Senator Pierrette Ringuette

Senator hopes for cap on fees ECONOMY: Small businesses could take hit

Credit card companies are gouging Canadians and if the debit card market continues to go on unregulated it will do the same, warns a Liberal senator.

"It's abuse. Pure and simple, it's abuse. All I want to see is justice in the system," said Sen. Pierrette Ringuette, who is spearheading senate hearings into the issue.

Opposition parties worry increases to the fees merchants pay credit companies to use their cards will be passed on to consumers. Glenn Thibeault, the NDP's consumer affairs critic, said some credit card companies will be dramatically hiking the fees they charge businesses.

"The merchant either loses their entire profit or they increase their prices," he said.

Catherine Swift, president of the Canadian Federation of Independent Business, said small and mid-sized businesses could take another hit when VISA and MasterCard enter the debit market in Canada. VISA has announced plans to do so later this year.

Canada's Interac system now has a monopoly on the debit market and functions as a not-for- profit company. Retailers pay a small fee, usually a few cents, to a terminal provider.

In the U. S., VISA and MasterCard charge retailers a percentage of the sale for debit transactions, just like they do for credit cards.

Faced with new competition, Interac said it is seeking to end its not-for-profit status and is currently in discussions with the Competition Bureau.

Sen. Ringuette hopes the senate committee hearings will lead to a cap on fees for merchants. Ted Menzies, parliamentary secretary to Finance Minister Jim Flaherty, is not yet taking sides. But he hopes the senate hearings will mean increased "financial literacy" so Canadians understand who actually pays for credit cards