Credit card firms face Canadian code of conduct
TORONTO (Reuters) - Canadian Finance Minister Jim Flaherty unveiled a voluntary code of conduct for the credit and debit card industry on Friday, but said the government stands ready to regulate if business does not regulate itself.
"The code of conduct encourages choice and competition. It gives merchants the freedom to choose which card networks they use, helps them control their costs and allows them to pass on savings to their customers," Flaherty said.
Small businesses have lobbied for a code of conduct for years, arguing that credit card companies have too much power to hike merchant fees when small businesses need to accept credit cards to remain competitive.
Under the code, credit card companies would be required to be more transparent about the cost of transactions, which would allow merchants to offer price discounts if customers prefer to use cash or debit cards instead.
The big credit card companies, including Visa Inc and MasterCard Inc, charge vendors fees to use their credit card system, but merchants have long argued they cannot afford to shun the credit cards without losing customers, who like the convenience and reward programs that the cards offer.
The code also includes a provision banning competitive co-badged cards and disallows negative optioning, which will likely affect plans by the credit card companies to enter Canada's debit market in competition with the Interac Association, a non-profit grouping of banks, trusts, merchants and others.
Interac dominates the country's debit card market, offering a comparatively low-cost payment system that consumers and merchants have embraced to a greater extent in Canada than in the rest of the world. About 60 percent of card transactions here are debit.
The credit card companies would like to piggyback on Interac's national network by offering co-badged cards, so that the debit cards are tied to a credit card company.
Interac applauded Flaherty's decision to allow complementary, rather than competitive, co-badged debit cards. Continued...