Industry Committee on Nov. 7th, 2024

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

Mr. Marion, excuse me for interrupting you. I was not talking about the number of businesses. The Canadian Federation of Independent Business is also playing this game by talking about the number of businesses. When you give statistics like that one, you’re comparing a grocery store making $12 million in sales revenue and a hairdresser making $33,000 in sales revenue, for example.

Instead, could you give us the percentage of Canadian sales revenue impacted by these agreements? I’m clearly stating “sales revenue,” so we don’t get the impression we’re being shortchanged.

[Nicolas Marion]

Thank you for the question.

The 90% of businesses accepting payment cards will benefit from it. According to estimates, they will be able to achieve savings—

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

I am talking from the point of view of sales revenue. What percentage of sales revenue do these agreements involve? That is what we want to know.

If the percentage of businesses benefiting from them represents just about nothing in Quebecers’ and Canadians’ market basket, these agreements have no value. What percentage of sales revenue is impacted by these agreements? My question could not be any clearer.

[Nicolas Marion]

Thank you for the question.

I would advise you to ask payment card networks to provide you with the details on total sales revenue for 90% of those businesses.

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

You negotiated agreements, but either you have no idea whatsoever about the effect those agreements had on Canadians’ wallets, or you are refusing to tell the committee.

Mr. Chair, I must tell you that I find this extremely concerning. Thank you very much.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Garon.

Mr. Masse, you have the floor.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Mr. Marion, one thing that came out in this committee was the lack of disclosure of credit card profit margins in what the banks and the credit card companies are receiving. Do you provide advice or measure the profit margins of the banks and the credit card companies with regard to the use of the product and the margin of profit they get out of it?

[Nicolas Marion]

We do not look at specific profit margins. We do not have that information, quite frankly.

[Brian Masse, NDP, Windsor West, ON]

Has that ever been requested?

Part of what I'm trying to find out here is what is getting through in terms of public policy. Has that information been requested from the companies or has the focus been just on the merchant fees? The credit card margins seem quite significantly different from those on the other products they have. We have a question to get some of that information from the banks and the credit card companies themselves. Has that come up as part of your interaction with the groups and organizations?

[Nicolas Marion]

The question, in this particular case, around interchange fees, for instance, and the impact on the financial institution, including the reward programs they provide, does come up.

In terms of specifics like profit margins for individual institutions, I think the committee would be best advised to ask the individual financial institutions for details on that. We do not have those details.

[Brian Masse, NDP, Windsor West, ON]

That's very helpful. This is where I'm trying to go. Where is the hole in the system in terms of what we see in the profit margins from the use of the credit card itself?

You mentioned in your testimony that there has to be notification by credit card companies about their policy changes. Does that come in the form of the written bill or the electronic one you get? What specifically do you have legislative authority over? Is it font size and whether it's highlighted? What type of financial literacy can you demand when credit cards and their companies unilaterally or with so-called “consent” make changes?

A lot of times, with many companies, if you didn't opt out, then you assume responsibility. It's a negative practice and negative option billing, really. What specifically can you demand from the credit cards—written, electronic or whatever—and how detailed is that notification when they change their financial arrangements?

I'll just conclude with this. I've been after Rogers and others with regard to this practice by telcos of changing the terms of their contract. What can you force them to do?

[Nicolas Marion]

I'll speak to what merchants can do specifically under the code of conduct for the payment card industry, and perhaps my colleague Madam Hamel can speak to—

[Brian Masse, NDP, Windsor West, ON]

Okay, yes; separate the merchants and consumers, then.

Thank you.

[Nicolas Marion]

Yes. With respect to merchants, under the code of conduct, there are specific requirements at the time they negotiate with their payment processors about the information that's available so that the merchants can compare processors to other processors with equivalent levels of information. Then payment processors have to provide information to merchants on a monthly basis, and the details of that information are codified in the code of conduct.

Then, following that, if ever there is an increase in fees or, for instance, a fee that is not reduced, that has to be passed on to the merchant as well. The code of conduct—

[Brian Masse, NDP, Windsor West, ON]

I'm running out of time here. I'm not trying to be rude, but perhaps you can give us specifically what, say, a convenience store operator would get instead of detailing it here. Can you visually give us that exact example you're describing verbally right now so we can see what information they get?

[Nicolas Marion]

We can, absolutely.

In the annex, there are some forms that demonstrate what merchants must receive under different scenarios.

[Brian Masse, NDP, Windsor West, ON]

It would be helpful if we could get that.

Then, for consumers, what is the distinction or difference?

[Judith Hamel]

We could also provide an example of the forms for the consumer.

For consumers, there's a very standard information box, when they enter into a credit card contract, that needs to be featured on all the contracts. It has standard information and is easy to comprehend for the consumer, and the forms must all follow the same template.

In terms of changes to features or terms and conditions, for example, if they're changing the annual interest rate, that must be disclosed at least 30 days prior to the change being put into effect.

[Brian Masse, NDP, Windsor West, ON]

If you could give us those so that we have them in written form in front of us, those would be good examples. Also, to finish, what specifically can you mandate them to do, versus options or suggestions?

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Masse.

Mr. Généreux, you now have the floor.

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

Thank you, Mr. Chair.

I thank all the witnesses.

Mr. Marion, I’d like to come back to Mr. Garon’s request. Several merchant associations testified before our committee. They told us that these merchants do not benefit from the agreement concluded with the government. You say you consulted representatives from convenience stores, for instance. Associations told us their merchants are not benefiting from it. You told us the agreement would apply to 90% of businesses in Canada. In the agreement, rates are cut by 25% or 27%. Do you think this agreement should apply unilaterally or variably?

[Nicolas Marion]

Thank you for the question.

Businesses with annual sales including a maximum of $300,000 in payments made with the Visa credit card or $175,000 in payments made with the MasterCard could benefit from the reduced interchange fee, which is an average of 27% within the framework of the agreement.

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

If I understand correctly, the 27% reduction applies unilaterally to everyone. In that case, why did representatives from the remaining 10% of businesses, for whom the rate does not vary, testify to the contrary before our committee? When they came here, they told us the agreement did not apply to a single one of their members. Where do you think the misunderstanding lies?

[Nicolas Marion]

If a merchant’s sales revenue includes more than $300,000 in payments made using the Visa credit card or more than $175,000 in payments using the MasterCard, the retailer would not be eligible for the reduced interchange fees.

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

We are therefore not talking about sales revenue, but the number of transactions per MasterCard or Visa credit card. For example, if a company’s sales revenue is $3 million, and at least $300,000—which is 10%—of those transactions went on a Visa credit card or MasterCard, would this business be automatically deemed ineligible, or does it vary based on sales revenue?