New Measures to Protect Consumers and Entrepreneurs

New Measures to Protect Consumers and Entrepreneurs
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Small businesses to benefit from improvements to the Code of Conduct for the Credit and Debit Card Industry.

Finance Minister Joe Oliver today released an update to the Code of Conduct for the Credit and Debit Card Industry in Canada, delivering on a commitment made in 2014 to help make life more affordable for Canadians and entrepreneurs. Following consultations with stakeholders, these new changes will make the Code even stronger by addressing unfair business practices and improving transparency for merchants and consumers, including new provisions that apply specifically to mobile payments. Participants in the debit and credit card market will have until 30 days from the issuance of this news release to review and adopt the enhanced Code of Conduct.

The Code was launched in 2010 to promote fair business practices and ensure that merchants and consumers understand the costs and benefits associated with credit and debit cards. Every time merchants accept a credit card payment from a customer, they pay fees. Like any other business cost, these fees are often passed on as costs to consumers in the form of higher prices.

Minister Oliver also released Balancing Oversight and Innovation in the Ways we Pay: A Consultation Paper, seeking the views of Canadians on the best approach to ensure that new electronic payment methods are safe and provide adequate consumer protection, while allowing innovation that benefits Canadians.

Quick Facts

  • The Canadian Federation of Independent Business (CFIB) says that the Code of Conduct for the Credit and Debit Card Industry in Canada “has served merchants extremely well. [It] has done an excellent job in ensuring some fair ground rules and maintaining Canada’s low-cost debit system.”
  • CFIB adds that “the Code played a big role in saving low-cost debit in Canada and it gave merchants some degree of power in dealing with the payments industry.”

The updated Code of Conduct for the Credit and Debit Card Industry in Canada includes:

  • A new requirement that the interchange rate reductions announced by Visa Canada and MasterCard Canada in November 2014 will be fully passed-through to merchants, or merchants can cancel their contract without penalty;
  • A new complaints handling process available to merchants with Code-related complaints;
  • Enhanced disclosure requirements that will require plain language disclosure in information summary boxes in merchant contracts of key contract terms and conditions and merchant fees;
  • Greater flexibility for merchants to exit their contracts without penalty, including a right to provide notice of non-renewal at any point up to 90 days prior to contract expiry, and limiting automatic renewal of contracts to six-month increments;
  • A new disclosure requirement for credit card issuers, to inform consumers that apply for premium credit cards that the use of these cards can impose higher merchant fees;
  • New branding requirements for premium cards, to make these cards more easily identifiable to merchants at the point of sale;
  • New consumer protections for mobile payment users, to ensure that consumers will have full and unrestricted control of the default settings on their mobile wallets and devices;
  • New protections for merchants who choose  to stop accepting mobile payments.

The Government is releasing Balancing Oversight and Innovation in the Ways we Pay: A Consultation  Paper, seeking the views of Canadians on the national payment system, recognizing that:

  • Every  year, Canadians make roughly 24 billion payments, worth more than $44 trillion;
  • According  to the Bank of Canada, between the early 1990s and 2011, the share  of cash used in point-of-sale transactions dropped from more than 80 per cent  of the total volume and 50 per cent of the total value, to less than 50 per  cent of the volume and less than 20 per cent of the value of these  transactions.
  • The Canadian Payments Association estimates that there were 24 million  e-wallet and electronic person-to-person transactions in 2011, worth nearly $10  billion, up from $3 billion in 2008;
  • The Task Force for the Payments System Review found in its December 2011 final report that  a thoroughly modernized payments system could save the Canadian economy as much  as 2 per cent of gross domestic product in productivity gains, equal to $32  billion in annual savings for Canada;
  • Core  clearing and settlement systems are currently subject to regulation and  oversight for safety, soundness and efficiency purposes. However, this  oversight does not fully extend to national payment systems. As a result, the  system as a whole is not currently subject to comprehensive and consistent  rules that protect consumers and ensure public confidence in the use of  electronic payment methods.

April 13, 2015 – Ottawa, Ontario – Department of Finance


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