Industry Committee on Oct. 10th, 2024

[Chandra Arya, Liberal, Nepean, ON]

Our focus here is not advertising.

[Bradley Callaghan]

That's an important distinction, I would submit. Again, that would really turn on the facts of the case as to whether it engages the sections of the Competition Act or not. What our deceptive marketing provisions really look at is marketing and advertising. I should say that I'm not an expert in or an enforcer of those aspects of our law. However, it would very likely be a factual determination and would depend on the evidence of the case as to whether it would amount to advertising or marketing.

[The Chair, Liberal, Joël Lightbound]

You still have a minute to continue, Mr. Arya.

[Chandra Arya, Liberal, Nepean, ON]

Thank you.

Dr. Syal, you mentioned that the banks and credit card companies should have clear, simple and non-misleading statements.

A few months back, I acquired a new credit card, and then came the terms and conditions, a thick book. Obviously, I didn't read it. Do you think that consumers are being provided that in plain English rather than lawyer's English?

[Dr. Supriya Syal]

I'll note that one of the key.... We have six key priorities associated with the national financial literacy strategy. The first one is to communicate in ways people understand.

[Chandra Arya, Liberal, Nepean, ON]

My question is this: Are the banks and credit card companies doing what you are saying they should do?

[Dr. Supriya Syal]

My colleague will chime in from a supervisory perspective.

[Frank Lofranco]

This speaks really to the market conduct provisions that banks, as issuers of credit cards, need to abide by. These are fairly recent. In 2022—

[Chandra Arya, Liberal, Nepean, ON]

I mean no disrespect, and I don't want to interrupt you, but what they need to do is not my question. My question is whether they are doing it.

[Frank Lofranco]

Okay.

From our supervisory work.... As of 2022, there's an increased standard for disclosure, so with regard to things like application forms, agreements and bank statements, there are new requirements for communicating information in a way that's clear and not misleading. It does include something called an “information box” where the information has to be summarized.

I would say to you that, in the exercise of offering products and services like credit cards, there's also a provision in relation to offering those that are appropriate for the circumstance of an individual, so there's an increased responsibility on the institutions. Granted, this has been in effect for two years. We're of the view that there is work to be done but that institutions understand their obligations.

[The Chair, Liberal, Joël Lightbound]

Thank you.

Mr. Généreux, you have the floor for five minutes.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair.

Thank you to all the witnesses who are here.

Mr. White, you mentioned how Quebec had adopted broader literacy provisions, if I understood correctly. These provisions apparently keep Quebeckers better informed.

What are they exactly?

[Geoff White]

Thank you for your question.

I'll give you two examples.

In example number one—I don't know if this has passed recently—it is proposed, at the very minimum, that a rule require the debt issuer not to issue inappropriate loans that exceed a certain debt-to-assets ratio. It's almost another level of credit check on the person you're giving the card to. If they don't meet a certain threshold, they can't get the debt, so they can't get themselves into trouble. That's point number one.

Example number two is a plain-language disclosure on how long the debt will remain if you only pay off your minimum payment. That's often a surprising amount. I mean, it goes on for decades if you only pay off your minimum amount on a huge amount.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

The Government of Quebec put that in place.

[Geoff White]

Yes, indeed.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

However, there is no bank in Quebec that corresponds to the Bank of Canada. Where did these new regulations come from?

[Geoff White]

It's in the Consumer Protection Act. We could send you more details.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Yes, I'd like you to send us that information, so that the committee's analysts will have it.

Ms. McWhinnie, you said earlier that your organization, the Competition Bureau Canada, had information on the total costs associated with credit cards. I'm talking about all the layers of fees, if I can call them that, between buyer and seller. All the suppliers in the chain must be considered.

I'd like you to provide the committee with an example of this concept in the Canadian banking system.

In addition, I'd like to know if you've ever compared this kind of fee chain in Canada, if I may call it that, to what happens in other countries. If you have, can you send us your observations?

[Krista McWhinnie]

Thank you very much for the question.

