On September 18, 2012, the federal government announced that the
Code of Conduct for the Credit and Debit Card Industry in Canada
(the CDC Code) will be expanded to include mobile payments. At the
same time, the government released a proposed Addendum to the CDC
Code for public consultation.
The CDC Code came into effect in August 2010 and is intended to
promote fair business practices and ensure merchants and consumers
clearly understand the costs and benefits of credit and debit
cards. (See our Blakes
Bulletin: Code of Conduct for Credit and Debit Card Industry in
Canada.) The CDC Code currently applies to credit and
debit card networks and their participants (such as card issuers
and acquirers), and covers several methods of making payments,
including point-of-sale, Internet and telephone. The proposed Addendum extends the application of the CDC
Code to credit and debit card networks and their participants that
offer mobile payments at the point of sale. Stakeholders are also
invited to comment on whether the Addendum should apply to other
mobile payment participants.
The announcement follows a commitment by the
federal government to review the application of the CDC Code to
mobile payments made in response to the Task Force for the Payments
System Review's final report, released in March 2012. (See our
Blakes Bulletin: The Final Report of the Task
Force for the Payments System Review Arrives.) The
proposed Addendum is intended to ensure that the protections
available in the CDC Code are made available for payments that
access debit or credit accounts through a mobile device. As the
Minister of State (Finance), the Honourable Ted Menzies explained,
"as mobile payment options begin to grow more rapidly in
Canada, our Government wants to ensure that the principles of
transparency, fairness and competition are respected."
The proposed Addendum extends the application of the CDC
Code's 10 policy elements to mobile payments with certain
clarifications to some of the elements.
In particular, Element 4 ensures that merchants have choice in
the type of payments they accept. A merchant who accepts credit
card payments from a particular network will not be obligated to
accept debit card payments from that same payment card network, and
vice versa. The proposed Addendum clarifies that merchants who
accept credit and debit card payments through a mobile device from
a particular network will not be obligated to accept all mobile
products of that network.
Element 6 provides that competing domestic applications from
different networks shall not be offered on the same debit card. The
proposed Addendum clarifies that competing domestic debit
applications can reside on or be accessed by the same mobile
device, provided they are represented as separate mobile payment
Element 7 provides that co-badged debit cards must be equally
branded. The proposed Addendum clarifies that equal branding
applies to all virtual or electronic representations of payment
applications. It also clarifies that establishing default
preferences for payment should be done by consumers based on a
clear and transparent process, with users being able to easily
change default settings.
Element 8 provides that debit and credit card functions shall
not co-reside on the same payment card. The proposed Addendum
clarifies that separate credit and debit applications may reside on
the same mobile device, provided they are represented as separate
mobile payment applications.
The proposed Addendum also invites stakeholders to provide
comments on whether express consent should be required from
merchants to accept debit or credit payment applications through a
mobile device, where fees to merchants remain unchanged and no new
infrastructure purchases are required. Such a consent requirement
could significantly delay broad acceptance of mobile payments.
The Financial Consumer Agency of Canada currently states that the CDC Code applies only to
credit and debit cards. It is expected that this guidance will be
updated after the Addendum is adopted to include mobile
The Addendum is being circulated for a 60-day comment period.
During this period, stakeholders are invited to submit their views
on the specific language of the proposed Addendum. Comments can be
submitted to firstname.lastname@example.org.
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