Credit/debit code of conduct: FAQs

Federal Finance Minister Jim Flaherty has announced a code of conduct for the debit and credit card industry to help businesses understand costs associated with these cards, and to provide them with more choice in how they interact with card networks.

Federal Finance Minister Jim Flaherty has announced a code of conduct for the debit and credit card industry to help businesses understand costs associated with these cards, and to provide them with more choice in how they interact with card networks.

What does the code aim to do?

The code is intended to inform merchants of the costs associated with accepting debit and credit card payments, so that they can project their monthly costs. It also lets merchants select the payment options they plan to accept from cardholders and to have pricing flexibility to allow cardholders to choose the lowest-cost payment option.

What's the status of the code?

The draft code was released for public consultation by Flaherty on Nov. 19  for 60 days. The code was finalized on April 16, 2010. The credit and debit card industry has until May 17, 2010  to review and adopt the code.

Is the code mandatory?

No, it is voluntary. But On March 29, the government introduced legislation in Parliament to implement certain provisions of the budget. The legislation enacts the Payment Card Networks Act, which would give the minister of finance the power to regulate the market conduct of the credit and debit card networks and their participants, if necessary.

Who are the players affected by the code?

Those affected are merchants, acquirers, payment card networks and issuers. Merchants are businesses that accept credit card or debit card payments for services sold. Acquirers are the financial institutions/organizations licensed as members of payment card networks who provide card-processing services to merchants. And payment card networks, which include VISA, Mastercard, American Express, etc., are the go-between the acquirer and issuer, the financial institution that issued the card to the cardholder.

How will the code work?

The payment card networks, which include credit and debit card networks, that decide to adopt the code will abide by the policies set out in the legislation, and will include elements of the code in their contracts.

Will there be more transparency?

Yes. The payment card networks and their participants will work with merchants to make sure any agreements between them and acquirers are clear and easy to understand. Merchant statements will have to include:

  • The effective merchant discount rate (calculated as the total fees paid by the merchant to an acquirer, related to the processing of a specific type of payment card from a payment card network, divided by the total sales volume for that type of payment card) for each type of payment card from a payment card network.
  • Interchange rates (paid by acquirers to card issuers on purchase transactions) and, if applicable, all other rates charged to the merchants by the acquirer.
  • The number and volume of transactions for each type of payment transaction.
  • The total amount of fees applicable to each rate.
  • Details of each fee and to which payment card network they relate.

How will fee changes be communicated?

Payment card networks will provide acquirers with 90 days notice of fee changes and 180 days for major "structural" changes, such as the introduction of new types of interchange or other fees, a change to the interchange rate structure or the introduction of a new type of credit or debit card. Merchants will also be given 90 days notice by acquirers before any interchange rates or fees related to debit or credit card transactions change. And despite signing a contract with an acquirer, a merchant will have the ability to terminate it within 90 days following a fee increase.

Will merchants have the choice to accept either debit or credit card payments if they've signed with a payment card network?

Yes. A merchant will be able to choose whether they accept one form of payment or the other.

Will merchants be able to offer discounts for payment with cash, debit or credit?

Yes, discounts will be permitted for any payment method, as long as the discounts are clearly marked at the point-of-sale. Merchants will also have the choice of selecting the lowest-cost option on transactions involving co-badged debit cards, which are cards that can have access to multiple debit card networks (e.g. Interac and Visa Debit on one debit card).

Will all-in-one debit-credit cards be allowed?

No. They will be issued as separate cards, due to the fact they perform different functions and have different fees.

Who will be eligible to receive premium credit cards?

Premium cards will continue to be issued to a select group of cardholders who meet a certain set of criteria, such as an income or spending threshold.