Right To Cancel Your Merchant Account (Credit/Debit Card Processing)

The Code of Conduct for the Credit and Debit Card Industry (Canada) which became effective in 2010. Before the code came into effect businesses were subjected to contracts that tied them into long term contracts with sometimes huge cancellation fees and subject to increases in fees with no alternative to paying increases other than cancelling and paying the cancellation fees. As you can imagine there was lots of room for abuse in this system (and there was).

The code allows businesses to cancel their contract without penalty anytime any new fees or an increase in fees occur. The code state:

“The purpose of the Code is to demonstrate the industry’s commitment to:

  1. Ensuring that merchants are fully aware of the costs associated with accepting credit and debit card payments, thereby allowing merchants to reasonably forecast their monthly costs related to accepting such payments.
  2. Providing merchants with increased pricing flexibility to encourage consumers to choose the lowest-cost payment option.
  3. Allowing merchants to freely choose which payment options they will accept.”

Element 2

“Payment card network rules will ensure that merchants will receive a minimum of 90 days’ notice of any fee increases or the introduction of a new fee related to any credit or debit card transactions, or a reduction in applicable interchange rates. Payment card networks will provide at least 90 days’ notice to acquirers for rate and/or fee changes and at least 180 days’ notice for structural changes.”


Element 3

“Payment card network rules will ensure that following notification of a fee increase or the introduction of a new fee, or a reduction in applicable interchange rates not passed on to merchants, merchants will be allowed to cancel their contracts without penalty.”


Note: due to some processors not disclosing the actual nature of changes element 3 was modified to allow businesses to cancel within 90 day of “being able to assess the effect of the change”. In other words if they don’t tell you what is increasing/changing you have 90 days after you receive the first statement effected by the change to cancel without penalty.


It should be noted that many processors are now giving a generic notice of a change 90 days in advance as most businesses don’t realize they have an additional 90 days to cancel. Note there is no reason you can’t cancel as soon as you get the original notice giving you in effect 180 days to cancel. You should check your statements every month especially notices checking for fee change notices. If you intend to cancel make sure the processor agrees you have the right to cancel without penalty you don’t need a surprise 4 figure cancellation fee and get everything in writing.


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