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Results: 1 - 15 of 29
View Gabriel Ste-Marie Profile
BQ (QC)
You oversee the Payment Card Networks Act, so as I understand it, you have the authority to investigate interchange fees. I would like to know whether you have the authority to make that information public. I'll explain.
Apparently, because of the pandemic, the number of credit card transactions has skyrocketed, both in person, to avoid physical contact, and online, because people are staying home and making more purchases on the Internet. First, can you confirm this boom in credit card transactions?
As elected officials, we often hear that these transactions result in higher interchange fees for merchants. In addition, consumers seem to be more dependent on credit cards and, therefore, on credit.
Could you tell me what kind of investigation you have conducted so far or are planning to conduct?
Judith Robertson
View Judith Robertson Profile
Judith Robertson
2020-07-07 16:04
Perhaps I'll first explain where we fit in the credit card network operators, because it's a complicated area, with many parties.
The network operators like Visa, Mastercard and Interac also work with individual parties like the merchants, the banks that issue the credit cards, and then of course the consumers.
Your question is about the relationship and the charges between the merchants and the payment card network operators. Our role in that relationship is governed by a code of conduct that is principally designed to ensure that there is proper disclosure and information about charges so that merchants know what they have to pay. That's just a little background on our role.
We do agree, and we have seen reported the increase in transactions taking place, either by debit or credit. That is absolutely valid. We do not know whether that will continue or whether it's a permanent change or a temporary thing, but that is something that we are monitoring.
View Gabriel Ste-Marie Profile
BQ (QC)
Thank you.
As I understand it, then, a code of conduct requires that Visa and MasterCard honour their own commitments. If we wanted to change that, it would be our duty to pass a new bill in the House.
Comparisons are often drawn with Australia and the European Union, which regulate interchange fees. I will digress for a moment. In your response, you talked about the relationship between the merchant and the credit card company, but you also spoke of the consumer and their reliance on credit, which is reflected in their credit card usage. The banks and credit card companies were asked to be flexible during the pandemic, but we are quite disappointed with what we've seen so far.
With respect to the Payment Card Networks Act, how does Canada compare with Australia and the European Union, where legislative changes have been undertaken to rein in the credit card companies' power?
Judith Robertson
View Judith Robertson Profile
Judith Robertson
2020-07-07 16:07
I'm going to ask Teresa if she has some information on an international comparison of fees. As I say, we monitor compliance with the code of conduct, as opposed to setting fees or regulating fees.
Just before we see if Teresa has something to add, I'll just say that the relationship between the bank and the consumer is of course governed under the Bank Act. There are separate regulations there that we also monitor, including the disclosure of the cost of borrowing.
Teresa, I don't want to put you on the spot, but do you have any information on an international comparison of exchange rates, or is that outside our purview?
Teresa Frick
View Teresa Frick Profile
Teresa Frick
2020-07-07 16:08
Thank you very much. I appreciate the question.
I know that we do have some information on international comparisons. Unfortunately, I don't have that with me right now. I'd be happy to share it with you at a later date, if that's all right.
Gary Sands
View Gary Sands Profile
Gary Sands
2020-06-18 17:25
Good afternoon. Thank you, Mr. Chair.
I'm the senior vice-president of the Canadian Federation of Independent Grocers. I would like to thank the committee for the invitation to participate in your hearings this afternoon.
Independent grocers across Canada serve a myriad of communities in this country, particularly rural, remote and indigenous communities in which we are the only source of food for people in those areas. As such, independent grocers are a critical linchpin in ensuring food security for much of the country. Independents account for about $18 billion in sales and there are approximately 6,900 independent grocery stores across Canada.
We compete on a landscape that is overly consolidated at the retail, wholesale and supplier levels in a number of categories. At the same time, our members operate on overall margins of an average 1.5%, and that is much lower than other retail sectors. To stay on that uneven playing field, independents must differentiate themselves, and they do so by buy buying local, hiring local, supporting local initiatives and living in the communities they serve.
There is no playbook or manual that exists that could have helped guide the industry through this crisis. In the context of panic buying, labour shortages, the closing of most of the food service business, plus the increases in costs through the entire supply chain, this industry, for the most part, has responded very well by supplying groceries and supplies to Canadians.
That being said, there have been issues around the issue of supply that our members have encountered over the last few months that need to be addressed within industry and government. Independent grocers and independent wholesalers have encountered problems getting access to some products.
