Evidence of meeting #31 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was merchants.
A recording is available from Parliament.
5:05 p.m.
Liberal
5:05 p.m.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
Oh, I have lots of time. I'll pass to Mr. Rota in a few moments as well.
Ms. Hughes Anthony, you talked about a kind of misunderstanding or some confusion with the merchants around this whole issue of costs. I'm confused as to why it would be a misunderstanding.
Basically, what they're saying to the committee is that with the change in interchange fees, with the change in the merchant fees, and with the introduction of these premium cards, their margins are being completely squeezed. Their costs have risen dramatically over the last couple of years.
Would you care to comment?
5:05 p.m.
President and Chief Executive Officer, Canadian Bankers Association
Certainly. When I was mentioning confusion, Ms. Coady, I think I was mentioning the fact that I personally have seen a number of billing statements that these merchants do receive. I have to say that they're very complex and very difficult to understand. So perhaps one of the issues, when we're talking about transparency and disclosure, is, boy, let's try to make it a little easier for them.
Perhaps some of the other members here can comment as well, but we don't seem to have the same numbers, shall we say, that the merchant community does with respect to the impact of, in particular, the implementation of premium cards.
To go back to something my colleague said previously, people might have in their wallets a gold card of some kind. It may not actually attract the additional interchange fee. It may not be a true premium card. When we looked at this whole premium card issue, we collectively looked at the entire industry. We think that represents about 9%. It's not the same sort of number that we're dealing with in terms of the merchant community.
I don't know if others have other items to add to that.
We don't have the same statistics, shall we say.
5:10 p.m.
Liberal
Siobhan Coady Liberal St. John's South—Mount Pearl, NL
We've been given clarity, I guess, around that issue from some of the merchants. They showed us their actual statements that showed this increase in cost. It's kind of a perfect circle. You led off your comments today by saying that the banking community has learned a lot, in this introduction of the premium cards, about the cost to consumers and the cost to merchants.
I'll leave it at that. I know that Mr. Rota has some questions.
5:10 p.m.
Conservative
The Co-Chair Conservative James Rajotte
Mr. Rota, you have only 15 seconds, but there will be time for another round.
5:10 p.m.
Liberal
Anthony Rota Liberal Nipissing—Timiskaming, ON
I'll wait until the next round. It's a lengthy question.
5:10 p.m.
Conservative
The Co-Chair Conservative James Rajotte
You will have time for another round.
Monsieur Carrier, s'il vous plaît.
May 28th, 2009 / 5:10 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Thank you, Mr. Chair.
Good afternoon, ladies and gentlemen. Before I forget, I would like to congratulate the representatives of the Canadian Bankers Association on their fine presentation. The work has been done very professionally, and I wanted to mention that fact. And it is very well done in both official languages.
I'm going to ask a question which cannot be answered here, because it would take up too much of my time. Since you are in the credit card market—that is why you are here—you must definitely make some profit on this. I would like a representative of each bank to tell me what percentage of your profit comes from credit cards. What percentage of your profits can be attributed to credit cards? I would like a detailed answer from each of the banks, since you represent the Canadian Bankers Association. You could send me that later.
5:10 p.m.
President and Chief Executive Officer, Canadian Bankers Association
That question was also on Mr. Van Kesteren's list of questions, Mr. Carrier. I have to say that we will have to consult our members on this, because I do not think we can provide you with those figures, because the banks do not report their results in this way. I will just make that comment, but we will get in touch with the members of our association to find out whether we can get an answer for you. If we cannot, we will tell you why.
5:10 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
We just want to know more about what credit cards represent as part of your market activities.
I would ask the same question of the representatives from the Credit Union Central of Canada. You said earlier that you represent the caisses de crédit, the credit unions in the Desjardins Movement in Quebec. Do you represent the Desjardins Movement?
5:10 p.m.
Vice-President, Policy, Credit Union Central of Canada
No, we do not represent the Desjardins Movement, we represent credit unions outside Quebec and caisses populaires in Ontario, the Alliance des Caisses populaires de l'Ontario.
5:10 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
I see. I would nevertheless like to know what percentage of your profits are generated by credit cards. It would be interesting to have that information.
5:10 p.m.
Vice-President, Policy, Credit Union Central of Canada
That would be a little bit difficult, because, although we are the Credit Union Central for the provincial centrals, credit unions do not have to report to the provincial centrals. In addition, we do not issue credit cards ourselves. They are issued by a different entity.
5:10 p.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
I see: most of my information comes from the Desjardins Movement in Quebec, for which credit cards are an important activity, but outside Quebec, the situation may be different. I accept your answer. That is all I have on this subject, because I will now turn to other matters.
My question is to the Canadian Bankers Association. In your presentation, you often talk about the importance of competition in your field. I think you want to highlight that point as regards the possibility of regulating credit cards. As has been said several times, the costs are passed on to the merchants. There is a coalition of merchants representing 250,000 businesses in Canada that are complaining that they are being forced to pay interchange fees that are higher than they were supposed to have been. I think the decisions made when credit cards are issued to increase the number of users are designed with competition in mind, but the cost of this competition is being passed on to people who were not at all involved in making the decision.
If there were regulations on an interchange rate, do you not think that there could still be competition? Interest is charged on unpaid credit card balances. It is the same as with all other bank operations. You are involved in areas other than credit cards, such as mortgages and personal loans. The banks are in competition to provide these services. So there could still be competition.
Would you care to comment on this?
5:15 p.m.
Conservative
5:15 p.m.
President and Chief Executive Officer, Canadian Bankers Association
The Canadian Bankers Association represents 17 credit card-issuing companies, including the companies at this table and a few for which this is their only activity, such as MBNA. This is not a business model that applies to everyone, and it is very important to emphasize that fact.
The other point, which I was going to ask my colleague to speak to, is that in terms of the regulation of interchange fees, the only proven example is in Australia.
I know that the chair is trying to....
5:15 p.m.
Conservative
The Co-Chair Conservative James Rajotte
I'm sorry, but we're well over time here. I have members who still want to ask questions.
5:15 p.m.
President and Chief Executive Officer, Canadian Bankers Association
I think our conclusion was that it was not....
5:15 p.m.
President and Chief Executive Officer, Canadian Bankers Association
It wasn't an experience that was of benefit to consumers.
5:15 p.m.
Conservative
The Co-Chair Conservative James Rajotte
Thank you. Merci.
If there's anything further you want to submit to the committee, you can always do so in writing after the meeting.
I have Mr. Chong on the list, for five minutes.
5:15 p.m.
Conservative
Michael Chong Conservative Wellington—Halton Hills, ON
Thank you, Mr. Chair.
I believe in competition. In my view, the role of government is to regulate the marketplace in such a way as to ensure sufficient competition so that the invisible hand can then set the appropriate price.
What would you, the bank issuers, say to the following two-part proposal? First, the government does not cap interchange rates. Rather, it allows the bank issuers--you--to set your own interchange rates by forbidding Visa and MasterCard from setting those rates. In other words, you could set those rates at 1.2%, 1.5%, 2%, 10%, or whatever you wish.
Secondly, the government mandates that the interchange rate be added on to the final bill of sale at the point of sale so that the consumer can make a choice between cash or credit. For example, if the consumer chooses credit, then that interchange rate is added on at that point to the bill of sale, at the point of sale, and itemized on the bill of sale so that the consumer can see what the rate is and what they've paid on the interchange, just as we do with the GST.
This seems to me to be a way to empower the consumer to choose the credit card and interchange rate that best fit their needs.