Consultation summary: Guidance on enhancements to the credit and debit card code

In March 2016, the Financial Consumer Agency of Canada (FCAC) called for public comment on its proposed Commissioner’s Guidance related to the enhancements of the Code of Conduct for the Credit and Debit Card Industry in Canada (the Code). FCAC considered all of the comments from its stakeholders and modified the guidance documents where appropriate. FCAC will review and update these guidance documents as required.

The summary below recaps the submissions received from stakeholders and provides FCAC’s responses to those comments.

Overview of stakeholder comments

The proposed guidance documents were well received by stakeholders who appreciated the templates and examples. The payment card network operators (PCNOs), along with other key stakeholders, including card issuers and acquirers, independent sales organizations (ISOs), and service providers such as terminal leasing firms (collectively Participants) noted they preferred receiving guidance made in consultation with them.

Recommendations by stakeholders resulted in several amendments to the guidance documents. For example, as requested by Participants, FCAC developed examples of Information Summary Boxes to guide the industry as they designed their own Information Summary Boxes. In addition, as requested by stakeholders, FCAC developed guidance to provide an example of clear, simple and non-misleading disclosure of applicable fees charged to merchants. 

The final versions of the following three Commissioner’s Guidance are available on FCAC’s website:

• Amended Commissioner’s Guidance 10: Increased disclosure in sales and business practices and cancellation of contracts without penalty (CG-10)
• Commissioner’s Guidance 15: Information Summary Box examples (CG-15)
• Commissioner’s Guidance 16: Fee disclosure boxes (CG-16)​

FCAC thanks all stakeholders who submitted comments during the consultation. Stakeholder feedback is key to improving FCAC’s ability to deliver on its mandate. 

Summ​ary of submissions

1. Amended Commissioner’s Guidance 10: Code of Conduct for the Credit and Debit Card Industry in Canada – Increased disclosure in sales and business practices and cancellation of contracts without penalty (CG-10)

• Comment: Stakeholders suggested defining “business connection” in practice #2 of CG-10 to explain when services provided by different entities are “deemed to be related and part of a single service package.”
  • Response: Multiple business models exist in the marketplace. It would be impractical to limit the industry with a prescriptive definition. An example was included to reflect our interpretation of the term “business connection.”
• Comment: Stakeholders raised questions as to whether specific industry practices complied with the Code.
  • Response: Assessing such questions does not form part of this consultation process. FCAC encourages all stakeholders to lodge a complaint if they believe they have not been treated in accordance with the Code. FCAC will investigate and will make the appropriate determination at that time.
• Comment: Stakeholders recommended that the following sentence: “In a situation where a merchant, of its own initiative, enters into separate contractual arrangements with unrelated Participants, the contract(s) with the separate Participant(s), a separate agreement(s).” should be amended to “…Participant(s) constitutes a separate agreement(s).”
  • Response: The wording was amended to reflect the stakeholder’s comments.
• Comment: Stakeholders commented on the disclosure requirements of the Effective Merchant Discount Rate (EMDR) on merchant statements.
  • Response: The EMDR disclosure requirement was not included in the original guidance. This requirement will be reviewed and assessed independently at a later date.

2. New Commissioner’s Guidance 15: Code of Conduct for the Credit and Debit Card Industry in Canada – Information Summary Box examples (CG-15)

