Credit, debit card firms face new conduct code

Federal Finance Minister Jim Flaherty has introduced a new code of conduct for credit and debit card companies.

1 month to comply or government will legislate changes

Federal Finance Minister Jim Flaherty has introduced a new code of conduct for credit and debit card companies — a move he says will protect merchants and consumers.

The voluntary rules are similar to a discussion paper the Finance Department released in November that called for more freedom for retailers to choose credit and debit options and governed the fees companies charge for the use of their cards.

"I look forward to a stronger, more transparent debit and credit card network in Canada," Flaherty said Friday at a news conference at Toronto's Eaton Centre.

The code of conduct will require payment card networks to be more clear about rates charged to retailers and allow retailers to opt out of a payment system if fees are changed.

More choice for merchants

It also allows retailers to choose to use either credit or debit services from a network without having to accept both. That has been a contentious issue according to Mark O'Connell, president and CEO of the Interac Association, Canada's largest debit card network.

O'Connell said the move will prevent MasterCard and Visa from forcing merchants who accept their credit cards to also opt into a new debit card scheme. 

"Now the merchants have the ability to control their own destiny, because if they all accept the Visa debit card, banks are going to issue them all over," he told CBC News, adding "There's a big price differential."

Little change for bottom line

Michael Kalmanovitch, who owns Earth's General Store in Edmonton, welcomes the code but doesn't think it will change his bottom line much.

As a small business he has been faced with fees in the range of two per cent on credit card transactions. He said Interac charges are much lower, but vary, and the statements are remarkably hard to understand.

"It's not very friendly — the statements they send me," he said in an interview with CBC News.

It's that kind of complicated system the finance minister says he's trying to get rid of.

"The goal is to keep the system clear so the customer doesn't get confused," Flaherty said.

The voluntary code sits well with the Interac Association.

"It's clear that Minister Flaherty has heard the concerns of merchants and consumers — concerns that we share — and has responded with an appropriate and pragmatic code of conduct," O'Connell said.

Voluntary — for now

Credit card and debit companies have until May 17 to voluntarily adopt the code or face legislation that will force them to do so.

"In the end we will have a code in the debit and credit card industry and I hope its voluntary," Flaherty said.