Finance Committee on April 29th, 2010

[John McKay, Liberal, Scarborough—Guildwood, ON]

No, I agree. My criticism is to the government. This is a crazy way to do business.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you, Mr. Hall.

We'll move to part 12 then, the Payment Card Networks Act.

We have Monsieur Carrier and then Monsieur Mulcair.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you, Mr. Chairman.

If my understanding is correct, part 12 creates a new Payment Card Networks Act which grants many powers to the Governor in Council. Section 6 sets out all the regulations the Governor in Council will be able to make in relation to network operators and card issuers.

I understand the enforcement of these regulations will take place under another piece of legislation, the Financial Consumer Agency of Canada Act. The responsibility being transferred to another act is to monitor payment card network operators in order to ensure that they comply with the provisions of the Payment Card Networks Act. This means giving incentives to network operators to comply with the provisions of the Payment Card Networks Act. It is a transfer of responsibilities.

Am I understanding this correctly? I wonder if you considered the implications of this decision on a practical level. Credit card operators are everywhere. How will this monitoring function that is handed to the Financial Consumer Agency of Canada be carried out? Will new inspectors be trained and assigned to this task? I would like to know your assessment of how this legislation will be enforced.

[Leah Anderson]

You are correct in the sense that the Financial Consumer Agency of Canada Act would administer the legislation and any regulations that come under the legislation if in force.

At this time we have released a code of conduct for the debit and credit card industry. Stakeholders have until May 17 to let the government know whether they will adopt that code. The minister has been quite clear that if the stakeholders do not adopt the code, he will proceed to regulate.

At that time, once the regulations are in force, the FCAC would monitor regulations. In the meantime, though, the new legislative provisions also give the Commissioner of the Financial Consumer Agency the authority to monitor compliance with the code of conduct. The commissioner currently does this for a number of other codes of conduct in the marketplace. My colleague Pascale is familiar with many others that the commissioner monitors.

In developing the code of conduct, we've worked quite closely with the commissioner to speak with the agency officials to discuss compliance issues and how they go about monitoring the code. They are quite comfortable that--consistent with other codes of practice--they have the resources in place to carry out that work. As part of the code, they will have the ability to levy assessments on the industry--if required to monitor compliance with the code--to cover any additional costs.

So I think in setting up the code and in preparing the regulations, the Financial Consumer Agency feels equipped to properly do its functions.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

So we create this new act. Does it mean that the government or the minister have no powers at the present time to regulate these payment card networks? Did it really take a new law in order to be able to act?

[Leah Anderson]

Well, there are two parts to that. In the first instance, as I mentioned, we're putting in place a code of conduct. So we just released that on April 16. The government is taking action in that regard. It's not legislation; it's a code of conduct. But what this legislation does is it gives the ability to the minister--should stakeholders not adopt the code--to proceed with regulations to make it enforceable.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

I do not believe that the code of conduct says anything presently about abusive fees imposed by credit card issuers to powerless retailers. Eventually your discussions will require a consensus in order to give consideration to both the acquirers and the issuers of credit cards.

[Leah Anderson]

On the cost question, the very purpose of the code is to bring fairness to merchants to be able to control their costs and increase competition in the marketplace. It requires networks and all those involved in providing services to merchants to clearly disclose the costs of those services. It allows merchants to cancel contracts--if they sign up, and then suddenly three months later the rates go way up. It allows them to discount to encourage consumers to use lower-cost payment methods. There is a whole range of elements in that code that really seek to empower merchants in their relationships vis-à-vis some of these networks. So it's a great first step in dealing with some of these issues we've heard a lot about from merchants.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Carrier, you will be able to get back to this.

I would like to give an opportunity to other committee members to ask their questions.

Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Welcome. Thank you for being here.

I would like to ensure I understood all the nuances in your comments where you said that a code of conduct might be put in place, but if not there would be another way to enforce the act. Your explanatory notes mention a voluntary code of conduct. Right?

Your head nodding is not going to be in the transcript. So could you respond?

[Leah Anderson]

Sorry, I just wanted to listen to your full....

Yes, it is a voluntary code of conduct in the first instance, but the minister has made it clear that should members not adopt the code, he will make it involuntary.

[Thomas Mulcair, NDP, Outremont, QC]

Even though the legislation is sparse, it provides for interpretation and application. Where are the provisions for interpretation and application in enforcement and in inspection of a voluntary code?

[Leah Anderson]

I guess the framework that surrounds the monitoring of voluntary codes is established by the Financial Consumer Agency of Canada Act, and that empowers the commissioner to get information from certain institutions to monitor, and so on.

[Thomas Mulcair, NDP, Outremont, QC]

In what section of the act is it?

[The Vice-Chair, Liberal, Massimo Pacetti]

Anybody who's in the front could answer. You all have name tags. You're all identified

[Thomas Mulcair, NDP, Outremont, QC]

Go ahead, Madam, if you already know the answer.

[Pascale Dugré-Sasseville, Chief, Consumer Issues, Department of Finance]

This information is in part 12 of the bill, in the clause that amends the Financial Consumer Agency of Canada Act.

[Thomas Mulcair, NDP, Outremont, QC]

Right.

[Pascale Dugré-Sasseville]

There are aspects of it in various places, including the clause that amends section 18 of the FCAC Act, which is Clause 1842 of the bill.

[The Vice-Chair, Liberal, Massimo Pacetti]

On what page?

[Pascale Dugré-Sasseville]

It is on pages 548 and 549 of the bill.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Go ahead, Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Could you help me find a reference to a voluntary code in the bill?

[Kevin Thomas, Senior Economist, Payments, Department of Finance]

Proposed paragraph 3(2)(c), found in clause 1836 of the bill, allows the FCAC to “monitor any public commitments”, but it also allows them to “monitor the implementation of voluntary codes of conduct that have been adopted by payment card network operators”.

[Thomas Mulcair, NDP, Outremont, QC]

So let us look at the bill, under proposed subsection 5(2). Should we read it together?