Enhanced Canadian Debit and Credit Card Code of Conduct

Navigator Edition: April 2015
By: David Woynerowski

On April 13th, the Canadian Finance Minister, Joe Oliver, released an update to the Code of Conduct for the Debit and Credit Card Industry in Canada (the “Code”), primarily designed to further enhance merchant rights to control the cost of credit and debit card acceptance. Most of the provisions will become effective within nine months of being adopted by the payment networks and their participants (which is expected to occur within 30 days of the announcement). While the announcement introduced a series of modifications to address mobile payments as anticipated, it also established parameters designed to enhance and clarify merchant acquirer contract disclosures and termination provisions, mandate merchant dispute resolution processes, and draw greater attention to premium cards:

  • Network Monitoring / Reporting – The payment networks must review and report to the Financial Consumer Agency of Canada (FCAC), no less than every three years, the compliance of acquirers and ISOs with the Code.
  • Enhanced Disclosures – All merchant acquirer agreements must include a cover page with an “Information Summary Box” containing key contract information (term, cancellation terms, complaint handling, etc.), and a “Fee Disclosure Box,” both of which must be based on mandated templates. The acquirer must also disclose all other fees (e.g., monthly minimums, administration fees, etc.) charged to the merchant. In addition, payment network rules will require that standard-form contract terms be disclosed clearly and simply, including cancellation and renewal provisions.
  • Interchange Reductions – The updated Code requires that the acquirer give merchants at least 90 days’ notice of all applicable interchange reductions and whether they have been fully passed through to the merchant. Merchants will henceforth be permitted to terminate their acquiring contracts upon 90 days’ notice, and without penalty (including penalties on related service contracts), in the event their acquirers do not fully pass through the savings from any reduction in interchange (including the recent voluntary reductions by Visa and MasterCard) applicable to that merchant. This change will be effective immediately upon payment network adoption of the Code.
  • Dispute Resolution – Payment network rules will require that merchants have access to a clear dispute resolution process that provides for an investigation and timely response to Code-related complaints. Acquirers must post a summary of their complaint handling process on their websites, acknowledge complaints within five business days, and resolve complaints within 90 days. Should the acquirer and merchant not achieve a satisfactory resolution, the merchant may escalate the issue directly to the network. Furthermore, acquirers must report to payment networks semi-annually on the Code-related complaints received and outcomes (which the payment networks must pass along to the FCAC).
  • Premium Cards – The new provisions of the Code relating to premium credit cards apply primarily to credit card issuers. Issuers must clearly disclose on applications for premium credit card products that these products can be more costly for merchants to accept. In addition, premium cards (and premium card applets in mobile wallets) must clearly indicate that they are premium cards through prominent branding.
  • Mobile and Contactless Payments – Several of the new provisions specify how the pre-existing principles of the Code would apply to mobile and contactless payments:

–  Separation of Debit and Credit: In mobile wallets and devices, credit and debit payment credentials must be presented as separate payment applets, must be branded with equal prominence, and must allow consumers unrestricted control over default settings. Interestingly, the Code appears to leave the door open for wallet providers to establish preset default preferences, provided that there is a highly transparent, accessible and easy process made available for changing the settings to the consumer’s preferences.

– Full Optionality of Contactless / Mobile: A merchant must not be required by network rules to accept contactless or mobile payments, or upgrade its POS to become contactless or mobile-enabled. The merchant must also have the ability to cancel either contactless or mobile acceptance upon 30 days’ notice without penalty or any other change to its contract. This will be effective immediately upon payment network adoption of the Code.

– Credit / Debit Acceptance: A merchant accepting credit credentials from a given payment network through a mobile wallet will not be obligated to accept debit credentials from that network, and vice versa.

The above changes to the Code are designed to benefit small merchants by increasing transparency, giving them greater leverage to extract the full benefit of interchange reductions (many of the recent voluntary reductions by Visa and MasterCard were expressly directed at small merchant categories), and empowering them to manage high-cost tender types and form factors (e.g., contactless, mobile).

However, some of the changes appear less likely to strongly benefit merchants. The premium card additions are unlikely to discourage consumers from applying for, or in fact using the elevated loyalty rewards premium cards, and the Code doesn’t appear to explicitly allow merchants to offer differentiated discounts for premium cards versus other cards of the same payment method and payment network. In other words, it doesn’t seem as though a merchant could apply one discount to Visa Infinite and Infinite Preferred credit cards and a different discount to other Visa credit cards (i.e., the merchant would have to assign a discount applicable to all Visa-branded credit products).

With respect to the rules governing prioritization of payment types in a mobile wallet, as previously mentioned, the Code still seems to permit the mobile wallet provider to establish a default prioritization of payment credentials, so long as it can be easily changed by the consumer. This may be enough to influence the behavior of a segment of consumers.

In general, the revised Code is very good news for merchants, but we wouldn’t be surprised to see the Code tightened further to explicitly permit merchants to offer differential discounts on premium credit cards and to address findings of future Code-related audits.

For more information, please contact David Woynerowski, Partner,, specializing in Credit Card Issuing and initiatives in Canada.

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