A Welcome Fix to Unfair Credit Card Practices

The Financial Consumer Agency of Canada has toughened up the rules of conduct for the payment industry

Written by Melissa Campeau

Thanks to stricter guidelines, questionable practices by some in the payment industry may soon be a thing of the past.

The Financial Consumer Agency of Canada (FCAC) has toughened up the rules of conduct for credit and debit card companies to protect both merchants and consumers. The agency clarified and strengthened how portions of the Code of Conduct for the Credit and Debit Card Industry in Canada (the Code) will be applied.

“We thank [FCAC] commissioner Ursula Menke for her hard work and for recognizing that retailers have been dealing with unfair and unscrupulous practices from some in the payment card industry,” says Diane J. Brisebois, president and CEO of the Retail Council of Canada.

Three particular areas of concern were addressed. First, merchants complained of discrepancies between agreements and statements that were often misleading or dishonest. With the FCAC’s changes, the Code now states payment companies can’t alter a signed contract without a merchant’s consent or quote rates that won’t be honoured. They’re also required to give merchants a copy of each contract.

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Next, merchants often believed they were signing a single contract provider agreement but instead found themselves obligated to multiple service providers. According to the new guidelines, payment companies must improve the clarity of disclosure to be provided to merchants and present key information in a way that merchants can easily understand. “Some in the payment card industry have buried agreements within agreements within agreements which misinform and mislead merchants,” Brisebois explains. “We are grateful that commissioner Menke is taking a hard line on this.”

And finally, while the Code currently allows merchants to cancel their credit and debit contracts without penalty if their fees go up, some payment companies were applying large exit penalties to separate contracts for leased equipment. The FCAC has clarified that a merchant’s right to cancel a credit and debit processing contract without penalty also applies to any related contracts.

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“We commend the FCAC and other industry players for siding with small merchants by clarifying acceptable business practices in the Canadian payments industry,” says Canadian Federation of Independent Business president and CEO Dan Kelly. “The Code is doing what it was intended to do—protecting consumers and merchants.”

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