• Comment: Stakeholders raised questions as to whether specific industry practices complied with the Code.
  • Response: Assessing such questions does not form part of this consultation process. FCAC encourages all stakeholders to lodge a complaint if they believe they have not been treated in accordance with the Code. FCAC will investigate and will make the appropriate determination at that time.
• Comment: Stakeholders commented on the details to be included in the Information Summary Box requirements.
  • Response: As stated in CG-15, the 2015 amendments to Element 1 of the Code require every new and renewed merchant-acquirer agreement to include a cover page that contains an Information Summary Box (as per Addendum I of the Code) providing the key contractual elements in a consolidated fashion. The Information Summary Box requirements are set out by the Code, and therefore cannot be modified.
• Comment: Stakeholders expressed the need for further clarification on the “transaction return policy” illustration in the Guidance. More specifically, concerns were raised regarding FCAC’s examples of transaction return policy including fees and the difference between transaction reversal and transaction refund. Stakeholders explained that the specific fee was not required under the Code.
  • Response: The purpose of the “transaction return policy” disclosure included in the template, as required by Addendum I of the Code, is to provide information on whether card acceptance fees will be applied to transaction returns. FCAC included an example of a “transaction return policy” which includes details on how card acceptance fees will be applied to such transactions.
  • Response: Reversal charges that apply when there is fraud, an error in transaction cancellation, or when a product is not received or does not correspond to the purchase should be disclosed in the Participant’s other fees disclosure box illustrated in table 2 of Commissioner’s Guidance 16.
• Comment: Stakeholders commented that the wording “and consented to by the merchant” in the sentence “For each payment card network, indicate whether contactless payments have been enabled at the point-of-sale.” be removed from the Contactless Payment Acceptance section of FCAC’s Information Summary Box examples, because it is not required.
  • Response: FCAC agreed with the recommendation and removed the “and consented to by the merchant” wording.
• Comment: Stakeholders requested clarification on the difference between a rental arrangement and a lease arrangement.
  • Response: FCAC used “terminal lease arrangement” in its example of a merchant-acquirer agreement with no related contracts (example #1) to demonstrate that a terminal lease arrangement can exist within that context. FCAC will not define the terms “rental arrangement” or “lease arrangement” and is of the view that the contractual agreement will determine if the arrangement is a lease or a rental.

3. New Commissioner’s Guidance 16: Code of Conduct for the Credit and Debit Card Industry in Canada – Fee disclosure boxes (CG-16)

• Comment: Stakeholders raised questions as to whether specific industry practices complied with the Code.
  • Response: Assessing such questions does not form part of this consultation process. FCAC encourages all stakeholders to lodge a complaint if they believe they have not been treated in accordance with the Code. FCAC will investigate and will make the appropriate determination at that time.
• Comment: Stakeholders commented on the disclosure requirements of the Effective Merchant Discount Rate (EMDR) on merchant statements.
  • Response: The EMDR disclosure requirement was not included in the original guidance. This requirement will be reviewed and assessed independently at a later date.
• Comment: Stakeholders expressed the need for consistency in terminology in merchant fee disclosure.
  • Response: FCAC’s position on consistency of terminology is addressed in question 6 of CG-16’s Appendix A.
• Comment: Stakeholders suggested adding a description at the top of the Fee Disclosure Box (FDB) to enable merchants to understand that the FDB does not represent all the possible fees and variations that are charged to them.
  • Response: The wording was added to reflect the recommendation.
• Comment: Stakeholders recommended removing the MasterCard International and Visa International card types from the FDB as merchants may be misled.
  • Response: The MasterCard International and Visa International card types were removed from the FDB to reflect the recommendation to eliminate confusion around domestically issued international cards and foreign issued international cards.
• Comment: Stakeholders recommended replacing the term “Standard” when describing Visa and MasterCard Consumer non-premium cards in the FDB by Visa Consumer Credit Cards and MasterCard Consumer Credit Cards.
  • Response: The wording was amended to reflect the recommendation.
• Comment: Stakeholders recommended removing the reference to World Cards in CG-16’s Appendix A (question 7), since World Cards are listed separately from MasterCard Consumer Credit Card in MasterCard’s interchange rate table.
  • Response: The wording was amended to reflect the recommendation.
• Comment: Stakeholders recommended amending “Processing method” definition under the “Card/Device Not-Present” heading to reflect market practice. The suggested wording was: “Means that the card/device was not electronically read, e.g. online, recurring payment, mail/telephone order, manually key-entered.”
  • Response: The wording was amended to reflect the recommendation.
• Comment: Stakeholders raised questions regarding the necessity of having the FDB in all new and renewed merchant-acquirer agreements.
  • Response: As stated in CG-16, the 2015 amendments to Element 1 of the Code includes the addition of the FDB that sets out fees for the most common types of domestic payment card transactions and processing methods available to merchants. The FDB is a requirement of the Code​ and therefore must be included in all new and renewed merchant-acquirer agreements.
• Comment: Stakeholders recommended removing “MasterCard Corporate premium cards” and “MasterCard Business premium cards” as MasterCard does not offer those two card categories.
  • Response: The wording was amended to reflect the recommendation.
• Comment: Stakeholders recommended providing an example of each PCNO under the “international assessment fee” and each PCNO pricing structure under “Other Fees Disclosure Box.”
  • Response: The wording was amended to reflect the recommendation.​