November 19, 2009
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News: Finance Minister Cracks Down On CC Companies
Jim Flaherty, Canada's Finance Minister is laying down the law to debit and credit card companies with new rules aimed at stopping unfair interchange fees. Earlier this year, retailers waged a war against the major credit card networks like Visa and MasterCard over the increasing high interchange fees. The new rules will now allow retailers to cancel any contract with the card networks without penalty if they receive notification a change in fees. These new guidelines will assist retailers in minimizing costs associated with credit card transactions and give them more flexibility in dealing with such fees.
The new guidelines will also include provisions that will allow merchants to choose which credit cards they will accept. Some of the higher reward cards charge merchants a higher interchange fee for payment transactions. This has been an increasing concern since banks have been issuing these higher rewards credit cards to consumers in place of their current card without receiving authorization from the customer. These new rules will prohibit lenders from sending out these types of cards unless the customer has requested it. According to the new rules, lenders will be required to provide online access to merchants with details on the interchange fees charged to them. Lenders will also be required to provide 90 days notice of any fee changes.
Although the new rules are handed down by the Finance Minister, they will be release on a voluntary basis. Flaherty is hoping that credit card companies will be willing to voluntarily comply with the rules. In a statement, the Prime Minister said he would rather work through the process of first standing with a voluntary code within the important stakeholders and then move on to an involuntary code. He also stated that revisions are likely to occur over the next 60 days as the codes are circulated. The codes will be applicable for all card networks which include Visa, MasterCard, Discover, and American Express. MasterCard has stated that they intend to comply with codes as a “standard of conduct.