Moneris and Merchants Reach a Deal That Could Keep Canada’s Voluntary Code Voluntary

A small-business trade group and Canada’s leading merchant acquirer reached a deal on Thursday that seemingly ends a dispute that, had it continued on its original course, might have transformed Canada’s seemingly voluntary code of conduct for payments companies into a mandatory one.

At issue was a Dec. 30 letter Moneris Solutions Corp. merchants received outlining pricing changes to take effect April 1 and, according to the Canadian Federation of Independent Business, a new fee. Some businesses complained that they had a hard time figuring out what the letter was saying, and that they wouldn’t have much time to change processors if they wanted to avoid Moneris’s new pricing plan. “This letter has created much confusion and may mean a total merchant fee increase for your business,” Dan Kelly, the CFIB’s senior vice president of legislative affairs, wrote on the association’s Web site.

The CFIB brought the letter to the attention of the Financial Consumer Agency of Canada and the federal Department of Finance as a possible violation of the voluntary code of conduct for payment-industry companies that the government created last year. Among other things, the 10-point code calls for timely and clear communications from acquirers to merchants, with 90 days for merchants to find other providers before higher prices take effect.

The Toronto Globe & Mail reported on Feb. 20 that Finance Minister Jim Flaherty saw the dispute as a reason to possibly make the code stronger, and mandatory. “Flaherty has instructed the FCAC to expedite its probe and is again raising the prospect that he will bring down tougher, binding regulations if industry players do not voluntarily comply with the code,” the newspaper reported.

But on Thursday, the CFIB revealed that it had withdrawn its complaint to the FCAC.
Key to the deal was more time until the price changes take effect. “Moneris will provide merchants with an extended 90-day review period, waiving cancellation fees associated with termination during the extension beginning April 1, 2011 and ending June 30, 2011, giving merchants more opportunity to assess the impacts of the revised pricing,” a joint CFIB-Moneris statement says. The statement also says, “Moneris and CFIB are pleased to work co-operatively, on behalf of small businesses and merchants across Canada.”

A Finance Ministry spokesperson couldn’t be reached late Thursday for comment about the new development. The spokesperson earlier told Digital Transactions News that Flaherty “has stated he will make it [the code] involuntary, if necessary.” But, he added, that assertion was not made specifically regarding the Moneris case. Flaherty indicated last spring as the code took shape that he would push to make the code mandatory if payments companies don’t follow it (Digital Transactions April 19, 2010).

Moneris said in a statement earlier this week that it adopted the voluntary code last May and, “in complete compliance with the code,” recently informed merchants of a revised pricing structure. The new schedule created an interchange differential to align merchants’ processing costs with the types of cards they accept, according to Toronto-based Moneris. “The introduction of premium cards has increased pricing complexity in the Canadian marketplace and as such processing costs for merchants may trend higher because premium cards attract a higher interchange rate, as set by the payment networks, such as Visa and MasterCard,” the statement said. Moneris also said other major Canadian acquirers such as Chase Paymentech and TD Merchant Services use similar pricing structures and that it had received “very few merchant inquiries” about the new schedule.

The Moneris-CFIB flap was just the latest tussle between merchants and the payments industry in Canada, some of which resemble controversies in the U.S. Many Canadian merchants were alarmed about the coming of Visa- or MasterCard-branded debit cards, which could cost them more to accept than the established Interac Association PIN-debit card, and didn’t relish the introduction of a Visa-branded premium credit card that carries higher interchange than conventional Visa cards. In December, Canada’s Competition Bureau challenged Visa Inc. and MasterCard Inc. rules against surcharging and the networks’ honor-all-cards rules (Digital Transactions News, Dec. 15).

Moneris, which is owned by the parent companies of Royal Bank of Canada and Bank of Montreal, serves about 350,000 merchants in Canada and the U.S. The U.S. operation is headquartered in Schaumburg, Ill.