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Speech at the Edmundston Chamber of Commerce (February 27), the Greater Moncton Chamber of Commerce (March 6) and the Charlottetown Chamber of Commerce (March 9) on her Motion for the Committee to Study the Credit and Debit Card Systems




I am pleased to be here this morning to talk about a subject that affects you daily and can make a big difference at the end of your fiscal year—your Visa, MasterCard and Interac INTERCHANGE FEES.


           The interchange fee is the percentage of the purchase price (including sales tax) that our businesses pay the system for each sales transaction.


Several countries have already legislated limits on these fees. I’m talking about Australia, England, Sweden and many other European countries. In my opinion, Canada lags far behind in revising the credit and debit card fee system and introducing legislation to ensure you are charged fair and reasonable fees.


Canadian small and medium-sized businesses are clearly at the leading edge of progress and like us, the consumers, use “FANTASTIC PLASTIC” in their daily transactions. 


Although we can’t go back, we owe it to ourselves to mitigate the negative effects of excessive fees. When they were introduced, the cards were a commodity—now we use them for almost all our financial transactions.


Last December, and again in January because Parliament was prorogued, I introduced a motion in the Senate urging the Senate Committee on Banking, Trade and Commerce to study the credit and debit card fee system and recommend legislative measures to the government by June 2009. Committee hearings will start on March 25th.


Here are a few credit card facts that led me to introduce the motion:


           Canadians hold 68 million Visa and MasterCard credit cards, which is 80% of the credit card market;


           Canadians use these credit cards to purchase an average of $267 billion worth of goods and services a year in Canada;


           The system is composed of banks, credit card companies (Visa, MasterCard, American Express) and equipment providers, such as Moneris and Paymentech.


           Interchange fees have been rising since the spring of 2008. Businesses have been unable to negotiate. 


           Currently in Canada, interchange fees charged by the system are up to 3% for businesses, 1.8% for governments and 1.5% for charities.


           Businesses are also subject to additional interchange fees:


o          if a client uses a premium card;

o          if a client’s credit card limit has been reached;

o          if a card is used by a higher risk client; and,

o          if a client uses a foreign credit card (e.g.: a credit card from an American institution);

o          without the business having access to the information when a client makes a purchase.


Several countries, including England and Australia, have reacted to these excessive fees and passed legislation limiting interchange fees charged to businesses.


For example, five years ago, Australia passed legislation capping interchange fees at:

  • 0.45% for businesses;
  • 0.33% for governments; and
  • 0.0% for charities.


If we assume that average interchange fees for Canadian businesses are 2%, they are paying 1.55% more than their Australian counterparts. Retail and Tourism businesses are in good financial shape if they can generate a 3% profit on sales. Just imagine what an additional 1.5% could do!


Dear friends, Visa and MasterCard are still used in Australia and making a profit despite the reduced fees. The reality is that these two giants increased their profits in 2008 compared to 2007. In fact, MasterCard doubled its net profits between 2006 and 2007.


The presidents of Visa Canada and MasterCard Canada met with me in January to tell me that their hands were tied and that providers, like Moneris, etc., set the fees and signed the contracts with our businesses. Visa and MasterCard said they were not to blame for the interchange fees. Yet the two companies continue lobbying Australia to do away with the legislation.


I would also like to point out that the contract forbids businesses from telling clients that there is a discount for cash payments.


Everyone is blaming everyone else, and nobody is acting.


I would like at this point to say that in our local banks, the employees are sympathetic to our complaints, however, we have to bear in mind that they can only execute the decisions taken in Toronto Headquarters.


You can imagine the army of LOBBYISTS Canadian and U.S. banks operating in Canada are sending to Ottawa these days. And it seems that all our Canadian banks are hurting financially. However,


           Since November 2008, the federal government has bought $125 billion in insured mortgages from our banks. I will spare you the reasons why because this $125 billion was borrowed and taxpayers will have to suffer the consequences, without getting a bit of a break on interest rates charged by our banks.


           Canadian banks recorded increased profits in 2008 compared to 2007, at close to $20 billion. Last week again, the Banks’ First Quarter shows excellent profits.


           By January 31, only 0.33% of mortgages were pending.


           By March 4, if you deposit moneys in a savings account from one of the five Charter Banks you will receive, on average, 0.1% of interest.


