Evidence of meeting #140 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was equifax.
A recording is available from Parliament.
Executive Director, Fintechs Canada
It depends on what sorts of services the merchant chooses to get. There are different pricing regimes for these kinds of things.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
The government is making a claim that there are going to be massive savings for small businesses with this fee, yet most of your members aren't willing to pass it on.
If they're not willing to reduce their fees, how are the savings going to get passed on? Isn't this a fake release, in the sense that most of your members aren't going to agree with the government, including one of the companies whose board member is the de facto finance minister of this government?
Executive Director, Fintechs Canada
Again, I don't know what the ones that have not yet responded are going to do. However, in some cases, the savings being promised might not come to fruition because the market for payment processing is much more complicated than an interchange fee. Just because you reduce an interchange fee doesn't mean other elements of that overall price are automatically going to fluctuate too. In some cases, some costs might go up.
In a lot of cases, payment processors today compete with one another not just by reducing prices but also by offering value-added services—inventory management and stuff related to fraud detection and prevention—making it a seamless, automated reconciliation. These sorts of things aren't going to be affected by an interchange fee.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Most of your members aren't committing to do this, yet the government claims it's going to reduce fees.
If your members aren't going to reduce their fees, how do small business fees go down for credit card fees?
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
What if I don't subscribe to Moneris or one of these others?
Executive Director, Fintechs Canada
The way you reduce payment fees is by introducing competition in the market for payment services, not by trying to micromanage one element of a big bundle of prices for merchants.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
Therefore, the government's attempt to micromanage this one element isn't going to work.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
That's an incredible revelation, because we also have the CFIB claiming wildly that this is going to happen, when it appears that most of their members aren't going to see this benefit, based on the fact that your members aren't willing to pass this on.
I presume Mastercard and Visa are not going to eat the savings required on the interchange fee just to be good people.
Executive Director, Fintechs Canada
I just want to be clear: I don't know what decisions many of the members will land on. I can't speak to whether they will or will not pass on the fees. As an association focused on public policy, we don't talk about these sorts of commercial matters.
Liberal
The Chair Liberal Joël Lightbound
Thank you very much, Mr. Perkins.
Mr. Badawey, the floor is yours.
Liberal
Vance Badawey Liberal Niagara Centre, ON
Thank you, Mr. Chair.
Thank you, Mr. Vronces, for being here today.
First, what steps are being taken to promote transparency in credit card fees and interest rates, particularly for new consumers?
Executive Director, Fintechs Canada
On the consumer end, there is quite a fair bit of transparency. You can compare credit cards fairly easily on the websites of all the different institutions that issue the cards.
When it comes to merchants, the debit and credit card code of conduct promotes a lot of the transparency and requires that payment processors notify their merchants in advance when anything is going to change related to pricing or anything else.
The debit and credit card code of conduct underwent a recent update that will improve transparency even more, compared to where things were at not too long ago.
Liberal
Vance Badawey Liberal Niagara Centre, ON
Has Fintechs developed any type of financial literacy products for consumers? What steps are you taking to educate consumers about responsible borrowing and financial literacy to help them avoid predatory lenders?
Executive Director, Fintechs Canada
If I understand your question correctly, you're asking what sorts of products fintech companies are building to help Canadians avoid things like predatory lenders.
I'd say they're doing a wide range of things. On the example I gave earlier, where two fintech lenders could have tried to take my business and get me to lock into a mortgage before two rate reduction announcements, they didn't do that. Instead, they said that there were likely going to be announcements to reduce interest rates further and to wait, and they could save me money.
There are plenty of good stories about some of our members helping Canadians build their credit score with their rent payments. We have some companies in the membership that help Canadians invest their money and grow their wealth in a very transparent and simple way.
I can follow up after this meeting with a short list of companies and the sorts of products they offer that get at what you're concerned with.
Liberal
Vance Badawey Liberal Niagara Centre, ON
That's great. I'd appreciate that.
Mr. Chair, I'm going to give the rest of my time to Ms. Vandenbeld.
October 21st, 2024 / 4:30 p.m.
Liberal
Anita Vandenbeld Liberal Ottawa West—Nepean, ON
Thank you very much.
I want to talk about something that's just a little different.
