Industry Committee on Nov. 7th, 2024

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Okay. Then you can table any emails you've had with them.

[Nicolas Marion]

It was done through verbal discussion, but at the same time—

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

When?

[Nicolas Marion]

We communicated that certainly in July of this year. I'd have to go back—

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

With whom was it from the company?

[Nicolas Marion]

It was with Stripe.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

With whom?

[Nicolas Marion]

Brian Peters, I believe is the gentleman.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

That's interesting.

I have a last question, and perhaps it's for Mr. Light.

Payment processors are citing the increase in GST/HST and the change in ruling—I won't get into it; you know what we're talking about—on certain fees as the reason they can't or aren't passing the savings from the interchange fees on Visa and Mastercard along to consumers.

Were you lobbied by payment processors? Did you hear a lot of feedback from payment processors that they didn't want that change to GST/HST made? Was there a lobbying effort within the department on behalf of payment processors to have GST applied to the fees? There was a court ruling, and I believe there was a change in policy to ensure that the GST did apply. Was that something that was heavily lobbied in your department by payment processors?

[Warren Light, Expert Advisor, Sales Tax Division, Department of Finance]

No, we did not get lobbied. The tax also applied up until a 2021 court ruling. In 2023, we made an amendment to ensure that the tax reapplied.

We did see some communication from acquirers asking for information, but we did not receive heavy lobbying.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you, Ms. Rempel Garner.

I'll now turn it over to MP Arya for six minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Chair, and thank you to the witnesses for coming here today.

I prefer the code of conduct instead of passing regulations to control and manage the various issues with the credit card industry or, for that matter, any other industry.

New regulations require more bureaucracy to manage them and implement them. Instead of that, a voluntary code of conduct between the policy-makers and the industry players is welcome any day.

However, what I want to know is what happens when there are one or more bad apples in the industry who don't follow the code. Specifically, let's talk about Stripe here. Stripe said that it is not going to pass on the benefits, so what do we have in our power to manage Stripe so that it also follows the conduct that is being followed by its peers?

Mr. Nicolas Marion, could you respond specifically to that, please?

[Nicolas Marion]

Yes.

I think part of the government's responsibility—and that's seen in the code of conduct—is making sure that merchants can make informed decisions at the time that they sign a contract with their—

[Chandra Arya, Liberal, Nepean, ON]

No, Mr. Marion. Unfortunately, my time is limited. Is there any mechanism available to take action against the major players who don't follow this code?

[Nicolas Marion]

Again, our expectation is that any interchange rate reductions will be passed on. Having said that, I'm fully aware of the situation with Stripe.

[Chandra Arya, Liberal, Nepean, ON]

Again, the expectation and the point is that the whole purpose of the code of conduct is that all major players will implement it. That prevents regulation.

With regulation, for example, we have heard that capping the interchange fee, as has been done in the European Union and Australia at 0.3%, is not effective. The industry players will find other means to charge fees.

I was told at the last meeting that the fees charged to small businesses in France are closer to what Canadian businesses are paying, though the top line says it is regulated at 0.35%.

What mechanism do we have? Let me put it bluntly: Do you have a stick?

[Nicolas Marion]

In the code of conduct, one, we require all payment providers to notify their merchants well in advance if ever they don't intend to pass on a reduction, or, if there's an increase in fees, they have to provide that well in advance—

[Chandra Arya, Liberal, Nepean, ON]

You're just saying that they pass on that information. They do that. That is not the point. The point is to bring down the fees. Am I right?

[Nicolas Marion]

That's right, so the second part is that if they don't pass on a reduction in this case, merchants can withdraw themselves from their contracts. They can cancel their contracts without penalty.

[Chandra Arya, Liberal, Nepean, ON]

That is not an option. You can say, “Mr. Arya, if you don't like credit cards, you don't have to take credit cards.” That is not practical. Let's put it that way.

Basically, if the code of conduct is violated by major industry players, we don't have any mechanism to manage it. That's what I understand from what you're saying.

[Nicolas Marion]

We do.

[Chandra Arya, Liberal, Nepean, ON]

I'm sorry. I spoke with you for quite some time, but I did not hear that. If you have any ways to manage it, please put it in writing and give it to us. We can look into that.

With my limited time, I want to go to Ms. Jennifer Withington.

Ms. Withington, you did mention—and previously, we also heard from an economist—that with the increase in inflation and interest rates, credit card balances also went up. That's what we have seen.

I'm surprised that you used the words “going forward, elevated interest rates”. We know the interest rates are coming down. Do you have any projection on the impact of lower inflation and lower interest rates? Do you expect the credit card balances of Canadians to go down? Do you have a study or can you make a statement on that?

[Jennifer Withington]

Certainly credit card interest rates, in general, tend to be stickier than other interest rates. Nonetheless, a reduction in interest rates will put some ease on consumers through lower mortgage rates and in other cases.

[Chandra Arya, Liberal, Nepean, ON]

I'm very clearly talking about credit card balances.

You mentioned that credit card balances have increased due to inflation and interest rates. With inflation and interest rates coming down, do you foresee credit card balances going down?