Industry Committee on Oct. 7th, 2024

[Jean-Denis Garon, Bloc, Mirabel, QC]

Mr. Littler, allow me take this opportunity to ask you another question. I asked the other witnesses questions about the fact that the government had sort of insisted on rate cuts. It apparently told Visa and Mastercard, if I'm not mistaken, that if they didn't agree with the government, they would be forced to lower their rates. That's a strong incentive because it appears that the banking industry is prepared to take many measures to avoid regulation.

It was said at the time that these voluntary agreements between Visa and Mastercard on the one hand, and the government on the other, would encourage other actors to follow their example. If I'm not mistaken, however, American Express hasn't yet decided whether to do so, and other actors, in certain cases, are slow to join the movement.

Can this voluntary approach be sustainable?

As for codes of conduct, I can understand why people say the situation needs to evolve quickly. I can accept that argument.

Why have other countries decided to regulate interchange fees, and, ultimately, why didn't the banking system collapse following that decision?

[Karl Littler]

That is exactly right. Obviously, they fought a rearguard action in Europe and in Australia against being regulated, but regulation was, of course, what was ultimately decided upon.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Mr. Chair, I would like to ask a final question, if I may.

We have genuine agreements. I agree that we've had declines and that they're asymmetrical for small businesses, according to the agreements. The fact remains that the agreements are neither permanent nor regulated.

Mr. Littler, are you concerned about what will happen after these agreements expire in 2025?

Have the merchants you represent been informed of what will happen?

Are we still unclear about how these agreements with the major credit card companies could be made permanent?

[Karl Littler]

I would probably recommend that you go down the path of regulation and set a competent authority to look at the economics of this, because it often gets played out in political theatre, and I think it doesn't lend itself well. That's not to say that some aspects, particularly for the code of conduct, may be more suitable to voluntarism.

This is about money at the end of the day, and very large amounts of it. I mentioned $60 billion. A handshake agreement or maybe a little better than a handshake agreement is obviously less compelling than a proper regulatory approach to it.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Masse, the floor is yours.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Mr. Ahluwalia, you have rightly shown pride in your patents that you developed. How many have gone to market?

[Balinder Ahluwalia]

I'm unsure. I can get back to you on that.

[Brian Masse, NDP, Windsor West, ON]

That would be good.

Is there an agreement with the government and the centre that you're doing here that those are commercialized in Canada?

[Balinder Ahluwalia]

Do you mean from Canada?

[Brian Masse, NDP, Windsor West, ON]

Yes.

[Balinder Ahluwalia]

Yes, the work is done here. It's commercialized from—

[Brian Masse, NDP, Windsor West, ON]

It's from Canada. That's an important distinction. I wanted to make sure that's clear, because I come from a place with tool and die mould-making and everything. We get lots of patents, but it doesn't necessarily mean that something is produced in Canada. I wanted to clarify that. I think it's important for the record. Thank you.

Quickly over to Mr. Hannah, you keep mentioning 71% of Canadians. That's not what the Harris Poll survey said. I'm going to read from their survey here. Also, it's not what Equifax says. They say:

More than half of Canadian adults (55%) currently have credit card debt—up from 43% when asked a year ago. The repayment periods for credit card debt are increasing, too. Of Canadians with credit card debt, 51% say it will take six months or longer to pay it off, up from 40% a year ago.

These trends dovetail with the findings from Canadian credit bureau Equifax. Total balances for Canadian credit cards reached an all-time high in the third quarter of 2023, with the average balance rising to $4,119, according to an Equifax Canada Market Pulse report.

Quite frankly, you have your 71%, and this is saying something different. There's a 20% margin difference there, which is quite significant.

Maybe you can tell Canadians now how they can get a lower-interest credit card rate. What would be your best advice for those 50%-plus Canadians, or even for the 30% you argue about, to get a lower rate?