On your first point, the analysis of the breakdown of fees that I was speaking about is contained in the decision of the Competition Tribunal based on the Visa and Mastercard case we brought. I'd be happy to provide that and point to the relevant sections.

In terms of your question on whether we've done a comparison of that fee breakdown across Canada and other countries, that's not something we've specifically studied.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Perhaps the people from the Financial Consumer Agency of Canada can tell us where to find the information we would need to meaningfully compare the costs associated with these layers of fees in different countries. We know that interchange fees are about 1.5% in Canada, whereas in Australia, they are 0.5% under regulations the government put in place. An agreement has just been reached here, if I understand correctly.

I'm coming back to my colleague Ms. Rempel Garner's question. In the context of the agreement in question, we're talking about a 27% decrease in interchange fees. However, I have one concern. As we know, the final cost of making a credit card purchase includes several other components or layers of fees. I'm afraid that someone at another stage might increase their fees. Earlier, my colleague talked about Stripe. That's one example. It's like the plumber for this entire technology.

Ms. Syal, could these people increase their fees and keep the merchant from getting the 27% reduction at the end of the day?

[Dr. Supriya Syal]

Thank you for the question.

In terms of your first piece, about who can provide the various layers, we're happy to look into that and get back to you.

Whether this would lead to somebody else increasing their prices, I'm unable to comment. However, we will look into whether there is layering, as you noted.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Ms. Alshahwany, you talked about open banking in Canada. I'm interested in that.

We know what it currently costs to make purchases using a credit card, because of interest charges. You say that “open” doesn't mean that people can do whatever they want and that there are no regulations. In fact, open banking will have to be regulated. I think everyone agrees on that. Other countries are already a step ahead of Canada in that respect.

Once the regulations are in place, do you think that consumers will benefit from using open banking services, which allow the consumer to deal directly with the merchant without necessarily having to use credit, and therefore be subject to very low or even no fees? Do you believe that, one day, new technologies like AI will make it possible to eliminate a whole series of fees related to purchasing goods and services?

[Aya Alshahwany]

Thank you for the question.

If it's okay, I'll respond in English.

Correct me if I'm wrong, but what you're asking is whether the new open banking services that are coming in are going to be generally good for consumers. We would have to wait and see. It would be great if they could increase competition. As we know, there's a high concentration between two credit card providers that have a little bit of a stronghold on consumers in Canada. It would be great to see more competition.

At the same time, from PIAC's perspective, we want to make sure the protections available to people who use the normal credit cards are available to the people who are going to be using these open banking systems. That includes keeping the consumer's liability rate in case of fraud, for example, at the minimum of $50, which is what we see with Visa and Mastercard right now.

It's important to basically just wait and see and make sure the consumer regulations extend to those open banking services. It would be great to see more competition, obviously. Hopefully, if it could bring down the costs, that would be great for consumers.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you.

I'd like to quickly circle back to what my NDP colleague Mr. Masse said earlier. To do so, I will turn to the representatives of the Financial Consumer Agency of Canada.

We have to think about the most vulnerable people in our society who apply for a credit card and, when they get it, receive an information document about 10 pages long. In terms of literacy, let's be honest: Many of them will use their credit card without reading the document. I think you should play a much more direct role with those people. You should let them know what could happen to them if they don't use their credit card properly. I'm trying to say that you should use the plainest language possible with these individuals.

Very vulnerable people use credit cards without even knowing how they work in my riding too. There should be a more direct connection with that group of people. Various organizations in our ridings, such as the Maisons de la famille, could certainly help you pass on information. These organizations help these individuals cope with financial difficulties. You could certainly work with them.

You say that 650,000 people visit your website each year. I don't know if they only visited your website. In any case, as Mr. Masse said earlier, that's an extremely low number, considering that billions of credit card transactions take place each year. I think you would benefit from dealing with organizations on the ground that can at least help you foster financial literacy.

[The Chair, Liberal, Joël Lightbound]

Mr. Généreux, I think that was more of a comment than a question.

I actually gave you twice as much time.