Industry Committee on Oct. 21st, 2024

[Chandra Arya, Liberal, Nepean, ON]

Again, the second thing that almost every witness who has come before the committee says is that the government has to fund this or fund that. At least in the article your organization wrote, you say that 52% of Canadians are not comfortable with open banking and about 9% of Canadians are aware of open banking. You're asking the government to fund the education of this.

The entire financial industry and financial institutions are making billions of dollars in profit. Can't the institutions fund a bit of education for the consumers?

[Alexander Vronces]

I think the industry certainly can. One reason we endorse the Financial Consumer Agency of Canada to be the regulator of open banking is that it's largely funded on a cost-recovery basis. It does receive a small sum from the government for the purposes of education.

We just ask for more money to be allocated for the purposes of open banking education.

[Chandra Arya, Liberal, Nepean, ON]

I'm sorry. Again, it's more money.

I have a question for Ms. Margaret Yu of Momentum.

Ms. Yu, the government has taken steps to curb predatory lending in the high-interest loan space.

What do you think the government should do? What regulatory steps do you think the government can take within the credit card industry?

[Margaret Yu]

Thank you so much for the question.

Yes, we're absolutely pleased that the government has made the announcement to lower the criminal interest rate to 35% annual percentage rate, or APR. I think the next step is a proposal to improve enforcement of the criminal rate of interest, which can be a very promising step for Canadians.

In our experience, there are Calgarians who have taken credit cards that are higher than the 35% annual percentage rate. One participant that we know of has taken a credit card at 36% APR.

[Chandra Arya, Liberal, Nepean, ON]

Are there specific steps you have in mind just for the government?

You can either give it now or you can give it in writing to the committee at later date.

[Margaret Yu]

We can.

Thank you.

[Chandra Arya, Liberal, Nepean, ON]

Thank you.

My last question is for Equifax Canada.

Ms. Kuzmic, you did come with interesting statistics on the delinquencies of the credit card balances, etc. When you look over the period of the last five or 10 years, what is the trend? Is it going in one direction? Do you see ups and downs?

Do you have any comment on the trend, please?

[Julie Kuzmic]

Thanks for that question.

The trend is generally increasing in terms of credit card usage, credit card balances and the number of credit card accounts that exist. It is also important to remember, though, that there is a population component that contributes to that trend. For example, last year we had very high levels of immigration of newcomers to Canada, many of whom would be starting credit card accounts.

Generally, I would say that, yes, we do see increases in all of those figures.

[Chandra Arya, Liberal, Nepean, ON]

When the real-time payment system comes into effect, do you think it will have an effect on the users of credit cards?

[Julie Kuzmic]

I can appreciate that question. I don't have any data to answer that effectively, I'm afraid.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Masse, the floor is yours.

[Brian Masse, NDP, Windsor West, ON]

Ms. Yu, I want to thank you for your practical suggestions on some of these things.

One thing that's coming to light now.... It's funny. You can always remember these things.

A good example of this is the motivation of the government. We see Rogers right now increasing its costs for boxes for consumers. It's a story that's out there right now. What's not really talked about in the story as much is that the government has almost no motivation to intervene on this because its going to get all of the HST revenue from this. It's actually clearly identified on the bill that, when they increase it, the HST will be applied and then collected by the government. Even if we get these merchant fees reversed, if there will be new taxes on it with the HST, which appears to be the case....

There's something I forgot about, and I think I mentioned at one point that it would make Bernie Madoff blush with regard to the Ponzi scheme on how to deal with this. What's the point of all of this if we don't pass on any of the consumer savings that we're trying to get to?

I would like you to speak about how important that is. If it just turns out to be a way to increase revenue for the government, is that not defeating some of the purpose?

What we want to have is that the consumer doesn't have to pay for regressive taxes or regressive fees on these things.

[Margaret Yu]

Thank you so much for the remark.

I was processing your question. I'm not sure how to answer that, to be honest. I'm so sorry.

[Brian Masse, NDP, Windsor West, ON]

At the end of the day, it's that the consumers get the benefit at the front end of it, rather than a government program later on from the accumulation of HST from the service. I think we want the relief in the front, not at the back end with a promise of maybe another program later on.

[Margaret Yu]

Yes, if consumers can see the cost benefits and savings on the front end, it would be ideal.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

[Margaret Yu]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

I'll now turn it over to MP Perkins.

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

Thank you, Mr. Chair.

I just want to follow up a bit on Mr. Patzer's questions, just to make sure everyone's clear on this thing.

The Liberal minister of revenue in 2023 changed the rules and allowed credit card processing fees to be included in the GST and HST charges, when they weren't before. Is that correct? Is that what you confirmed?

This happened about the same time that the announcement was made in May 2023 by the Minister of Finance that we would have this miraculous reduction in credit card payment processing fees for small businesses. Both happened at the same time.

I accept what you said, absolutely. Somebody has to pay. This is a service that's being offered. The question is where it gets charged. How does it flow through? As part of that change, small businesses were allowed to do something that they weren't allowed to do before, which is to pass that fee on to consumers on the transaction, and the GST and HST could be paid on that.

Do you have any idea what the estimate was that this new revenue source would present to the federal government in HST revenue?

[Alexander Vronces]

I do not.

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

There are estimates from accounting firms that it's about $160 million, so this change seems to benefit the government. That will grow, obviously, as transactions and value grow. That HST component that the government gets will grow. That's the beauty of the GST for the government; it grows as the economy grows. As those transactions grow, that number of $160 million will grow.

That change gets made. Then we have a situation that says that they're going to do this announcement that they're going to lower the processing fees for credit cards. A lot of your members aren't agreeing to pass it on. It doesn't seem clear that anyone will pass it on.

Is that correct, except for the ones who have already committed to the government, which is about four or five companies and most of them aren't your members?

[Alexander Vronces]

I can't speak to who's decided to pass it on and who hasn't, because I'm not entirely sure myself at this point.

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

Mr. Chair, this is what I'd like to do, because we have two issues here. One is with regard to some of the other witnesses we still need to see in this study, and we did say that there would be at least four meetings in MP Masse's study. I still believe, because of the testimony of the Canadian Bankers Association and everyone, that we still need to still have the banks come here individually since the CBA couldn't announce that.

Specifically given today's testimony, I would like to move that. I think the clerk has this.

[The Clerk of the Committee, Ms. Miriam Burke]

I don't have it yet.

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

Okay. You're going to get it as soon as I'm done reading it. Then we can take a momentary break.

I move:

That, given that,

(i) some payment processors have failed to commit to reducing their merchant fees despite recent deals with Visa and Mastercard that sought to lower transaction costs; and

(ii) given that Fintechs Canada has told the committee that “in some cases, the savings being promised [by the government] might not come to fruition”, the committee therefore agree to extend its ongoing study of credit card practices by at least two meetings, and agree to invite:

(a) companies that have yet to commit whether they will pass on these savings according to the Canadian Federation for Independent Businesses, including companies, Fiserv, Nuvei, People’s Trust, PSP Services Inc., Adyen Canada Ltd., Elavon, Shopify, Square Inc.; and

(b) officials from the Department of Finance for one hour, and officials from Revenue Canada for one hour; and, that these meetings take place within 14 days following the adoption of this motion.

I will make one minor change to that and send it to you, if I could.