B-1 Application of the Credit and Debit Card Code to Online Debit Transactions
Effective date: April 28, 2011
In August 2010, the Government of Canada announced the introduction of the new Code of Conduct for the Credit and Debit Card Industry in Canada (the Code), which was developed to promote greater transparency for business owners and Canadian consumers who use credit and debit card, as well as to enhance fairness, clarity and choice within the credit and debit card industry.
The Code applies to payment card network operators (PCNOs) that operate in Canada and their participants (e.g. card issuers and acquirers). The Compliance and Enforcement Branch (CEB) of the Financial Consumer Agency of Canada (FCAC) was given the mandate to monitor PCNO’s adherence to the Code.
During FCAC’s monitoring of the implementation of the Code by members of the credit and debit card industry, questions were raised by the industry regarding the application of Element 6 of the Code to online debit transactions.
Element 6 states:
Competing domestic applications from different networks shall not be offered on the same debit card. However, non-competing complementary domestic applications from different networks may exist on the same debit card.
A debit card may contain multiple applications, such as PIN-based and contactless. A card may not have applications from more than one network to process each type of domestic transaction, such as point-of-sale, Internet, telephone, etc. This limitation does not apply to ABM or international transactions.
The uncertainty of the application of Element 6 to online debit transaction stems from the fact that for some online debit transactions, the debit card is not physically used (i.e. the card is not swiped, its chip not inserted nor is its number entered) to process the transactions.
CEB recognizes that online debit is an evolving payment area. Our analysis shows that in the majority of cases, a debit card and/or a debit card number must underlie the process of an online debit transaction, even if the process does not require the consumer to physically use the card or key in a card number for each transaction.
Therefore, it is our view that the underlying requirement for the consumer to have a debit card or debit card number to make the transaction is sufficient for Element 6 of the Code to apply to an online debit situation.
Moving forward, CEB will deem Element 6 of the Code applicable to any investigation related to online debit transaction. In the event that an investigation leads to a finding of non-compliance, the party involved will have the opportunity to make representations to the Commissioner.
This Compliance Bulletin sets out how CEB will apply the broad requirements of the Code, but does not represent a formal interpretation of the FCAC Commissioner. In the context of any findings of non-compliance by CEB that may arise in the future, representations can be made to the Commissioner, who will render a final determination based on the facts of particular matters.
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