“Payment cards are a cheaper and a safer payment system than using cash, and the benefits of the cards far outweigh the legitimate cost of accepting them,” Canadian Bankers Association president Terry Campbell said. “Credit card costs are a cost of doing business. Quite frankly, it’s among the smaller costs that businesses face.”
Canadian Federation of Independent Businesses president and CEO Dan Kelly said merchants should have the power to add surcharges when consumers use credit cards that have higher interchange fees. “Consumers can use the cards. Banks have issued them in huge numbers, and the rates for accepting credit cards have been going up. We’re pushing for the power to add surcharges,” explained Mr. Kelly. “More than anything, it would give merchants power so that if credit card companies started to jack up rates, merchants could actually push back.”
The issue is currently in the Competition Tribunal’s hands as hearings on interchange fees concluded June 21. Hearings began in May after the Competition Bureau challenged the merchant restraints placed on businesses that accept credit cards as payment. According to the bureau’s initial filing with the tribunal, payment system operators such as Visa and Mastercard restrict retailers from levying surcharges on credit card payments and encouraging consumers to use cards with lower merchant fees.
Visa and Mastercard, which are the two largest credit card providers in Canada and account for 90 per cent of the market, challenged the Competition Bureau’s case. TD Bank and the Canadian Bankers Association also submitted closing arguments against the bureau’s position. A final ruling from the Competition Tribunal is expected some time this fall.
While debit card transactions cost retailers a flat rate of approximately 12 cents per sale, credit card transaction fees depend on the type of card being used. Premium cards offering cardholder benefits cost retailers more to process, but because of a clause requiring retailers to “honour all cards,” businesses are forced to accept cards with higher processing costs
The Competition Bureau estimates that credit card system fees cost businesses $5-billion in 2009, which was in turn passed on to consumers. On average, the credit card payment system costs each consumer $140 annually.
Commissioner of Competition Melanie Aitken has argued that the current conditions are in violation of Section 76 of the Competition Act, which prohibits parties from discouraging customers’ ability to lower their costs. Ms. Aitken has requested that the tribunal strike down restrictions on merchants’ ability to level surcharges and eliminate the “honour all cards” clause.
Mr. Campbell said that proposal would only create negative consumer experiences when customers have their cards rejected or are forced to pay a fee. Mr. Campbell added that the oft-cited $5-billion annual cost figure was the cost of doing business for retailers.
Mr. Kelly did not dispute Mr. Campbell’s claim that surcharging would result in negative consumer experiences, but said that the retailers simply want some control over the amount they pay in credit card interchange fees.
Mr. Kelly also disputed the suggestion that customer surcharges on credit card transactions would become the norm. He pointed out that retailers are able to levy customer surcharges on debit transactions, but rarely do.
“Consumers are actually paying $5-billion in credit card merchant fees, they’re just embedded in the price of everything they buy. We support surcharging because it’s a more honest and fair way of levelling these fees, as opposed to having them hidden in the prices,” he said.
NDP consumer affairs critic Glenn Thibeault (Sudbury, Ont.) is hopeful that the Competition Tribunal will strike down the merchant restraints in its final ruling. He said it’s time for the federal government to introduce legislation limiting the credit card industry’s ability to “gouge” retailers.
“Small businesses have to increase their costs to offset the costs that they’re paying on interchange fees, which means everybody pays more,” Mr. Thibeault told The Hill Times. “If businesses know how much they can expect to pay, they won’t have to keep increasing the costs of the items that are purchased.”
The federal government introduced a voluntary code of conduct for the credit and debit card industry in 2010, which included requirements for the industry to provide retailers with clear information on transaction fees and to give 90 days notice of rate changes. The Financial Consumers Agency of Canada oversees industry compliance with the code.
Although Mr. Thibeault has called on Finance Minister Jim Flaherty (Whitby-Oshawa, Ont.) to give retailers more discretion over which credit cards they accept, the Finance Minister has shown little interest in going beyond the current voluntary code of conduct.
“The rates and fees associated with financial products and services reflect the business decisions of the payment card networks,” a statement from Minister Flaherty’s office read. “The current framework encourages competition, requires disclosure of fees, and provides the right of the merchant and consumer to exercise choice.”
Original Article
Source: hill times
Author: CHRIS PLECASH
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