Changes to the Code of Conduct for the Canadian payment card industry
On October 30, 2024, the Financial Consumer Agency of Canada introduced the federal Code of Conduct for the Payment Card Industry in Canada (the “Code”). The Code replaces and extensively revises the previous Code of Conduct for the Credit and Debit Card Industry in Canada, with further new provisions coming into effect on April 30, 2025.
The changes to the Code are designed to increase transparency for merchants who accept card payments from customers, and new provisions broaden the range of entities subject to Code compliance. Businesses that provide payment processing services should become acquainted with these changes.
Changes effective as of October 30, 2024
Entities required to comply with the Code
The Code is a governing policy for all payment card network operators (“PCNOs”) in Canada that have chosen to adopt it. The Code has been adopted by all major PCNOs in Canada: American Express Canada, Discover, Interac, Mastercard Canada, Visa Canada and UnionPay.
The October 30, 2024 revisions to the Code formally expand and define the entities required to comply with the Code, including card Issuers, Acquirers and Downstream Participants:
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Payment Card Network Operator (PCNO) |
An entity that operates a Payment Card network, by establishing standards and procedures, including for compliance with the Code. |
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Acquirer |
An entity that enables merchants to accept payments by Payment Card, either by way of a direct contractual relationship with a PCNO (e.g., as an acquiring entity) or via sponsorship by an acquiring entity (e.g., as an agent of an acquiring entity). |
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Issuer |
Any entity that issues Payment Cards to cardholders. |
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Downstream Participant |
Any person or entity that:
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The Code also provides the exception that if a merchant and a Downstream Participant enter into a separate agreement that is unrelated to an underlying merchant-Acquirer agreement, this agreement will not be subject to the requirements of the Code.
Transparency for merchants
The Code requires every disclosure to merchants to be presented in a way that is clear, simple and not misleading. Acquirers and Downstream Participants must ensure that all merchant agreements and statements include a sufficient level of detail, are readily available to merchants and are easy for merchants to understand.
Code-related complaints procedures
Among the most significant changes to the Code is a set of new procedures for handling complaints of non-compliance with the Code. These procedures are applicable to all PCNOs, Acquirers, and Downstream Participants.
The Code permits Acquirers to delegate complaint-handling responsibility to their Downstream Participants but requires a clearly established system of accountability for complaint-handling between a PCNO, Acquirer, and Downstream Participant. Acquirers and Downstream Participants must post a summary of the complaint-handling process on their website, in a manner that is easy for merchants to access and understand.
All complaints must be acknowledged within five business days. Acquirers and Downstream Participants then have 20 days, and PCNOs have 30 days, to investigate and address a complaint, and provide the complainant with either a written response or a reason for the delay.
Complaint reporting requirements
On a semi-annual basis, Acquirers and their Downstream Participants must inform PCNOs of all Code-related complaints, including the nature of the complaints and their outcomes, which must then be reported by PCNOs to the Financial Consumer Agency of Canada.
On an annual basis, Downstream Participants must provide to Acquirers, and Acquirers must provide to PCNOs, copies of their current internal policies and procedures related to Code compliance. PCNOs are responsible for addressing any non-compliance issues related to these policies and procedures.
Changes effective as of April 30, 2025
Further revisions to the Code that require complex or technical system changes will come into effect on April 30, 2025.
Disclosure
Beginning April 30, 2025, any card processing application, quote, or proposal provided to merchants by Acquirers and Downstream Participants must include detailed disclosure related to fees and costs.
Merchant statements must be made available or provided to merchants on a monthly basis, at minimum, and must include the following information:
- the effective merchant discount rate, reflecting the aggregate rate for each type of PCNO card accepted by the merchant during the statement period;
- the rates and fees charged by the Acquirer or Downstream Participant in that period; and
- the number and volume of transactions processed for each type of payment transaction.
PCNO Core Fees
The April 30, 2025 provisions introduce the term “PCNO Core Fee”, which is any amount set or charged by a PCNO, paid or payable by an Acquirer, for the acceptance and/or processing of Payment Card transactions. Changes to a PCNO Core Fee may be “structural” (new PCNO Core fees, Card products, or criteria for an Acquirer to change a PCNO’s existing PCNO core fee structure) or “non-structural” (changes to the value of an existing PCNO Core Fee).
PCNOs must provide 120 calendar days’ notice to Acquirers for non-structural fee changes and 210 calendar days’ notice for structural fee changes. PCNOs must also post any new or upcoming changes to certain rates and fees on their websites at least 30 calendar days prior to the effective date.
Cost certainty
As of April 30, 2025, Acquirers and Downstream Participants must notify merchants 30-60 days prior to the effective date of the following:
- the introduction of, or increase to, any new or existing Acquirer/Processor Fee or domestic PCNO Core Fee passed on in part or in full to the particular merchant;
- a reduction in domestic PCNO Core Fees that are not passed on in full to the particular merchant.
The notice must provide the previous and new PCNO Core Fee, the amount of the change that will be passed on to the merchant, and disclose whether the change originates from the PCNO, Acquirer, or Downstream Participant. Merchants have the penalty-free right to cancel agreements within 70 days upon such changes to a PCNO Core Fee, and the notice must inform merchants of this right.
Future Code changes
Following the October 30, 2024 changes to the Code, the Department of Finance may review or make “technical changes” to the Code at any time, however, the Code must be assessed on or about October 30, 2027 to determine whether a full review is required in accordance with policy intentions and changing market conditions.
Impact on Code-governed entities
Any businesses that directly or indirectly offer payment processing services to merchants, including Issuers, Acquirers and Downstream Participants, should review the Code’s new provisions to ensure their agreements and procedures remain in compliance.
For more information about the changes to the Code, please contact a member of our Financial Services team.
