Common pitfalls and official sources
Card processing pitfalls for Canadian merchants, and the official sources to check
The most common costly mistakes with merchant processing in Canada, composite examples, and the regulators and official sources to use: FCAC, Bank of Canada, OPC, CRA.
The costliest processing mistakes Canadian merchants make are rarely about the headline rate. They are: signing an equipment lease that outlasts the processing agreement, missing a non-renewal deadline, ignoring a PCI non-compliance fee, underestimating chargebacks, being surprised by a hold or reserve on deposits, surcharging incorrectly (or at all in Quebec), and not using the 70-day exit window after a fee increase. Each one is avoidable with the documents the Code of Conduct already requires and a few official sources: the Financial Consumer Agency of Canada (FCAC) for card network rules and merchant rights, the Bank of Canada for the payment service provider registry, the Office of the Privacy Commissioner for data, the Canada Revenue Agency for tax, and the Office de la protection du consommateur in Quebec.
This page is the overview for the pitfalls and official sources section. The examples are composites, not real businesses, and amounts are illustrative.
Ten pitfalls and how to avoid them
| Pitfall | What happens | Prevention |
|---|---|---|
| Separate equipment lease | Years of payments that continue after you leave the processor | Ask who the lessor is; compare total payments with buying; see contract length and early termination fees |
| Missed non-renewal date | Contract extends | Diary the date; under the Code, auto-renewals are limited to six months or less and you can give notice up to 45 days before renewal |
| PCI non-compliance fee | Monthly fee until you complete validation | Complete the self-assessment questionnaire; see PCI compliance fees |
| Chargebacks | Lost sale plus fee; possible higher risk pricing | Clear descriptors, receipts, delivery proof; see chargebacks and dispute fees |
| Holds and reserves | Deposits delayed or partly withheld | Ask about reserves before signing; warn the processor before large or unusual sales; see settlement holds and reserves |
| Unregistered provider | Weaker safeguards for your funds | Check the Bank of Canada registry; see RPAA registration checks |
| Surcharging wrongly | Breach of network rules, complaints, Quebec enforcement | Follow the cap, cost limit and disclosure rules; never in Quebec; see surcharge rules |
| Fee increase ignored | You keep paying more | Use the 70-day penalty-free exit or renegotiate; see Code rights |
| Introductory rate ends | Effective rate jumps | Ask what applies after the promotion; scheduled increases are excluded from the Code's exit right |
| Recording net deposits as sales | Understated revenue, wrong tax filings, fees invisible | Record gross sales and fees separately; see effective rate |
Composite example 1: the lease that outlived the processor
A composite of common situations, not a real business: a bakery signs up for processing at a trade show and, in the same meeting, signs a 48-month equipment lease at $59 a month. After a year it finds a cheaper processor whose terminals are included. The processing agreement ends cleanly under its terms, but the lease is with a separate leasing company and is non-cancellable: 36 × $59 = $2,124 still owed. The Code limits related service agreements with the processor so they do not outlast the main agreement, but a lease with an independent company may not be covered.
Lesson: never sign equipment paperwork without knowing who the counterparty is and the total of all payments.
Composite example 2: the fee increase nobody used
A composite: a florist receives a notice that its monthly account fee will rise from $15 to $25 and a new $12 "compliance" fee will start in 45 days. It does nothing. Over the next year the change costs (10 + 12) × 12 = $264. Under the revised Code, the florist could have left without penalty within 70 days of the increase taking effect, or used that right to renegotiate.
Lesson: read every notice from your processor, note the exit window's end date shown on it, and decide before it passes.
Composite example 3: the surcharge applied in Quebec
A composite: a retailer with stores in Ontario and Quebec configures a 2% credit card surcharge across all its terminals. Surcharging is allowed in Ontario within the rules, but not in Quebec. Quebec customers complain, and the retailer has to reconfigure its Quebec terminals and may have to refund the surcharges.
Lesson: set surcharges by location, and offer discounts for cheaper payment methods instead if you want one approach everywhere.
Who does what: official bodies
| Body | Role for merchants | When to contact |
|---|---|---|
| Financial Consumer Agency of Canada (FCAC) | Supervises card networks' compliance with the Code of Conduct; publishes merchant guidance | Possible Code breaches; information on your rights (it does not resolve individual disputes) |
| Department of Finance Canada | Sets payments policy, announced the Code revisions and interchange commitments | Policy background |
| Bank of Canada | Supervises payment service providers under the Retail Payment Activities Act; keeps the PSP registry | Checking a non-bank provider's registration |
| Office of the Privacy Commissioner of Canada | Oversees PIPEDA | Privacy obligations and breaches |
| Canada Revenue Agency | GST/HST, income tax | Tax treatment of fees and equipment |
| Office de la protection du consommateur (Quebec) | Enforces Quebec's Consumer Protection Act | Pricing rules in Quebec, including surcharges |
| Competition Bureau Canada | Enforces the Competition Act | Misleading sales practices or drip pricing |
| Canadian Anti-Fraud Centre | Collects fraud reports | Scams targeting merchants |
How to escalate a problem with your processor
- Write to the processor and use its complaints process. Under the revised Code, complaints must be acknowledged within 5 business days and investigated and resolved within 20 business days (30 for network operators).
- Escalate to the card network if unresolved; the network's complaint process applies to its participants.
- Contact the FCAC at any stage if you believe the Code was not followed. It does not award compensation but looks for systemic issues.
- Get legal advice for contract disputes, leases or larger amounts; small claims court may be an option for smaller sums, depending on your province.
Using this section
Each pitfall above has its own guide: chargebacks, PCI fees, contracts and termination fees, RPAA registration and settlement, holds and reserves. Keep the quote comparison checklist open when you read a contract.
FAQ
Can the FCAC get my money back?
No. The FCAC supervises compliance and may examine complaints for systemic issues, but it does not resolve individual disputes or provide compensation. Use the processor's and network's complaint processes, then legal routes.
Is a sales agent's promise binding?
What binds the processor is the written agreement. Get any promised rate, waiver or credit added to the documents before signing.
Where can I report a payment scam aimed at my business?
Report to the Canadian Anti-Fraud Centre and your local police, and tell your processor and bank immediately.
Sources
- FCAC: Accepting card payments — merchant rights, complaints, surcharges
- Financial Consumer Agency of Canada — Code of Conduct and supervision
- Bank of Canada — retail payments supervision and PSP registry
- Office of the Privacy Commissioner of Canada — PIPEDA
- Office de la protection du consommateur — Quebec consumer protection
- Competition Bureau Canada — misleading representations
- Canadian Anti-Fraud Centre — fraud reporting
