November 1, 2024

Updated Code of Conduct for Payment industry creates stricter rules for credit card companies in Canada. Could the US follow suit?

On October 30, 2024, the Financial Consumer Agency of Canada (FCAC) implemented an updated version of the Code of Conduct for the Payment Card Industry in Canada. Originally published in 2015, the revised Code introduces measures to enhance transparency, strengthen merchant rights, and ensure fairness in the payment card ecosystem. This begs the question of if the US will offer similar pro-merchant protections by introducing updated laws or policies in the near future. Here are the updates Canadian businesses should be aware of:

Key Updates

  1. Expanded Scope
    The revised Code now includes downstream participants, such as payment processors, facilitators, and aggregators, in addition to issuers and acquirers. Downstream participants are defined as entities with direct or indirect relationships with acquirers or PCNOs that interact with Canadian merchants for payment processing services or equipment.
  2. Broader Definitions
    • Payment Card: Now refers to any physical or digital card used for debit, credit, or prepaid transactions, linked to a specific cardholder account.
    • Related Service Agreements: Includes contracts tied to payment processing services between merchants and downstream participants, provided they involve relationships with acquirers or other participants. Independent arrangements are excluded.
  3. Improved Disclosure Requirements
    • Disclosures, notices, and communications must be clear, simple, and non-misleading.
    • Acquirers and downstream participants must provide accessible information on their websites.
    • Merchant agreements must feature a cover page summarizing key elements, transaction costs, and applicable fees.
  4. Streamlined Complaint Handling
    • PCNOs, acquirers, and downstream participants are required to implement clear, accessible complaint-handling procedures.
    • Complaints must be acknowledged within 5 business days and resolved within 20 business days (30 for PCNOs). Delays require communication of reasons and expected resolution times.
    • Complaint-handling summaries must be publicly available online.
  5. Notice Requirements for Fee Changes
    Effective April 30, 2025:
    • PCNOs must give 120 days’ notice for non-structural fee changes and 210 days for structural changes, up from 90 and 180 days respectively. New fees must also be posted online 30 days before taking effect.
    • Acquirers and downstream participants must notify merchants of fee changes or new fees 30–60 days in advance. Penalty-free cancellation is allowed for non-predefined fee increases.
  6. Compliance and Oversight
    • PCNOs must enforce compliance measures, monitor participants, and address violations.
    • Acquirers and downstream participants must submit annual policy updates to ensure adherence.
    • Semi-annual reports on Code-related complaints must be provided to PCNOs and the FCAC.

Purpose

These revisions aim to create a more transparent, equitable, and merchant-friendly payment card industry, addressing longstanding concerns while ensuring adaptability to evolving market needs.

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