Canada’s stores, small business claim victory in card code

Canadian stores and small businesses are hailing Finance Minister Jim Flaherty’s new code of conduct for credit card companies as a victory that will restore fairness for both merchants and consumers.

Flaherty unveiled the long-awaited code in Toronto on Friday. Although it is voluntary, the minister warned the government has the legislative authority to regulate the industry if card companies fail to comply.

Under the code of conduct merchants will be given clear information as to fees and rates charged by credit card companies when their cards are used for payment. Retailers will be given advance notice on any increases or new charges and will be able to cancel a contract without penalty if new fees are introduced.

They will also have the freedom to accept credit cards from a particular network without being forced to accept debit cards from the same company.

“Businesses have voiced real concerns about the lack of choice they have had in accepting debit and credit card payments, and about the costs involved,” Flaherty said in a statement. “These added business costs are borne by merchants and may be passed on to consumers, which makes this an issue of importance to all Canadians.”

Retailers and service-sector businesses have been lobbying hard for more than a year for more transparency in the system, dominated by a few key players, such as Mastercard and Visa. They claim the card companies have been pushing up costs which are reflected in higher prices for consumers. Shop owners are wary of refusing to accept the cards for fear of losing customers used to the convenience.

"This is a solid victory for merchants across the country and a major step toward addressing imbalances in the Canadian payments system," Diane Brisebois, president and chief executive of the Retail Council of Canada said. "Though our members continue to believe a robust regulatory framework is necessary for Canada's debit and credit card markets, the code represents much needed incremental progress."

The Canadian Federation of Independent Business said the code will help restore fairness to small businesses and consumers.

“These developments will create a better future for merchants and help ensure a fair and transparent credit and debit card market instead of just letting large industry players call the shots,” CFIB President Catherine Swift said.

The code comes ahead of an expected push by the credit card companies into the debit card market, which accounts for 60% of all card payments in Canada.

Debit company Interac also welcomed the code.

"As we have said repeatedly, a level playing field is an essential foundation of a healthy competitive market and one that truly works for all stakeholders," said Mark O'Connell, president and CEO of Interac. "Without question, the Code helps build that by re-establishing choice and transparency in the marketplace for merchants and consumers, which we support."