Industry Committee on Nov. 7th, 2024

[Jennifer Withington]

In general, with lower interest rates and lower inflation, credit card balances could be going down. However, we do see that price levels remain high. Prices are increasing at a slower rate, but they will still remain high, so there might still be some pressure on interest rates.

Matthew, did you want to add anything?

[Matthew Hoffarth, Assistant Director, National Economic Accounts Division, Statistics Canada]

Thank you.

I would just add that the price change has really been a level shift, so we're seeing those balances rising because of that. As Jennifer said in her opening remarks, we can't really disentangle volume, so with more purchases.... Canada surpassed 40 million people. There are many more people new to credit, so we can't really disentangle that from just pure price change.

I go to the grocery store and I buy all the same things I used to buy, and things cost more. That's the challenge.

[Chandra Arya, Liberal, Nepean, ON]

Thank you.

Ms. Rizzo, I don't know why you're here. Is there anything that comes under your jurisdiction or mandate to manage interchange fees or interest rates? Is there anything at all?

[Luisa Rizzo]

No, there is not, as far as the Canada Revenue Agency is concerned.

[Chandra Arya, Liberal, Nepean, ON]

Thanks for spending some of your time with us.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Arya.

Mr. Garon, you have the floor.

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

Thank you, Mr. Chair.

I would like to welcome all the witnesses who have joined us today. Thank you for coming. We greatly appreciate it.

I'll now turn to the officials from the Department of Finance.

Mr. Marion, you referred to the 2022 fall economic statement, which announced the intention to negotiate an agreement with stakeholders, particularly with regard to interchange fees. I would like to read you the excerpt from the statement in question:The government intends to enter into negotiations with payment card networks, financial institutions, acquirers, payment processors, and businesses to lower credit card transaction fees for small businesses in a manner that does not adversely affect...reward points...

I want to point out that the statement says that the government intends to enter into negotiations with the businesses.

The committee met with representatives of the Retail Council of Quebec. They told us that these agreements were unsatisfactory and that the agreements applied to almost none of their members. We met with representatives of the Retail Council of Canada. They told us that they obviously hadn't been consulted, because they see these agreements as unnecessary and almost crude. We met with representatives of the Convenience Industry Council of Canada. They told us that these agreements affected 0% of their members, since the agreements lower interchange fees for businesses whose sales figures are too low.

Moreover, as I showed here, we can easily deduce that these agreements don't apply to any restaurants. We can also deduce that these agreements don't apply to any hotels, with the possible exception of people who operate short‑term rentals, which contribute to the housing crisis.

I don't think that negotiations took place. I think that the minister simply prepared a bill that she never intended to push through, and whereby she could, in any case, impose by regulation a probably unnecessary agreement. I think that the credit card companies made you an offer and that the Department of Finance was quite happy to wipe the slate clean and let them walk away with an agreement that didn't apply to anyone.

I would like you to tell us two things.

First, in the negotiations, when Visa and Mastercard made you an offer, what was the government's counter‑offer? Were you satisfied with the credit card companies' first offer?

Second, can you explain why the Canadian Federation of Independent Business, the Retail Council of Quebec, the Retail Council of Canada and the Convenience Industry Council of Canada, for example, say that they weren't consulted? This contradicts the information in the statement.

[Nicolas Marion]

Thank you for the question. I would like to make a few comments.

First, we conducted consultations following the 2022 fall economic statement. We held discussions with payment card network operators, financial institutions and merchant associations. We spoke with the Convenience Industry Council of Canada, a number of acquirers, a number of payment service providers and a loyalty program operator.

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

If I may, I would like to expand on my question. I think that I've been misunderstood.

There wasn't any talk of consultations. There was talk of negotiations. Can you confirm to the committee that, when Visa and Mastercard made the lenient offer that led to the agreements in place today, the Retail Council of Canada, the Retail Council of Quebec, the Convenience Industry Council of Canada and the Canadian Federation of Independent Business took part in the negotiations described in the statement? Did they say that these agreements were outstanding, that they supported the agreements and that they wanted the agreements implemented?

That's my question. I don't want to know whether you consulted them. Did they negotiate with you as the government promised in the 2022 fall economic statement?

[Nicolas Marion]

We held discussions with a number of stakeholders and negotiated a great deal with the networks. That said, we have, as I said, held discussions with a number of stakeholders. I think that describing these discussions as negotiations with all the stakeholders might be going a bit too far. However, we did have discussions with a number of participants. These discussions built—

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

Mr. Marion, I must interrupt you since I don't have much time.

You answered my question. The government promised to negotiate with these stakeholders. You didn't promise this. The government did. It was written in the 2022 fall economic statement. Yet you just told us that the government didn't keep its word, that it didn't proceed as set out in the statement and that, as a result, it accepted agreements that weren't the result of the promised negotiations. The government never had any serious intention of passing legislation

I have about one minute left. A negotiation is a process that leads to offers and counter‑offers. At the end of the process, everyone meets halfway. As a result, I want to know the credit card companies' first offer and the government's counter‑offer to get us to this point. I want to know whether, on the contrary, the companies simply made a proposal and the government caved in.

[Nicolas Marion]

There were a number of offers and counter‑offers. Moreover, there was a great deal of discussion about—

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

Is it possible to submit them to the committee?

[Nicolas Marion]

—how to classify small businesses—90% of businesses that accept credit cards benefit from the reductions. There were a number of discussions on how to define or establish the scope of the application.

Obviously, interchange rates are a highly complex matter. We wanted to better understand certain aspects. However, we also had a clear and firm position. We wanted to see substantial reductions. We also wanted to ensure that other businesses wouldn't be punished by a reduction for certain businesses. We also wanted to ensure that Canadians' loyalty programs would be protected.

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

Mr. Chair, I know that my time is up. However, I want to ask Mr. Marion whether he could give the committee some examples of the counter‑offers that the Department of Finance made to Visa and Mastercard and that led to the current agreement. Could he submit these documents to the committee? I think that the committee would even be prepared to read these documents in camera if they're classified as secret.

[Nicolas Marion]

Thank you for the question. However, I don't think that we're authorized to send you the various offers and counter‑offers.

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

These documents are too secret for parliamentarians, for members of Parliament and for Parliament, I imagine.

[Nicolas Marion]

I don't think that we can send you the offers and counter‑offers.

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

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Garon.

Mr. Masse, the floor is yours.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

I just want to confirm this, Mr. Marion: Who actually pays your salary?

[Nicolas Marion]

I work for the Department of Finance, and ultimately it's the government and ultimately the taxpayers.

[Brian Masse, NDP, Windsor West, ON]

Yes. Thank you.

I just want make sure to confirm that, because you said that you give strategic advice to the minister. What is that strategic advice that you provided on this issue?

[Nicolas Marion]

Well, we provided advice in terms of what we thought we could achieve in some of the considerations around reductions in interchange fees, as well as with respect to as key stakeholders, as well as a strategy in terms of delivering meaningful reductions for a broad group of merchants.

[Brian Masse, NDP, Windsor West, ON]

Okay. Was that verbal or was it written? Is it email?

You've given testimony that you provide all those things, and one that was more surprising was that some of it was just verbal when dealing with the credit card companies. Can you provide us with that? I don't have a lot of time, so I would like the notes and the information that you provided the minister.