Senator Pierrette Ringuette

'Unfair' credit card fees, rates must be examined

A New Brunswick senator has called upon the standing Senate committee on banking, trade and commerce to study and report on Canada's credit and debit card rates and fees.

Liberal Senator Pierrette Ringuette, who was an MLA in the former provincial riding of Madawaska-Victoria, tabled her motion in the Senate this week.

While Progressive Conservative senators adjourned debate on her motion, Ringuette is optimistic she'll be able to convince her colleagues to propel the motion ahead to committee study.

Ringuette said she wants the Senate investigation to focus on rising interchange and interest rates charged by credit card companies, and she wants the federal government to step in and regulate the industry, as is done in Australia and the United Kingdom.

The Canadian Federation of Independent Business, the Retail Council of Canada, the Hotel Association of Canada, the Canadian Restaurant and Foodservice Association and chambers of commerce across the country have called for the government to rein in fees.

Interchange rates are the fees, usually a percentage of the total purchase price, that businesses pay in order to provide credit card services to their customers.

With a number of new "high spend" charge cards, companies such as Visa and Master- Card are racking up higher profits by hiking those costs to small business.

"It is a serious issue," Ringuette said in a telephone interview from Ottawa on Wednesday.

"It is very unfair. Our research indicates that currently in Canada there's up to three per cent interchange rate costs to the business community on the amount of purchases. In Australia, it's legislated at 0.45 per cent."

That difference can make or break many small- to med i u m - sized businesses, she said.

"For many Canadian businesses , it's a question of survival," Ringuett e said.

"If the government of Australia has legislated interchange rates and the interest rates for credit cards, and it seems that both the major credit card issuers are still doing business there and are still profitable there, they should be able to do the same here with the same kind of service with fair legislated rates.

"That would be fair to the economy."

On the consumer side of the equation, consumers are paying interest rates of up to 25 per cent on some credit cards.

"They're winning on both ends," Ringuette said of major credit card issuers.

MasterCard's worldwide net income has doubled in recent years. In 2007, its net income was $1 billion.

Eighty per cent of the 63.1 million credit cards used in Canada are Visa or Master- Card, and Canadians use 65 per cent of those cards to purchase $294 billion in goods and services.

"People don't like to have cash in their wallet , " Ringuett e said.

A n o t h e r looming issue for Canadian consumers is Interac's talks with the Competition Bureau of Canada regarding abandoning its not-for-prof it mandate.

Interac was created to be the country's debit card processing venture.

Every time a consumer uses a debit card, the average cost to a business that supplies that service is $0.12 cents per transaction, but if Interac becomes a profit-making organization, those fees too will rise, Ringuette said.