The federal government has released a code of conduct for the credit and debit card industry, aiming to promote fair business practices and ensure that merchants and consumers understand the costs and benefits associated with the cards.

Finance Minister Jim Flaherty announced the final version of the code in Toronto on Friday. It was developed in response to concerns raised by merchants regarding the business practices of credit and debit card networks, issuers and acquirers.

“Businesses have voiced real concerns about the lack of choice they have had in accepting debit and credit card payments, and about the costs involved. These added business costs are borne by merchants and may be passed on to consumers, which makes this an issue of importance to all Canadians,” Flaherty said. “The Code of Conduct encourages choice and competition. It gives merchants the freedom to choose which card networks they use, helps them control their costs, and allows them to pass on savings to their customers.”

Under the code, merchants will be:

• Provided with clear information regarding fees and rates
• Given advance notice of any new fees and fee increases
• Able to cancel contracts without penalty should fees rise or new fees be introduced
• Given new tools to promote competition, and in particular, will have the freedom to accept credit payments from a particular network without the obligation to accept debit payments and vice versa

The code of conduct is the result of extensive consultations with merchant and consumer associations, debit and credit card networks, payment processors and credit card issuers across Canada. The credit and debit card industry will have until May 17th to review and adopt the code of conduct.

The code is voluntary, but Flaherty noted that the government took steps in the 2010 federal budget to ensure that it has the legislative authority to regulate the industry if necessary.

Flaherty said he is confident that industry members will adopt the code voluntarily.

Indeed, MasterCard Canada issued a statement saying that it will adopt the code of conduct.

“The Minister achieved appropriate balance in deliberating these complicated issues,“ said Kevin Stanton, president of MasterCard Canada.

Retail industry groups applauded the code of conduct. The Canadian Federation of Independent Business said the code would help increase transparency and restore fairness to small businesses and consumers in their credit and debit card transactions.

“It is now time for industry players to get on board. And, we fully expect them to sign on immediately,” said Catherine Swift, CFIB president.

The Payments Accountability Council, which is led in part by the Retail Council of Canada, expressed similar support.

“This is a solid victory for merchants across the country and a major step toward addressing imbalances in the Canadian payments system,” said Diane Brisebois, president and CEO of the Retail Council of Canada.

Retailers have been advocating in the past year for greater regulation of the credit and debit card industry, complaining that processing fees are soaring, and that there’s a lack of consumer choice, with only two major credit card companies operating in Canada.

Interac Association also welcomed the code, calling it “appropriate and pragmatic”.

“The Government has listened to the concerns of Canadian merchants and consumers,” said Josée Verner, Minister of Intergovernmental Affairs, who joined Flaherty for the announcement in Toronto on Friday. “The Code will help ensure accountability; prevent unfair business practices in the credit and debit card market; and help protect businesses from rising costs that may be passed on to consumers.”

IE