Senator Pierrette Ringuette

Credit crusade comes home; Legislation Senator makes case for cap on card costs in Moncton

Liberal Senator Pierrette Ringuette brought her outrage over credit card costs to her home province on Friday, describing the fees charged consumers and businesses as "abusive."

Ringuette spoke about the need to curb climbing credit card costs, warning that out-of-control fees and interest charges are emptying the pocketbooks of both consumers and businesses.

The New Brunswick senator's campaign got a boost this week as the Senate and the House of Commons decided to form committees to scrutinize costs associated with Canada's credit and debit-card systems.

Ringuette said the Senate hearings will begin March 20 and she is hoping her colleagues will adopt her suggestion that Canada regulate its credit industry.

She said the outcome of the parliamentary investigations could keep billions of dollars out of the hands of the country's largest credit card companies.

"I truly feel that the interchange fees that are being charged to the business community and the interest fees that are being charged to consumers are unrealistic and abusive," Ringuette said.

"The system is broken."

Ringuette first called for changes in December, before introducing a motion in the Senate asking for a study that could recommend legislative measures by June.

Ringuette said interchange fees continue to rise in Canada.

When consumers swipe their credit cards to make a transaction, interchange fees cost businesses up to three per cent of the sale. The same fees take 1.8 per cent of transactions with governments and 1.5 per cent of transactions with charities, she said.

Australia implemented a cap five years ago, freezing the same interchange fees to 0.45 per cent, 0.33 per cent and zero respectively.

"In 2008, had our Canadian businesses benefited from the same interchange fee legislation as their Australian counterparts, they would have saved close to $6.7 billion, sales dollar for sales dollar," Ringuette said.

"Although we can't go back, we owe it to ourselves to mitigate the negative effects of excessive fees."

Ringuette said Canadians are paying as much as 25 per cent in interest on some credit cards, despite the fact the Bank of Canada slashed its overnight rate to 0.5 per cent on Tuesday.

The senator's motion also calls for a study of non-bank cash debit card services, which she labelled a "ticking time bomb."

Interac, the largest service provider, is currently in talks with federal authorities to move out of not-for-profit status. Ringuette fears the change would mean escalating transaction fees.

New Brunswick's Justice and Consumer Affairs Minister T.J. Burke supports Ringuette's campaign. Burke's office said Friday the minister understands the concerns of retailers and consumers.

Backing for Ringuette's campaign has snowballed recently as the restaurant industry and several business organizations have formally endorsed her efforts.

A group of Canadian associations representing more than 120,000 businesses have joined forces as the Stop Sticking It To Us Coalition in an effort to stop skyrocketing credit card fees.

"In the past year, Visa and MasterCard has moved from one percentage fee for accepting credit cards to a matrix system," saidw

Credit card companies switched some cardholders to "premium" credit cards, which offer additional benefits to cardholders at no additional fee, but cost merchants significantly more to accept, he said.

Other card holders have been deemed "high-spending" by card companies, which cost businesses more to process their transaction.

Rob Boulanger, director of counselling for the Credit Counselling Services of Atlantic Canada, said caps, within reason, make sense.

"I'm not a huge fan of regulation, because too much red tape just makes the system not work that well, and we have a good system," he said.

"But at the same time, there should be some kind of capping on the kind of rates that can be charged. If credit card companies are turning decent profits, there's no reason that they can't pass along some of the savings to consumers."

He said without a cap, credit card companies can increase interest rates to as high as 59.9 per cent, making it almost impossible for some to escape debt.

"What am I going to do?" Boulanger said. "I'll never get out of debt, unless there is some kind of cap to make that possible."