We understand that for some products there has been a huge spike in demand, particularly when customers want to buy enough toilet paper to last them for the next two years. However, when our members cannot access poultry, flour, eggs or other essential products, including fair access to PPE, such as hand sanitizers and face masks, then that not only impacts the ability of that independent grocer to continue to stay in business but the ability of those people, especially in more rural and remote communities, to access those essential products. The situation we've experienced has put that at risk and that is unacceptable to us. We hope it would be unacceptable to this committee as well.
Too often, over the past few months, we've had conversations with associations representing supply-managed sectors or companies in the consumer packaged goods areas, and with governments, that were taken aback when we would explain that what they were saying, in terms of supply, was not what our members were seeing. There were two different realities.
There are issues around distribution that need to be addressed and fixed. While panic buying has subsided, we could see a second wave, or at some point, some other pandemic or crisis could again arise. This means we all need to ask what we can learn from the past few months.
This industry, producers, processors and retailers, all responded with dedication and an exemplary commitment to ensuring Canadians had food and essential products. However, there is learning and things we can all do better in the event of another crisis. That includes consumers refraining from panic buying, but it also means wholesalers and suppliers have to ensure there is fair access to products for all retailers.
It also means governments have to ensure there are going to be mechanisms in place that allow our independents to access PPE supplies, both for the protection of their customers and employees. As well, all agriculture and food ministries, federal and provincial, must end their entrenched and systemic preoccupation with on-farm to the exclusion of off-farm. They are fond of slogans such as “gate to plate” or “farm to fork”, but the reality is, and it doesn't matter what party is in power, scant attention is paid to this end of the supply chain.
I would like to conclude by pointing out how the reality for all small and medium-sized businesses has changed and will change as a result of COVID-19. We know this because our members have been open as an essential service. We know what lies ahead for everybody, because we're on that road right now.
Increased costs to enhance consumer and team member safety through rigorous and stringent in-store cleaning, enhanced safety protocols, additional supplies of PPE, including installation of plexiglass barriers, are just some of our new realities. For independent grocers, because we're not part of the on-farm sector, we have received no government financial support unlike other parts of the supply chain.
As well, this committee in particular should be cognizant of the significant migration away from cash on the part of consumers to credit and contactless payments. This has meant, and will mean, a correspondingly significant erosion of the bottom line of most businesses because of the increased percentage they must now pay in interchange fees. Since large chains pay much less in interchange fees as a percentage than small and medium-sized businesses do, this erosion has a disproportionately deeper impact on those without the leverage of a Walmart to negotiate more favourable rates.
It is naive to believe that these billions of dollars siphoned out of the pockets of those SMEs do not have a huge impact on what Canadians pay for goods and services. Of course they do, but with the percentage of credit transactions now so much higher, this will make it a much more difficult journey for many businesses on their road to recovery in the next couple of years.
In the context of COVID-19, we would urge this committee to recommend that the government revisit the current agreement with the credit card companies, yet to go into effect, to reduce fees to an overall average of 1.4%. The payment landscape is much different now. All of us need to work together to put this country back on its feet, and credit card companies need to be part of that solution.
Thank you again, Mr. Chair and members of the committee, for the opportunity to speak with you today. We very much appreciate it.
View Peter Julian Profile
NDP (BC)
Thank you.
My final question is for you, Mr. Sands.
You raised the issue of interchange fees. Other countries basically have put handcuffs on the banks' gouging of people. I know of many small businesses that are impacted by the high cost of access through interchange. How important is it that the government, given that they've provided about $750 billion in supports to the banks, actually require the banks not to gouge small businesses on interchange fees?
Gary Sands
View Gary Sands Profile
Gary Sands
2020-06-18 18:31
We feel very strongly about it. I don't think there's an issue that's more important for all small and medium-sized businesses in Canada.
I do want to start off by saying that the government has brought about a new agreement, which was to go into place in April and has been delayed. That was definitely an improvement over the agreement that was in place with the previous government, but there's still much more to be done. The gap that exists between what the main street small businesses in this country pay and what a company such as Walmart pays is indefensible. It's inexcusable.
I want to go back to the grocery sector and have members understand the context of this. These independent grocers—I'm going to have to pick my sector, but I know that I'm speaking for all small and medium-sized businesses—are at margins of 1.5%. The new agreement that is supposed to come into effect is to provide an overall rate of 1.5%. That's an overall rate, and that's disingenuous, because the rates for premium cards actually drive that higher.
