The Canadian code of conduct became operative in August 2010 and is projected to encourage good business practices and ensure retailers and customers identify with the costs and advantages of debit and credit cards.
eMerchantBroker breaks down the benefits of the Canadian Code as well as a few missing items merchants should watch out for.
Effective Discount Rate
All processors are now required to display their “effective processing rate” on their monthly statements for all debit and credit card types. The effective rate is the equal of the sum of all the fees that apply to a credit card type, e.g., interchange fees, qualified fees, non-qualified fees, per transaction fees and card-brand fees divided by the total sum processed.
90-Day Notice of any Fee Increase
Card-brands like Visa or payment processors no longer have the free will to raise fees without giving the retailer a 90-day notice. On the announcement of a fee increment, the trader is allowed to cancel his/her account without penalty. However, this penalty-free cancellation is only applicable up to 90-days following the price increase.
New Law: Limits on Auto-Renew Agreements
The latest Code addresses Auto-Renew Agreements. Merchants are now free to provide notice to their payment processors if they do not wish to auto-renew an existing contract. They are not obligated to do this within a certain span (e.g., 30 days before the term date). Lastly, Auto-renew agreements are now limited to a max of a 6-month term, which means even if you don’t remember to send a termination notification, your contract won’t be renewed for another two or three years.
No Standards Set for Advertisements
The Canadian code has not set any advertising standards for processing fees. Up to now, some processors are still marketing incredible rates such as 1.49% without stating their full processing rates. Most merchants discover this much too late, after signing a contract.
No law on Equipment Leasing
While retailers are allowed to cancel their Canadian merchant account without penalties (terms may vary, look at your contract) if there’s a rise in the processing rates, this doesn’t apply to equipment leasing. Equipment leases for Canadian Merchants are still noncancellable contracts. So even if you hasten to cancel your account, you will still have to sort out the lease payments.