Canadian Government releases statement on credit card merchant fee reductions

Early last week, Finance Minister Joe Oliver released a statement regarding credit card merchant fee reductions. In his statement Minister Oliver welcomed changes made by credit card companies at the government's request and stated that there is no need for the Government to regulate the interchange rates set by the credit card networks. He also added that lower costs for merchants should result in lower prices for consumers.

This topic has been very close to the Association of Canadian Travel Agencies (ACTA) through our involvement with the Small Business Matters (SBM) Coalition. As part of the Coalition, ACTA takes the position that the exorbitant credit card fees we have in Canada (unlike other jurisdictions including the European Community, Australia and Spain) are eroding the profitability of many small and independent businesses, including travel agencies.

While the Coalition thanks the Ministry for their attention and efforts to address retailer concerns regarding the significant impact that excessive and escalating credit card fees have on our businesses, we feel the move is not far enough and will have limited impact on rising fees. The fees are a significant revenue generator for Visa, MasterCard and the lenders that issue cards which is estimated above $5-billion annually. Credit card fees in Canada are amongst the highest in the world, a point noted by the Government and Canada's Competition Tribunal. Also worth noting was the "ask" of government by the SBM Coalition to not pass on the credit card fees to the consumer but rather, that the government make the charges more fair, especially in comparison to other jurisdictions where regulatory intervention has proven successful.

We have concluded that a number of the points in the announcement lack clarity and the SBM Coalition have been advised that policy statements will be released over the next several days / weeks that will clarify some of the matters. We will share this information as it becomes available.

In summary, the voluntary proposals from Visa and MasterCard include:

• A voluntarily reduction in their respective credit card fees for consumer cards to an average effective rate of 1.50% for a period of five years.
• Assurances that all merchants receive a reduction in credit card fees.
• Small and medium sized enterprises and charities will stand to benefit the most especially in light of their lack of bargaining power.
• A requirement for annual verification by an independent third party to ensure compliance.
• The reductions are scheduled for implementation by no later than April 2015.

Gary Sands, chair of the SBM Coalition stated, "We need to bear in mind that several other countries have supported their small businesses by regulating a capped rate that is much lower than that announced by the Canadian government."