My constituents don't have that same experience when contacting credit cards, trying to consolidate and so forth. Maybe a public service announcement right now would be helpful to tell those who are paying off massive amounts of debt of $4,000 or more how they can get a lower rate.

[Darren Hannah]

My advice is always the same. Talk to your bank. Go in, tell them your situation, tell them what you're looking for, tell them what you need and have the dialogue. Most issuers offer one. Go in and have the discussion.

[Brian Masse, NDP, Windsor West, ON]

If that doesn't work, what do you do next? That's what I'm getting at.

[Darren Hannah]

That's when you shop around. This is an incredibly competitive market with 26 different issuers, a couple of hundred products and a product that frankly is basically a perfect substitute for each other.

[Brian Masse, NDP, Windsor West, ON]

Okay. I appreciate that.

I want to end on the note of helping some consumer advocacy here. Here's the other problem. What would you say to those people who lose all their points and all the other things, the trinkets and baubles that are attached to credit cards right now that they have been paying into and sometimes pay fees to get? I know my credit card charges a certain amount to accumulate points. Then they lose all that. All those people lose those points.

Should there be work done so that people accrue those benefits and can transfer them as well? Is that something your organization would support?

[Darren Hannah]

They're definitely not trinkets and baubles. These are real value. They're giving people real value that they can use for real expenses, which is important. It's also important because what we've seen in other jurisdictions that have regulated is that this is what has been lost.

[Brian Masse, NDP, Windsor West, ON]

Okay, fine. I'm explaining it in that way, because people pay for them ultimately one way or the other. I mean, you pay for everything. Nothing's for free. You mentioned that earlier.

What would you agree to or what would be possible for people to be able to transfer those benefits? Similar to telco companies, when you transfer from one carrier to another carrier, you can keep your phone number, so why can't people keep the same types of benefits equally amongst credit cards for the types of benefits that accrue? Sometimes it's air miles and sometimes there are other benefits to point systems.

Would your association support a transfer of that? That's wealth they give up if they have to switch credit cards to get a lower rate, because they go on bended knee to the banks. Would you support that? There would be a transfer of that wealth that people have accumulated. It could be at air miles, points or so forth, which would be translated into some type of an economic return so that they would then get those benefits with the new card.

[Darren Hannah]

What should happen is that, if people want to get a new card, they go in, they have their discussion and then they ultimately decide if that's the product for them. They can keep their existing card as well, if they want, use up the points they have on there, and then transfer over to a new one. That's entirely up to them. That's a discussion—

[Brian Masse, NDP, Windsor West, ON]

Yes—20% or 30% or so forth, but the whole point was to try to get people out of massive amounts of debt.

Okay. We'll work on this.

Thank you, Chair. I know that you've been generous with the time.

Thank you to the witnesses for coming here today. I really appreciate that.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Masse.

Mr. Perkins, the floor is yours.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

With my last round here, I'll start off by saying that I did spend a few years working at a head office of a bank on Bay Street as well as on an executive team of two retailers. I do know that the internal rate of return on equity of the bank I worked for in credit cards was 52%. You've focused a lot at the Canadian Bankers Association on the cost, but they're making a massive amount of profit. When the bank's target ROE was 15%, it was making 52% on credit cards. Like Mr. Van Bynen said, clearly it's business development to move them to other products, because they don't cut the credit card off when they make that shift to a line of credit.

I'd like to ask about the interchange, just briefly. Visa, I guess, is the best one to answer this, or Mastercard, whichever one wants to take it. The interchange revenue is based on a percentage of the sale, yet the cost does not change based on the sale, does it?

[Jay Dorey]

It does, in fact. The benefits that are afforded to consumers in terms of insurance, fraud protection, loss underwriting, as well as the provision of credit—those all fluctuate with the size of the sale and the amount of the underlying transaction.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Yes, but the difference between what the credit card company gets on 2% of $100 or 2% of $10,000 is very different, and your costs don't go up that much.