On September 18th, 2012, the federal government announced the proposed expansion of the Code of Conduct for the Credit and Debit Card Industry in Canada (the “Code”) to apply to credit and debit network participants that provide point-of-sale payment services through mobile devices. The government undertook to amend the Code, which currently does not expressly address mobile payments transactions, following the release of the final report of the Task Force for the Payments System Review (released in March 2012).

A copy the Consultation Paper and proposed Addendum to the Code, together with Backgrounder issued by the Department of Finance can be accessed through the following links:

The proposed Addendum clarifies that the rules relating to payment cards will apply at the payment application level and not the mobile device itself, and provides specific guidance in relation to four key elements of the Code, stated as follows:

  • Element 4 ensures that merchants have choice in the type of payments they accept: a merchant who accepts credit card payments from a particular network will not be obligated to accept debit card payments from that same payment card network, and vice versa. The Addendum clarifies that merchants who accept credit and debit card payments through a mobile device from a particular network will not be obligated to accept all products in that payment network’s mobile wallet.
  • Element 6 provides that competing domestic applications from different networks shall not be offered on the same debit card. The Addendum clarifies that competing domestic debit applications can reside on or be accessed by the same mobile device provided they are represented as separate mobile payment apps.
  • Element 7 provides that co-badged debit cards are equally branded. The Addendum clarifies that equal branding applies to all virtual or electronic representations of payment applications. It also clarifies that establishing default preferences for payment should be done by consumers based on a clear and transparent process and users should be able to easily change default settings.
  • Element 8 provides that debit and credit card functions shall not co-reside on the same payment card. The Addendum clarifies that separate credit and debit applications may reside on the same mobile device provided they are represented as separate mobile payment apps.

The proposed Addendum also specifically seeks comments on:

  • whether the amended Code should apply to other entities enabling mobile payments (the Code currently applies to credit and debit card networks and their participants (e.g., card issuers and acquirers)); and
  • whether express consent should be required from merchants to accept debit or credit  payment applications through a mobile device where there are no changes to fees and no new infrastructure purchases are required.

The proposed Addendum could impact mobile payment projects that are currently being in the process of being developed. Industry participants wishing to comment must do so within the 60 day comment period. Comments can be submitted to codeconsult@fin.gc.ca.