Ottawa Announces New Credit Card Code of Conduct Rules
Finance Minister Joe Oliver announced this week that Ottawa will be strengthening the voluntary Code of Conduct. Beginning this week, credit card issuers will have 30 days to fall in line with the Conservative government’s new rules intended to address unfair business practices and improve transparency for merchants and consumers.
Specifically, the new guidelines suggest that processors and the associations not re-coup the 10% reduction in interchange fees previously agreed to by Visa and MasterCard from merchants – such that the savings get passed onto merchants in their entirety. Moreover, the revised code of conduct will require clear branding of premium credit cards, and that consumers be informed of the fees merchants assume when accepting credit cards. The code will also be extended to govern credit card and debit card payments in the mobile world.
In November of 2014, Visa and MasterCard voluntarily agreed with the government to limit the average of all interchange fees they charge to merchants to 1.5% for the next 5 years. Merchants have been concerned that credit card processors and/or Visa and MasterCard would recoup their interchange losses through the introduction and/or increase of alternative fees. The new Code of Conduct guidelines mandate that all of the savings from the .10% interchange reduction get passed on to merchants.
In the event that merchant processors raise their rates or don’t pass on savings from Visa or MasterCard they will be able to opt out of their merchant acquiring contracts.
“The industry and the federal government are to be commended for drafting updates to the Code that protect small businesses,” said DanKelly, President of the Canadian Federation of Independent Business (CFIB). “Minister Oliver was a big supporter of an industry-led solution on reducing interchange fees, and these Code updates will help ensure those savings are passed on to merchants.”
“We’re very encouraged that theCode continues to evolve with the latest industry developments to make certain that merchants are treated fairly.”
Not everyone believes the Conservative government has gone far enough. Earlier in April, Bill S-202, an Act introduced by MP Pierre Ringuette, to amend the Payment Cards Network Act was killed by the conservatives. Bill S-202 sought to lower interchange fees to 0.5% for standard transactions, 0.3% for government, and 0% for charities.
Ringuette said “the Conservatives may feel that this issue is not important, but there are millions of Canadians and thousands of businesses who are paying these excessive fees. They deserve real action, not empty voluntary codes of conduct and friendly agreements.”