I know that the Canadian Center for Women's Empowerment has identified financial abuse as a means of coercive control and intimate partner violence. Often, for women looking to leave abusive situations, either their credit has been impacted because of the control that the spouse had over the finances or, in other cases, they don't have the credit.
Is there anything that you—I'm also looking at the other witness—are doing? They're calling on financial institutions to be more aware of these kinds of situations, because often this is why women stay in those relationships. They're not able to get out financially.
Executive Director, Fintechs Canada
Those sorts of situations are tragic. I'd venture to say that probably not enough is being done.
I'm not aware of any particular ideas or services that any companies offer to help women get out of those situations, but I'd be happy to set up some time and talk with you and learn more about what we can do to be allies.
Liberal
Anita Vandenbeld Liberal Ottawa West—Nepean, ON
If Equifax is still there, I'll ask the same question.
Senior Compliance Officer, Consumer Advocacy, Equifax Canada Co.
Yes. Thank you.
I'm so glad you brought this up, because this is an issue that I personally am quite involved with and Equifax in general is as well.
We know that survivors of human trafficking often end up with a lot of what we call “coerced debt”, which in a lot of cases takes the form of a credit account that was opened in the survivor's name and that she never knew about, or one that she did know about, but if it was a credit card, she never saw the card and she was never able to use it. She comes out of the situation owing debt that really isn't hers.
What we're seeing is a move towards including coerced debt as a recognized form of fraud. The Ontario government actually has passed some legislation around that, which puts the onus on financial institutions to have a process. One of the suggestions I've heard is to use a process similar to what the guidelines are around finding potential elder abuse. There are a lot of possible parallels there. A lot of those guidelines that have been established might be used or modified slightly for this scenario.
Thank you for raising this. This is something that we're having a number of conversations about.
Liberal
Anita Vandenbeld Liberal Ottawa West—Nepean, ON
Thank you very much. Obviously, there are other implications of this, as well, as you mentioned, elder abuse and others.
Thank you so much for those recommendations.
Liberal
The Chair Liberal Joël Lightbound
Thank you very much, Ms. Vandenbeld.
Mr. Garon, you have the floor.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Thank you, Mr. Chair.
I'm going to continue with the Fintechs Canada representative. Quite frankly, I think the fintech market is a fascinating topic.
In your opening remarks, Mr. Vronces, you said that we obviously need a certain level of oversight and regulation. In my experience, when representatives from the banking and financial sector come to meet with us in parliamentary committee, they all start by boasting about the level of regulation in the Canadian market. They tell us how secure the market is and that consumers should feel confident. However, when we then ask them what regulations there should be, they say they don't want them or they want fewer. They want codes of conduct or voluntary agreements.
Let's take the example of lowering interchange fees. There have been no agreements on that. There has never been a single agreement between Mastercard, Visa and the government. The government kindly asked Visa and Mastercard to lower their rates by threatening to perhaps regulate them. These companies have offered the minimum, and the government has bowed to them and never regulated them. That's the Canadian way.
I'll soon get to the more specific question I want to ask you, Mr. Vronces.
When it comes to interchange fees, we are told, for example, that Canada is in the global average. When you look at the situation, you see that all the businesses that charge higher interchange fees than in Canada are in less regulated markets. On the other hand, all the countries where interchange fees have been reduced, such as New Zealand, Great Britain and other European countries, are of the opinion that interchange fees must be regulated. Even the U.S. Federal Reserve agrees. At the end of the day, interchange fees in those countries are lower than they are in Canada.
Mr. Vronces, if we were to further regulate fintech, in other words, impose real regulations with teeth, not a code of conduct, what would be the three most important regulatory elements that the federal government should introduce right now?
Executive Director, Fintechs Canada
I think the goal to reduce transaction costs for merchants is laudable. It's one of the premises of the association. That's why we want more competition in this space. The way to reduce fees is not by regulating them down. In many of these other jurisdictions, we've seen that the effects of interchange fee regulations haven't been exactly what policy-makers intended.
Interchange fee caps in the United States and Australia reduced the interchange fee revenues of the banks that issue the cards. This resulted in those banks cross-subsidizing those losses by increasing fees in other areas. In EU countries, they couldn't find a systematic relationship between overall fees and interchange fee regulations. They did find that, when they looked at a very broad dataset, some fees did go up as a result of interchange fee regulations.