Credit Card Execs Grilled Over Fees

We thought you would find the following story from blacklocks.ca of interest and relevant to the fact that ACTA participates in a newly formed coalition known as the Small Business Matters Coalition addressing the need for fairer credit card fees for independent businesses. With the exorbitant credit card fees we have in Canada (unlike other jurisdictions including the European Community, Australia and Spain) eroding the profitability of many small and independent businesses, this is an issue that ACTA needs to be involved.

The “ask” of government is not to pass on the credit card fees to consumers but rather make the charges more fair, especially in comparison to other jurisdictions where regulatory intervention has proven successful.

By Paul Delahanty: www.blacklocks.ca

Credit card executives have been grilled by the Senate banking committee over $5 billion-a year merchants’ fees charged for using Visa and MasterCard. Senators cautioned that years after cabinet introduced a voluntary Code Of Conduct on the industry, fees remain too high.

“Let me be clear,” said Senator Irving Gerstein (Conservative-Ont.), chair of the committee. “Canadian merchants and consumers are expecting movement”; “You’ve talked the talk but I suspect what the committee wants to know is when you will walk the walk.”

Retailers and restaurateurs in Canada pay from 1.8 to 3.1 percent to process Visa and MasterCard sales compared to regulated charges of 0.3 percent in the European Union and 0.5 percent in Australia. A Senate bill S-202 An Act To Amend The Payment Card Networks Act would cap Canadian fees at 0.5 percent for merchants, 0.3 percent for public institutions and zero for charities.

“Enough is enough,” said Senator Pierrette Ringuette (Liberal-N.B.), sponsor of the bill; “Why is it okay for you to have 0.5 percent merchant fees in Australia for the last 14 years and to commit to comply with 28 European countries at 0.3 percent, while here in Canada it is okay to gouge merchants and consumers?”

Visa and MasterCard account for 90 percent of credit card transaction in Canada, by official estimate. Nationwide credit cards account for 28 percent of sales followed by cash (25 percent); Interac payments (18 percent) and debit cards (18 percent).

Company executives testified that regulating fees would “eliminate competition” and “lead to negative consequences for consumers and merchants,” said Don Lebeuf, head of customer delivery at MasterCard Canada. “It is important to remember that every merchant makes a choice to accept credit cards,” said Lebeuf – a claim challenged by Senator Douglas Black (Conservative-Alta.).

“I am skeptical,” Black said. “I understand we all have vested interests”; “We’re here to try and affect some kind of resolution that benefits Canadians”:

•BLACK: “Do you control 90 percent of the market?”
•LEBEUF: “Ninety percent of the credit card market. You have to factor in debit. You have to add cash to that because cash is a legitimate competitor, if you will…”
•BLACK: “Your evidence is there are other players, but certainly you wouldn’t suggest to this committee they are real competitors to Visa and MasterCard?”
•LEBEUF: “I would suggest Interac is a definite competitor.”
•BLACK: You stand by your suggestion there is real choice and competition?”
•LEBEUF: “Absolutely, we battle it out every day.”
Nothing To Be ‘Proud Of’

The 2010 Code of Conduct introduced by the Department of Finance suggests credit card issuers provide retailers a minimum 90 days’ notice of fee increases; stop the “unilateral altering” of contracts; explain terms in plain language and allow merchants to cancel contracts without penalty. The government’s Financial Consumer Agency of Canada in 2013 cited card issuers for numerous violations but refused to name the companies involved, and issued no penalties.

Senators on the banking committee noted the Code of Conduct failed to regulate fees or provide merchants with more choice.

“In this day and age, if you want to sell somebody something you have to offer more than cash,” said Conservative Senator Stephen Greene of Nova Scotia. “You have to offer credit cards or at least a debit card. To say that’s a choice they have, to me it’s not really a choice.”

Senator Paul Massicotte, Liberal of Québec, said credit card companies left Canada with “the honour of having the second-highest merchant fees in the world” outside the U.S.: “It’s not an honour we’re proud of. What can you do to bring down those fees?”

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.