In April 2010, the Government of Canada introduced the NEW Code of Conduct for the Credit and Debit Card Industry in Canada, which was developed within the payment processing industry to promote much greater transparency for merchants when signing merchant contracts, as well as to enhance fairness, clarity and choice.
The Financial Consumer Agency of Canada (FCAC), has the responsibility to monitor and ensure compliance of all payment card network operators, especially their adherence to the Code of Conduct.
In monitoring compliance within the Code of Conduct and the payment processing industry, FCAC believes there are a few main flaws that were not falling suit with the way the Code of Conduct was to be interpreted. FCAC issues a Commissioner's Guidance 10 (CG-10) in order to rectify and clarify the application and interpretation of the Code of Conduct for the payment processing industry. The CG-10 sets out the issues and the principles that must be adhered to by not only the payment card network operators, but also independent sales organizations, and additional service providers such as terminal leasing services. This guidance has been put into affect to directly address any issues with:
- Inappropriate sales and business practices
- Disclosures to merchants in multiple service provider agreements
- Multiple contract cancellation penalties, costs or fees
These three elements must be monitored in order to ensure that the merchant has all necessary information, a contract that is fair with full disclosure of fees and a cancellation policy.
Inappropriate Sales and Business Practices
The breakdown of this element is very simple, but unfortunately must be addressed due to poor business ethics within the payment processing industry by those payment processors that do not pride themselves on customer service and customer support. This element includes those payment processing companies that fail to provide merchants with complete copies of the agreed upon merchant-acquirer agreement or terms of incorporated therein by reference in a timely manner.
Not providing applicable transaction and processing fees and rates at the time the merchant enters the agreement. Sales representatives that are advertising and promoting rates and fees that are not being honored at time of agreement signing. Also, misrepresenting contractual terms is an issue with merchant agreements and those payment processors that are including hidden fees or hidden agreements.
Disclosure in multiple service provider agreements
Merchants often find multiple service provider agreements convoluted and difficult to read and understand in part because of the many different but connected payment services they require. Sadly, as a result, it is often difficult for merchants to make informed and reasonable decisions when choosing a payment processing provider, and some payment processors take advantage of that.
Not understanding your rights and the Code of Conduct will keep you and your business at a disadvantage when choosing a payment processing partner. It is this element that the CG-10 has set out to work with ISO's and payment card network providers to ensure that merchants receive clear to the point information about all services being offered in a multiple service provider agreement prior to entering into that agreement.
Multiple Contract Cancellation Penalties, costs and Fees
This element has been set address due to the influx of situations by merchants that have signed a merchant agreement to later find out that they in fact have entered into additional contracts for related services, terminal, online etc., which all contain separate and expensive cancellation penalties, fees and costs. With the CG-10, all contracts will be made clear, and separated to outline any separate fees or cancellation costs by the merchant for each contract.
Additionally, at any point during a rate or fee increase by a payment processing provider, the merchant will be able to cancel at no charge within a 90 day period. This will protect the merchant from being stuck in a contract with large cancellation fees, while fees and costs increase.
Outlined above is all the more reason why doing your due diligence in choosing a payment processing provider is such an important part of the livelihood of your business and your bottom line. We stress working with a payment processing provider that knows your industry, knows how to manage client expectations and overall knows what good business ethics entail. Make the switch to a the right payment processing provider. Accepting credit cards should drive revenue, not increase costs.