How do you make money? How does a small and medium-sized business in this country make any money when your margins are so tight? On the interchange fees, if Walmart can get 0.89%, why can't other small and medium-sized businesses in this country get the same? We've never had a clear, concise answer given. It's almost a deafening silence.
The amount of money we're talking about is billions of dollars, and I'm saying to this committee that we need to take another look at this, because in the post-COVID landscape there are going to be a lot of potholes on that road to recovery, and we don't need the credit card companies putting up any more roadblocks. That's what exists now. They have to be part of the solution. If they're not, they're part of the problem.
View Alexis Brunelle-Duceppe Profile
BQ (QC)
They are probably quite similar.
What I want to emphasize is that this is almost a monopoly. Many merchants have called me about interchange fees. I don't know if you know what those fees are. Right now, I don't think they're regulated. These merchants today pay 2% to 3% interchange fees. You may have different numbers. In Europe and Australia, it's 0.3%.
Do you think that would be a good way to—
View Wayne Easter Profile
Lib. (PE)
Alexis and Mr. Rudin, some of this area is really the government's decision to make.
I don't want to put Mr. Rudin in a spot of having to.... He has to abide by what the established government policy is. I think your question related to exchange rates is more for the finance minister's perspective rather than Mr. Rudin's.
Mr. Rudin, if you want to add anything to that, go ahead.
View Alexis Brunelle-Duceppe Profile
BQ (QC)
I had lost my connection, but I'm back online.
I wanted the superintendent's opinion on interchange fees. Is that possible, Mr. Chair? If he can regulate them...
Can you hear me well?
Jeremy Rudin
View Jeremy Rudin Profile
Jeremy Rudin
2020-05-21 18:40
Yes, I heard the question well.
We have no power to regulate interchange fees. That is a power Parliament has not given us.
View Alexis Brunelle-Duceppe Profile
BQ (QC)
So you're telling me that if we ever want to help our small businesses instead of the big credit card issuers, the government should introduce legislation to regulate interchange fees.
View Alexis Brunelle-Duceppe Profile
BQ (QC)
Thank you.
Hello, Mr. Giroux.
First of all, like my colleague from Joliette, I salute you for staying so busy lately. Well done.
You recently talked about measures for stimulating the economy when the time comes for a reboot. Last week, a question was asked by Mr. Littler, who was appearing before the committee as a representative of the Retail Council of Canada. Mr. Littler has been advocating a certain measure for years, over a number of Parliaments. We asked Mr. Morneau the same question, but we didn't get an answer. It's about the interchange fees that retailers have to pay for every transaction. As we know, because of COVID-19, people are mostly using credit cards. The use of cash is way down.
I was wondering if we should imitate Europe or Australia and cap the fee at 0.3% per transaction, instead of the current rate of 1.5%. In reality, the rate is around 2% and sometimes even goes up to 2.5% in certain situations. That eats directly into retailers' bottom line. Wouldn't capping these rates at 0.3%, as is being done elsewhere, stimulate an economic recovery, among other things? It would mean a lot more money in these retailers' pockets, but also more tax to pay because they would be making higher profits.
Has this measure previously been studied by your office? This is a long-standing request. Would it be advisable to implement such a measure here in Quebec and Canada?
Yves Giroux
View Yves Giroux Profile
Yves Giroux
2020-05-12 16:12
Thank you, Mr. Brunelle-Duceppe.
That is not an issue that we have looked at, at least not since I have been the Parliamentary Budget Officer. That being said, it probably should be considered. Service providers hold a virtual monopoly over interchange fees. Merchants don't really have any other choice but to offer this method of payment. It has become very common over the past two months. It is the preferred method of payment of many employees who work in the retail and food industries. Merchants therefore have practically no other choice than to use these payment methods. They also have very little choice about service providers. If it is not a monopoly, it is an oligopoly.
With regard to public policy, the logical response when faced with a monopoly is to regulate to ensure that prices are reasonable. I am not a payment system expert. Are interchange fees reasonable or not?
As an ordinary consumer, I find it a bit troubling to know that, when I go to the local pizza joint and pay with my credit card, 2% or 3% of the amount of the sale or possibly even more goes to various financial intermediaries. It would likely be a good idea to examine the issue and to establish regulations if the fees seem excessive. As I said, this is not my area of expertise, but, as a consumer, I find the situation worrisome.
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