New payment card industry code of conduct takes effect, strengthening merchant rights

Major card network operators such as Mastercard, Visa, Amex, and Discover agreed to adopt it
New payment card industry code of conduct takes effect, strengthening merchant rights

The new Code of Conduct for the Payment Card Industry in Canada governs payment card network operators (PCNOs), including Mastercard, Visa, Amex, Interac, Discover, and UnionPay, and most of the updated provisions took effect on October 30.

The updated code will be implemented in phases, with full enforcement by April 30, 2025. The revised code aims to improve transparency and protect merchants when accepting card payments.

Merchant Protections

The main objectives of the code are to ensure merchants are aware of the costs associated with payment card acceptance, enabling them to forecast monthly expenses accurately. It also aims to increase pricing flexibility to promote the use of lower-cost payment options by consumers and to allow merchants to choose which payment options they accept.

PCNOs that adopt the code must embed its policies into their agreements and ensure compliance across their network participants. Network participants include issuers (entities that provide payment cards), acquirers (entities that facilitate merchant payment acceptance), and downstream participants (entities that provide payment processing services).

Merchant Rights

Under the code, merchants have the right to clear, simple, and non-misleading disclosures from their card service providers. Monthly statements must detail the effective merchant discount rate for each type of card, all applicable fees, transaction volumes, and a breakdown of charges by card network. Providers must give merchants at least 90 days’ notice of new fees or rate increases and provide updates to fee disclosure tables upon request.

Before entering into agreements, merchants must receive a cover page summarizing key elements, including cost disclosures, contact information, cancellation terms, and complaint-handling procedures. If fees increase or new charges are introduced, merchants can cancel agreements without penalty within 90 days of receiving notice. This right also applies if acquirers do not fully pass on savings from reduced interchange rates.

Merchants may also choose which card payment methods to accept and must provide express consent for new services. Discounts can be offered for different payment types, including variations among card networks. To protect merchant rights, payment service providers must have clear, accessible complaint processes in place.

These strengthened rights aim to give merchants greater control over their payment processing costs and ensure transparency in their business dealings.

Complaint-handling process

The code introduces a streamlined complaint-handling process, ensuring that merchants can access support and have their complaints investigated promptly. Complaints must be acknowledged within five business days, and resolutions are expected within 20 to 30 days, depending on the party responsible for addressing them. PCNOs, acquirers, and downstream participants must keep merchants informed throughout the complaint process.

The revised code further empowers merchants by protecting their ability to offer discounts for different payment methods and reinforcing their right to avoid automatic long-term renewals of agreements. Fixed-term agreements can only be extended in six-month intervals, providing more flexibility for merchants to renegotiate or exit contracts.

Oversight

Oversight of the new code will be managed by the Financial Consumer Agency of Canada (FCAC), which will monitor its adoption and compliance. PCNOs must report all code-related complaints to the FCAC on a semi-annual basis and adhere to any necessary enforcement actions. The Department of Finance plans to assess the code’s effectiveness three years after implementation and may initiate reviews sooner if required to ensure the code continues to align with market conditions.