On October 1, 2024, the Canadian Department of Finance announced that there will be a new Code of Conduct for the Payment Card Industry (the Code), currently known as the Code of Conduct for the Credit and Debit Card Industry in Canada. The Code is a set of policies and rules that govern payment card network operators (PCNOs) that have agreed to its adoption. Once adopted by a PCNO, the Code's rules are incorporated in the network's governing rules, regulations and contracts. Participating networks include Mastercard, Visa, Amex, Interac, Discover and UnionPay.
The changes to the Code are extensive and bring, directly and indirectly, network participants including issuers, acquirers and payment processors within the oversight of the Federal Consumer Agency of Canada. In particular, the new Code formalizes concepts that apply to third-party "downstream" processors involved with merchant-acquirer arrangements and related contracts.
The existing Code of Conduct for the Credit and Debit Card Industry in Canada remains in effect until October 29, 2024, with most elements of the revised Code coming into effect the following day on October 30, 2024, and the balance coming into effect next year on April 30, 2025.
The New Code
The new Code introduces substantial revisions to its 2015 predecessor. Effective October 30, 2024, these changes include, but are not limited to, the following:
- Expanded Scope for Intermediaries as Downstream Participants: The existing Code identifies "downstream participants" of a card network as an example of those that might constitute a participant who the network needs to ensure abides with the original Code. In contrast, the new Code includes a fulsome definition of a "Downstream Participant", clearly bringing into scope intermediaries who interact with Canadian merchants to provide or offer any payment processing service or equipment for a payment card transaction.
- Payment Cards: Esoteric definitions of different payment mechanisms, such as payment applet, mobile wallet and mobile device, have been replaced by an all-encompassing term. The new Code defines "Payment Card" to be digital and physical cards from an issuer that provide the ability for debit, credit or prepaid transaction that is linked to a cardholder account.
- Expanded Scope for Related Service Contracts: New rules apply to certain "Related Service Agreements" between a merchant and a Downstream Participant for payment processing (and related) services. Where a merchant on its own separately contracts with a processor for services unrelated to the underlying merchant-acquirer agreement, that separate contract involving the merchant is not subject to the new Code.
- Merchant Notices for Fee Changes: Under the
new Code, any new or increased fees that are payable by the
acquirer or processor and passed on to merchants must be clearly
communicated. Notices to merchants must include and specify:
- the previous and new amounts of interchange rates, wholesale discount rates, network assessment fees or any other rates and fees charged by the acquirer or downstream participant;
- whether the change originates from the PCNO, acquirer, or downstream participant, and the amount of the change passed on to the merchant; and
- merchants have the right to exit their agreement without penalty within 70 calendar days after the effective date of the change, and the notice must include the expiration date of this period. If there are no fixed terms or penalties for cancellation, merchants must be reminded of their right to exit without penalty at any time.
However, similar to the existing Code, notice is still not required for fee changes made according to pre-determined schedules, such as those based on merchant sales volume or the end of a promotional period, if these schedules were disclosed to the merchant in the merchant-acquirer agreement.
- Complaint Handling Process: The new Code has
reworked the complaint process for non-compliance to ensure timely
and transparent outcomes for complainants. It establishes
merchants' right to a clear, simple and transparent complaint
handling process that investigates merchant complaints related to
Code non-compliance in a timely manner. Additionally, PCNOs,
acquirers and downstream participants must now ensure:
- merchants are provided information about the complaint handling process, and the complaint handling process is easy to access and understand;
- accountability for complaint handling is clearly established within a PCNO, acquirer and downstream participant, who each must have processes in place to monitor and report such complaints to the business's management;
- complaints are acknowledged within a maximum of 5 business days, investigated and addressed through a written response within 20 business days (30 business days for PCNOs);
- the complainant must be kept up to date on the resolution process or be kept apprised of any delays in response time; and
- PCNOs must investigate all merchant complaints, including complaints received from acquirers, downstream participants and the FCAC.
- Compliance Requirements: The Code requires acquirers to provide PCNOs with their current internal policies and procedures related to Code compliance on an annual basis. Downstream Participants must provide their acquirers with their current internal policies and procedures related to Code compliance. PCNOs must be informed of all Code related complaints received by acquirers and their downstream participants on a semi-annual basis and will be required to report the complaint information to the FCAC.
- Information Boxes: Key elements that have been
revised or newly included in the Code will need to be included and
provided to merchants across three clear disclosure boxes:
- a summary of the agreement's key elements;
- fees on a cost per transaction basis; and
- all other fees or charges.
What this means for Card Networks and Participating Businesses
The 2024 revisions to the Code are designed to enhance transparency, bolster merchant rights and ensure that the payment industry remains fair and competitive for customers. Businesses directly or indirectly offering payment processing services to merchants are encouraged to review these changes carefully and consider how they may impact their partnerships, agreements and procedures.
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