nine months of the date on which the payment networks adopt the Code, and certain disclosure-related elements will come into force within 18 months. Some elements, such as the measures to facilitate the pass-through of interchange rate reductions to merchants and the new rights for merchants regarding acceptance of contactless payments, will take effect immediately.
In summary, the updated Code of Conduct includes several new requirements:
- a new requirement that the interchange rate reductions announced by Visa Canada and MasterCard Canada in November 2014 will be fully passed-through to merchants, or merchants can cancel their contract without penalty
- a new complaints handling process available to merchants with Code-related complaints
- enhanced disclosure requirements that will require plain language disclosure in information summary boxes in merchant contracts of key contract terms and conditions and merchant fees
- greater flexibility for merchants to exit their contracts without penalty, including a right to provide notice of non-renewal at any point up to 90 days prior to contract expiry, and limiting automatic renewal of contracts to six-month increments
- a new disclosure requirement for credit card issuers to inform consumers that apply for premium credit cards that the use of these cards can impose higher merchant fees
- new branding requirements for premium cards to make these cards more easily identifiable to merchants at the point of sale
- new consumer protections for mobile payment users to ensure that consumers will have full and unrestricted control of the default settings on their mobile wallets and devices
- new protections for merchants who choose to stop accepting mobile payments
A more detailed summary of the updated Code and the consultation paper will follow in the coming days.