On September 18, 2012, the federal government announced that the Code of Conduct for the Credit and Debit Card Industry in Canada (the CDC Code) will be expanded to include mobile payments. At the same time, the government released a proposed Addendum to the CDC Code for public consultation.
The CDC Code came into effect in August 2010 and is intended to promote fair business practices and ensure merchants and consumers clearly understand the costs and benefits of credit and debit cards. (See our Blakes Bulletin: Code of Conduct for Credit and Debit Card Industry in Canada.) The CDC Code currently applies to credit and debit card networks and their participants (such as card issuers and acquirers), and covers several methods of making payments, including point-of-sale, Internet and telephone. The proposed Addendum extends the application of the CDC Code to credit and debit card networks and their participants that offer mobile payments at the point of sale. Stakeholders are also invited to comment on whether the Addendum should apply to other mobile payment participants.
The announcement follows a commitment by the federal government to review the application of the CDC Code to mobile payments made in response to the Task Force for the Payments System Review’s final report, released in March 2012. (See our Blakes Bulletin: The Final Report of the Task Force for the Payments System Review Arrives.) The proposed Addendum is intended to ensure that the protections available in the CDC Code are made available for payments that access debit or credit accounts through a mobile device. As the Minister of State (Finance), the Honourable Ted Menzies explained, “as mobile payment options begin to grow more rapidly in Canada, our Government wants to ensure that the principles of transparency, fairness and competition are respected.”
The proposed Addendum extends the application of the CDC Code’s 10 policy elements to mobile payments with certain clarifications to some of the elements.
In particular, Element 4 ensures that merchants have choice in the type of payments they accept. A merchant who accepts credit card payments from a particular network will not be obligated to accept debit card payments from that same payment card network, and vice versa. The proposed Addendum clarifies that merchants who accept credit and debit card payments through a mobile device from a particular network will not be obligated to accept all mobile products of that network.
Element 6 provides that competing domestic applications from different networks shall not be offered on the same debit card. The proposed Addendum clarifies that competing domestic debit applications can reside on or be accessed by the same mobile device, provided they are represented as separate mobile payment applications.
Element 7 provides that co-badged debit cards must be equally branded. The proposed Addendum clarifies that equal branding applies to all virtual or electronic representations of payment applications. It also clarifies that establishing default preferences for payment should be done by consumers based on a clear and transparent process, with users being able to easily change default settings.
Element 8 provides that debit and credit card functions shall not co-reside on the same payment card. The proposed Addendum clarifies that separate credit and debit applications may reside on the same mobile device, provided they are represented as separate mobile payment applications.
The proposed Addendum also invites stakeholders to provide comments on whether express consent should be required from merchants to accept debit or credit payment applications through a mobile device, where fees to merchants remain unchanged and no new infrastructure purchases are required. Such a consent requirement could significantly delay broad acceptance of mobile payments.
The Financial Consumer Agency of Canada currently states that the CDC Code applies only to credit and debit cards. It is expected that this guidance will be updated after the Addendum is adopted to include mobile payments.
The Addendum is being circulated for a 60-day comment period. During this period, stakeholders are invited to submit their views on the specific language of the proposed Addendum. Comments can be submitted to email@example.com.