Senator Pierrette Ringuette

Senator pushes for credit card fee regulation; Visa spokesman counters that regulation would ultimately harm consumers, business owners

New Brunswick Senator Pierrette Ringuette has taken a "small step towards a big goal" in her fight to have tighter legislation on credit card transaction fees and interest rates.

Ringuette, who was in Moncton yesterday to speak with the Greater Moncton Chamber of Commerce, recently introduced a motion to the Senate, that was referred to the Banking, Trade and Commerce committee.

"I have been in politics for 22 years and know that taking the lead on this issue is like attacking the big and mighty," said Ringuette, who is a former Liberal MLA and MP for Madawaska. "Although I will probably end up with a few scratches, I am hoping that, ultimately, a positive outcome will be achieved for all of you."

Ringuette originally tabled a motion in the Senate in December, and then again in January, asking that the Standing Senate Committee on Banking, Trade and Commerce be authorized to examine and report on the credit and debit card systems in Canada and their relative rates and fees, in particular for businesses and consumers.

She now hopes a preliminary report can be done in May, in order to put some legislation in place before the end of the summer.

One of the main issues Ringuette wants explored is the hike in interchange rates -- which is a percentage of a purchase price which businesses pay to their financial institutions in order to provide credit card services to their customers.

Ringuette has lobbied for legislation similar to that in Australia where, five years ago, interchange rates were capped at 0.45 per cent for businesses, 0.33 per cent for governments and zero for charities.

In Canada, the maximum rates are up to 3 per cent for businesses, 1.8 per cent for government and 1.5 per cent for charities.

While the senator said Canadian businesses would have saved a total of $6.7 billion in fees had the same interchange maximums of Australia been in place here in 2008, a spokesman for Visa Canada said a desire to emulate the Australian concept is misguided.

"The (Australian) government's intention in regulating them was that they would, in effect, be lowering the costs of goods and services that consumers pay," said Brian Wiener, head of strategy and interchange for Visa Canada.

Wiener noted that Australia is the only market in the world with such regulations.

"There is no evidence, whatsoever, that consumer costs have gone down as a result of regulation in Australia -- none whatsoever," Wiener said. "There is evidence that the number of products available to consumers have gone down, the number of benefits associated with those same products has gone done and, in some cases, we've seen surcharging at the point of sale."

Wiener explains that interchange fees are set by companies like Visa and then the financial institutions pay them amongst themselves whenever a card is used.

"Visa doesn't actually receive any revenue, whatsoever, from these fees," Wiener said. "That's one of the big misconceptions out there that these interchange fees are coming to Visa. In fact, we don't make any revenue at all from interchange."

While Ringuette is strong in her resolve that regulating interchange fees is key to helping out businesses and consumers in this time of economic turmoil, Wiener believes it would have the opposite effect.

"If we had legislative intervention into interchange fees, the result would be that it would suppress competition, it would suppress innovation and, ultimately, it would result in harm to the consumers and retailers and to small financial institutions," he said.

Ringuette also pointed to the fact that interchange fees have been rising since the spring of 2008, but Wiener counters that the result of those changes were revenue neutral. The Visa spokesman said some interchange fees went up -- such as the purchase of a coffee at a fast food establishment; other rates went down -- such as the fees levied on a local moving company.

Ringuette, who has been speaking to a variety of groups in the last few weeks, said momentum is growing in support of legislating credit card rates and fees, with everyone from restaurant owners to the Retail Council of Canada getting behind the cause.

"If they cut us at the throat with excessive fees, they won't have us around for long to make profit," Ringuette said.

Terry Malley, chairman of the Greater Moncton Chamber of Commerce, said he found Ringuette's talk fascinating and said it's a "timely subject that affects both consumers and business people."

Ringuette also expressed concern that Interac is currently in talks with federal authorities to inquire about shifting to a for-profit company. She has asked federal officials to hold off on making such a decision until the study is completed, but has received no guarantees.

"We know that businesses must generate profits, but, in my book, reasonable limits are needed to ensure that everyone can survive in the current economic crisis."