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The payments industry’s Code of Conduct – what does it mean for your business?
By Justin Taylor, Canadian Restaurant and Foodservices Association
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This spring, the federal Minister of Finance released a Code of Conduct for the credit and debit card industry in Canada following almost two years of public outcry and Parliamentary debate. In reading about it in the headlines, you may have asked yourself: “What exactly does this mean for my business?”
The answer might not be what you’re expecting. While it provides clarity and helps to protect merchants from many of the unfair business practices associated with credit card processing, the code is most valuable to merchants for how it protects them against potential threats on the debit card side of the equation.
In Canada, the debit card industry is dominated by Interac, a not-for-profit, low-cost network. In the U.S., VISA and MasterCard own the market. They charge percentage-based fees on debit transactions, much like they do for credit cards, and merchants must accept debit if they accept the brand’s credit cards. In short, the American debit system is plagued with all of the problems we’ve seen in credit cards, and both Visa and MasterCard had plans to aggressively roll out such a system in Canada. The Code of Conduct ensures that merchants and consumers can choose which debit and credit products they wish to use.
Specifically, the Code protects your rights in these three areas:
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Debit
In short, you, the merchant, have the ability to choose which method of payment makes the most sense for your business to accept. Processors cannot force you to accept a brand’s debit product if you accept their credit product, and vice versa.
Processors aren’t allowed to use “negative option acceptance” to introduce new products or services. This means that new Visa or MasterCard debit products can’t be added to your system without your explicit approval.
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Credit
On the credit card front, the Code requires processors to be more transparent about the fees they are charging merchants and allow you to make better business decisions about the methods of payment you choose to accept. Processors must provide you with a clear explanation of the total fee you will be charged for each type of card. Processors must break down of the number and volume of transactions processed for each type of card. Your statement should allow you to clearly understand which fees are being charged and why.
If your processor adds a new fee or increases existing fees, you will have 90 days to opt out of your contract and shop your business around without being penalized. Gone are the days where your processor can lock you into a contract and then force you to accept higher fees once you’ve signed the agreement.
Cash and debit discounts
Under the code, you are now able to help your customer choose the most economical method of payment for your business. If you find that debit or cash is significantly cheaper than credit card, you can give your customer a discount to encourage them to pay using the cheaper method.
As of Aug. 16, 2010, all of the major payment processors, banks and debit and credit card networks have signed on to the Code and the Minister of Finance now has the power to regulate the industry.
So, check your statements and contracts. If they’re in breach of the Code, contact the Financial Consumer Agency of Canada to file a complaint. The Code is a step in the right direction but merchants need to speak up loud and clear if it’s not being followed.
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