Credit card code a success, Flaherty says
(Source: The Canadian Press, Tuesday, May 18, 2010)
The federal finance minister says the Code of Conduct for the Credit and Debit Card Industry has been widely adopted by the industry. Finance Minister Jim Flaherty says all the payment card networks, major credit and debit card issuers and payment processors have adopted the code, which will be effective starting Aug. 16. Under the code, merchants will be given clear information regarding fees and rates and given advance notice of any new fees and fee increases. They will also be able to cancel contracts without penalty if fees rise or if new fees are introduced. Under legislation currently before Parliament, the mandate of the Financial Consumer Agency of Canada will also be expanded to allow the agency to monitor compliance with the code.
Bank card code a useful tool for consumers
(Vancouver Sun, Editorial, April 27, 2010)
All things being equal, competition is better than regulation at serving the interests of consumers. But when a market is dominated by a few big players who can dictate the terms of commerce, consumers need the protection of government. So we were pleased to see the code of conduct for credit and debit card markets introduced this month by federal Finance Minister Jim Flaherty. Click here for full article.
(The Toronto Star, April 16, 2010)
Payment Card Network Act
On March 29th in the House of Commons, the federal government introduced the Payment Card Network Act. The Act expands on measures announced in the federal budget in March to rein-in the practices of credit card companies, processors and banks regarding the fees charged to merchants for debit and credit card acceptance.
Following the recommendations of the StopStickingItToUs Coalition, the Act:
• provides the Minister of Finance with the legislative powers to regulate the Canadian payments market.
• illustrates Finance Minister Flaherty’s continued commitment to regulate the conduct of the credit card companies, banks and processors if they do not adhere to the forthcoming voluntary code of conduct for Canada’s payments market.
• outlines amendments to the Financial Consumer Agency of Canada (FCAC) mandate, empowering them to monitor compliance with the voluntary code of conduct, once finalized. Strict FCAC oversight of code of conduct compliance was a key recommendation put forward by the Coalition in a submission to the Department of Finance during consultations on the draft code.
• outlines possible fines of up to $200,000 for card companies, processors and/or banks that are found in violation of its provisions.
While other industry associations have maintained that voluntary measures are enough to guarantee transparency, accountability and merchant choice in the payments market, Shelfspace, as a member of the Stop Sticking It To Us Coalition has fought on your behalf to regulate the card companies, processors and banks, and ensure strict oversight. The announcement of this Act is a strong step forward in the Coalition’s campaign to create a robust regulatory framework to protect merchants and consumers in Canada’s debit and credit card market.
Other relevant information of interest:
• Today in Canada, Interac is the lowest cost option available. In the United States, Visa and MasterCard debit have been in place for some time and U.S. retailers report debit fees up to ten times higher than Canada’s home-grown Interac system.
• Chip-based Interac cards offer the same functionality, utility and security as the new Visa and MasterCard debit products now promoted by your processor. Interac is still the most affordable debit product in Canada.
• You don’t have to accept any new debit product until such time as a Canadian Credit & Debit Card Code of Conduct is in place. The Coalition’s recommendation is not to commit to any contracts in the short term.
• Visa, MasterCard and Interac will be co-badged on the same debit card. So that means that all debit cards will have the Interac function even if other card logos also appear on the back of the customer’s debit card.
• You can tell your processor that you only want to accept Interac debit until such time as the Code is in place and until such time as you feel other debit products are competitively priced. Choosing the brand with the lowest cost debit network does not limit a customer’s ability to use debit as a payment option.
• Before determining whether to accept any of these new products, the Coalition encourages merchants to ensure they are not replacing a low cost debit option with a higher cost option that offers the same features.
Ask the tough questions of your processor
1. If a processor suggests you that you must accept all types of debit cards (e.g. Visa, MasterCard and Interac), ask the processor to put it in writing before you make a decision and request pricing information for each individual debit product.
2. If you choose to only accept Interac debit, let your processor know immediately. All the debit transactions in your store will be routed through the Interac network, currently the most affordable debit offering. Customers will not be affected regardless of the debit card they may carry.
3. Ask your processor if your PIN pads have been pre-programmed to route debit transactions to other pre-determined debit networks. If you choose to accept different debit products, debit transactions in your store may end up being routed to the processor, the issuing bank or credit card company’s preferred network – and it may not be your most cost-effective choice. Ask your processor to give you the facts.
4. Keep an eye on what Canada’s banks are telling customers about new debit products. It’s important to understand what customer expectations will be when they visit your store. If they ask, tell your customers that you are choosing the lowest cost debit system for your and your customer’s benefit.
5. Let your processor know that you are aware of the draft Code of Conduct and that you have the right to choose your preferred debit network.
6. Refer to the Code of Conduct to better understand what the draft Code includes and how you will be protected.
What the Code means for you as you renew your processor contracts for 2010
Your processor (e.g. Moneris, Chase Paymentech, Global Payments etc.), banks and/or Visa/MasterCard may contact you regarding new debit products that will likely enter the Canadian market in early 2010. It is imperative that you talk to your processor, credit card company and/or financial institution so that you can make an educated decision when signing new contracts.
By programming the chip in the new cards as well as programming your point-of-sale hand-held terminals (PIN pads), Visa and MasterCard, some financial institutions and processors may try to ensure that debit transactions are routed automatically to their preferred debit option, not yours.
The New Code of Conduct, if properly implemented, including an appropriate oversight mechanism, will provide you with the opportunity to say no to the products you do not wish to accept. It will also give you the decision-making ability for routing options for credit and debit. All merchants are urged to consider their options carefully before signing any new contracts. You may want to consider waiting for the final Code to be released before entering a new agreement with you processor.
Shelfspace is a proud member of the Stop Sticking it to Us Coalition. If you have thoughts you'd like to share on this issue, please post to the MerchantHub blog.