           In 2008, the lowest paid bank CEO in Canada was the National Bank’s, earning $4.92 million, or $21,400 a day; the highest paid CEO was Scotiabank’s, at $7.5 million, or $32,600 a day.


           In January, the Toronto Star newspaper reported that the Royal Bank had sent 700 employees and their spouses on a one-week cruise. When the reporter asked why the cruise was not cancelled she was told that it would have been too negative on the employees’ moral.


           The Bank of Montreal is buying financial institutions in England.


I am giving you these facts to show you that our banks are in pretty good shape financially and should not be used as an excuse to not introduce legislation limiting interchange and bank fees.


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.


To put the figure in perspective, $6.7 billion is more than what the last budget gave in tax cuts to businesses. And unfortunately, tax cuts are always tacked onto federal budget deficits.


For Canadian consumers, credit card interest rates can rise up to 24.75% at a time when the Bank of Canada interest rate is only 0.5%.


In January 2009, the Canadian Bankers Association reported that only 1% of credit card balances were past due.


Here again, to put things in perspective, the last budget gave taxpayers an average of $200 in tax cuts. Trust me, the average Canadian pays much more than $200 in interest rates a year.


In fact, introducing legislation to cap excessive fees in Canada would have cost the government nothing and eliminated $20 billion from the deficit over two years, while stimulating the economy.


Unfortunately, consumers have no recourse because under Canada’s current legislation, the Criminal Code, one can charge up to 59.9% in interest – at 60% you are a criminal.


While the first part of my motion deals with credit cards, the other part deals with debit cards or, as I like to call them, “ticking time bombs” for businesses and consumers.


Currently, the only company offering debit cards in Canada is INTERAC, which is composed of over 60 businesses.


Through an agreement with the Competition Bureau of Canada, which reports to the Minister of Industry, Interac has been providing its debit card services as a NOT-FOR-PROFIT organization for the last five years.


In 2007, consumers made 3.3 billion Interac transactions. The average cost per transaction for a business that accepts Interac is $0.12. In 2007, Interac collected $396 million from businesses for transactions made, not counting what consumers paid in Interac fees and the fees at ATMs.


Interac is currently in talks with federal authorities about shifting to FOR-PROFIT status.


Last November, I met with Competition Bureau officials who confirmed to me that they were in talks with Interac. I told them that I was about to introduce a motion in the Senate urging the Committee to review the system and make recommendations.


I also asked them not to sign an agreement with Interac before we completed our study and made recommendations. The officials made no commitments in this regard and are continuing their in camera discussions with Interac.


If Interac gets for-profit status, two things will happen:


1.         Interac will want to make profits and therefore increase its business and consumer transaction fees.




2.         Visa and MasterCard will be waiting in the wings to enter the debit card market and generate another source of profit.


Listen, 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.


Here again, I take the example of Australia, which also regulated debit card fees, capping them at $0.12 per transaction. Competition for debit card issuers in Australia is still vigorous, without being excessive.


In short, our stakeholders must understand the following:


           Our banks are less involved in the subprime fallout thanks to Canadian bank regulations; regulations are good to protect us;


           We must mitigate the current economic situation through regulation and allow our businesses and consumers to survive.


           On March 3, the Senate referred my motion to the Banking, Trade and Commerce Committee.  It’s a small step towards a big goal.


Appearing before a U.S. Senate Committee on February 11, Goldman Sachs CEO Lloyd Blankfein said that Wall Street finally understood that it could not prosper without Main Street, and vice versa.


Because of their interdependence, financial institutions, businesses, consumers and governments will fail if they operate in silos or without solidarity, which is clearly crucial in a time of crisis.

In these difficult times, if we can’t help each other as Canadians, we really need to ask ourselves what globalization has done for us.


Is this the kind of society we want to leave our children? Do profits for businesses listed on the stock exchange trump values?


I have been in politics for 22 years and know that taking the lead on this issue is like attacking the big and mighty. 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.


I would be pleased to answer any questions you have.


In closing, I would like to thank you for your attention. 


I am also asking you to support me by writing to the Minister of Finance Flaherty, senators and your federal and provincial MPs to urge them to study this issue, sooner rather than later, and pass legislation to protect you from current and future excesses.


You can make a difference!


Thank you.