Business

Code of conduct for credit cards updated to include mobile payment

Ottawa has updated the code of conduct governing credit and debit card transactions, including adding new rules relating to mobile payments.

Smartphone user has the right to make sure that the form of payment is the one they want

The code of conduct that governs credit and debit card transactions is being extended to apply to mobile payments as well, federal Finance Minister Joe Oliver said Monday.

The new rules also include a provision that says mobile users must be given full control of the default settings on their virtual wallets, Oliver said in making the announcement at the Arts Market gift store in Toronto.

He also disclosed several other additions to the code of conduct, including a requirement that savings resulting from reduced credit and debit card fees be fully passed on to merchants.

Visa and MasterCard struck a voluntary agreement with the government last November. Under the deal, both companies agreed to limit how much they charge retailers for the next five years to 1.5 per cent of the value of the transaction.

The code of conduct revisions aim to ensure that merchants will actually see that money.

Better for retailers

The expanded code also allows merchants to exit their contracts with credit card processors without penalty.

And it grants new protections to retailers who decide to stop accepting mobile payments.

Dan Kelly, president of the Canadian Federation of Independent Business, says the new rules will give merchants ammunition in the battle against new mobile fees.

"Our fear was there will be a big fee-apalooza when mobile payments go mainstream," Kelly said following Oliver's announcement.

The new rules make that less likely, Kelly said.

For example, if credit card processors try to introduce new fees for mobile payments, merchants will be able to cancel their contracts or stop accepting smartphone payments in response, he said.

The Retail Council of Canada said that while it sees the announcement as "real progress," Canadian retailers are still paying amongst the highest transaction fees in the world.

"In the European Union, interchange rates are one-fifth of the average level paid by merchants in Canada," the association said in a statement.

"These costs are ultimately borne by all consumers whether they are paying with cash, debit or credit. RCC intends to continue to press for deeper cuts to bring interchange in line with the fees charged elsewhere."

NDP consumer protection critic Andrew Cash noted that the code of conduct is a voluntary one, so companies don't necessarily have to comply.

"They've extended a voluntary code to mobile devices and they've made that announcement to pat themselves on the back, but what consumers and small businesses need are some strong regulations here," he said.