Enhanced Code Of Conduct For The Payment Card Industry In Canada Takes Effect – Financial Services #CanadaFinance

As of Oct. 30, 2024, the Financial Consumer Agency of
Canada’s (FCAC) updated Code of Conduct for the Payment Card
Industry in Canada (the Code) is in effect. The Code is a set of
policies that govern payment card network operators (PCNOs) that
have agreed to adopt it, which include Visa, Mastercard, Interac,
Amex, Discover, and UnionPay.

The federal government announced on Oct. 1, 2024 that the Code,
originally published in 2015, has been revised to include several
substantive changes intended to promote transparency, strengthen
merchant rights, and increase fairness in the payment card
industry.

What you need to know

1. Expanded scope

The new Code has an expanded scope that now requires downstream
participants, in addition to issuers and acquirers, to comply with
the Code. Downstream participants are defined in the Code as a
person or entity that that (1) has a direct or indirect
relationship with an acquirer; (2) is directly or indirectly
covered by a PCNO’s network rules, and (3) interacts with a
merchant located in Canada to provide or offer any payment
processing services and/or processing equipment for payment card
transactions. Downstream participants include but are not limited
to payment processors, payment facilitators, and aggregators.

2. Expanded definitions of payment cards and related
service agreements

The new Code defines “payment card” as any digital or
physical card from an issuer that provides the ability to conduct a
debit, credit, or prepaid transaction and is linked to a specific
cardholder account. This definition is broad and replaces outdated
terms that were previously defined in the Code.

In addition, the new Code provides a definition for
“related service agreements” that includes agreements
related to payment processing services between a merchant and
downstream participant where there is a contractual agreement
between the acquirer and the downstream participant and both
provide payment processing related to the merchant; or there is a
contractual agreement between two or more downstream participants,
and all provide payment processing related services to the
merchant. The Code further clarifies that where a merchant enters
into a separate contractual arrangement with an unrelated
downstream participant, the contract with that separate entity is
not required to comply with the Code.

3. Expanded disclosure and communication
requirements

In addition to the requirement that all disclosures, notices,
and communications be presented in a clear, simple, and
non-misleading manner, the revised Code now indicates that
acquirers and downstream participants should make information
easily available for merchants on their websites. It also requires
that PCNOs make all applicable standard interchange rates,
wholesale discount rates, and acquiring network assessment fees
easily available on their websites.

Further, the revised Code requires that all merchant agreements
that include card processing contain a cover page containing: (1) a
summary of the key elements of the agreement, (2) cost per
transaction disclosure, and (3) disclosure of fees.

4. New complaint handling process

The new Code provides an updated complaint handling process that
shortens the wait time for complaints and requires PCNOs,
acquirers, and downstream participants to have clear and
transparent processes for handling merchant complaints. The new
Code requires that PCNOs, acquirers, and downstream participants
ensure that:

1. Merchants have access to a clear, simple, and transparent
   complaint handling process;




2. Merchants are provided information about how and where to make
   a complaint;




3. Adequate training is in place for all applicable employees;
   and




4. A summary of the complaint handling process is posted on the
   acquirer’s or downstream participant’s website.

Further, the new Code shortened the wait time for handling
complaints and now requires that complaints be acknowledged within
five business days and investigated within 20 business days (30
days for PCNOs) according to order of urgency. If a response cannot
be provided within 20 business days (or 30 days for PCNOs), the
merchant must be informed for the reason for the delay and expected
response time.

5. Increased notice requirements for fee
changes

Effective Apr. 30, 2025, the revised Code requires that PCNOs
provide at least 120 days’ notice to acquirers for
non-structural fee changes and 210 days’ notice for structural
fee changes, an increase from the former 90- and 180-days’
notice requirements in the previous Code. The new Code also
requires PCNOs to post any new or upcoming changes to standard
interchange rates, wholesale discount rates, and acquiring network
assessment fees on their websites at least 30 days prior to the
effective date.

6. Increased notice requirements for fee changes and
merchant’s ability to cancel agreements without
penalty

Effective Apr. 30, 2025, acquirers and downstream participants
are required to notify their merchants between 30 and 60 calendar
days prior to the effective date of a fee increase, introduction of
a new fee, or any reduction to PCNO core fees that are not passed
on in full to merchants. The notice must include the content
prescribed in the Code. As in the previous Code, the right to
cancel agreement without penalty does not apply for fee increases
made in accordance with pre-determined schedules.

7. Compliance requirements

Under the new Code, PCNOs are required to establish and
implement measures, controls, and tools to prevent non-compliance;
monitor the market conduct of their participants and take
appropriate enforcement action; and require their participants to
comply with the Code. Additionally, on an annual basis, acquirers
must provide PCNOs with their current internal policies and
procedures related to Code compliance, and downstream participants
must provide their acquirers with their current internal policies
and procedures related to Code compliance. Finally, PCNOs must be
informed of all Code-related complaints received by acquirers and
their downstream participants on a semi-annual basis, and in-turn,
must report that information to the FCAC on a semi-annual
basis.

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