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Senator pushes for committee to look into credit, debit card system; High fees | Low interest rates at banks not followed by credit card companies

IDNUMBER 200902020047
PUBLICATION: The Daily Gleaner (Fredericton)
DATE: 2009.02.02
SECTION: News;News
COPYRIGHT: © 2009 The Daily Gleaner (Fredericton)

Senator pushes for committee to look into credit, debit card system; High fees | Low interest rates at banks not followed by credit card companies

New Brunswick Liberal Senator Pierrette Ringuette has made a second attempt to get her Senate colleagues to support her in a bid to have a Senate committee on banking, trade and commerce, delve into the country's credit and debit card system.

"Since December, I've received feedback and encouragement from Canadians, increasing my determination to get the Senate to move forward. Make no mistake. Canadians are furious at sky-high interest rates charged by banks and credit card companies," Ringuette said in a statement.

In tough financial times, more Canadians than ever may need to depend on credit and consumers need to pay less in interest rates, rather than more, the Liberal senator said.

Ringuette said the government needs to establish regulations and oversight to ensure transparency into credit and debit card rates.

Canadian retailers are crying foul over the introduction of new premium credit cards that come with higher-than-usual interchange rates.

Interchange rates are the fees that are charged to businesses in order to provide credit card services to their customers.

Some merchants are paying both a flat fee of as much as $7 per transaction, plus an additional interchange fee of up to three per cent of purchases.

Interchange rates are set at the discretion of credit card companies.

The Canadian Federation of Independent Business, which represents 105,000 small businesses, has asked the government to intervene.

Ringuette said she's also concerned about an application from Interac - which manages debit card charges - to the Competition Bureau to end its not-for- profit mandate.

Currently, the average cost to a business on a debit card transaction is $0. 12 per transaction.

Credit card companies say that merchants are the winners when their customers have access to credit cards and the flexibility to spend using those cards.

Tony Maraschiello, director of corporate and government affairs with MasterCard, said recent merchant fee increases were the first in seven years and not all merchants will end up paying more.

"In Australia, where such regulation occurred, retailers did not pass on cost savings to consumers and many instituted surcharges on purchases," Maraschiello said.

"Consumers saw annual fees for their cards rise and benefits decline," Maraschiello said.

In Canada, 80 per cent of all credit cards are Visa or MasterCard.

Ringuette said she's also concerned that consumers are paying 24.75 per cent in interest rates on some cards.

Ringuette introduced a similar motion in the Senate just two days before Parliament was prorogued in December.

Ringuette said at a time when bank interest rates have fallen to all-time lows, credit card interest rates haven't declined.

In last week's federal budget, Ottawa signalled that it may claim the right to regulate when credit card companies slam customers with unforeseen rate hikes and that it will look at legislative measures to force companies to be transparent about rate changes.