Gov’t Stung With Credit Fees

Paul Delahanty, www.blacklocks.ca
Federal agencies paid more in $17 million in credit card transaction fees last year, according to the Department of Public Works. A bill currently before the Senate would drastically reduce Visa and MasterCard fees payable by public institutions and other vendors.

“The card acceptance initiative is helping the government fulfill its e-commerce commitments,” said Alex Lakroni, chief financial officer at Public Works Canada; “It’s up to government agencies whether or not to accept credit cards.”

Visa and MasterCard collect some $5 billion a year in vendors’ fees to process credit card payments. Rates for merchants ranged from 1.8 to 3.1 percent last year. Lakroni said the $17 million in costs were run up by Canada Revenue Agency, Parks Canada, the passport office and others. “Once the decision is taken that Canadians can pay be credit card to purchase these services, we pay the fee,” Lakroni said.

Bill S-202 An Act To Amend The Payment Card Networks Act proposes to cap fees at 0.3 percent for public agencies, 0.5 percent for merchants, and zero for charities. The Senate banking committee earlier heard Canadians pay among the highest transaction fees in the world, compared to 0.3 percent in the European Union and 0.5 percent in Australia.

Testifying at the Senate national finance committee, Lakroni said the Government of Canada itself processes more than 10 million electronic card transactions a year, with $3 billion in payments. The Canada Revenue Agency was a “larger user”, he said.

Senator Pierrette Ringuette (Liberal-N.B.), sponsor of Bill S-202, earlier said cabinet appeared determined to prevent legal limits on credit card fees. “I am realistic in understanding the current government does not want the legislation to move,” Ringette said in an earlier interview.

Under a voluntary Visa and MasterCard agreement sanctioned by Finance Canada last November 4, the companies suggested they’d reduce rates to an “average” 1.5 percent over five years. Visa has told retailers its basic fee will be fixed at 1.52 percent effective April 1; MasterCard set its small business rate at 1.45 percent.

Visa and MasterCard account for 90 percent of the credit card market in Canada, by official estimate.  The federal anti-trust Competition Tribunal in 2013 dismissed merchants’ complaints of unfair trade practices by Visa and MasterCard. The ruling followed a three-year investigation.