Industry Committee on Nov. 25th, 2024

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I’d like to continue along those lines.

In a previous meeting, the member I’m replacing, Mr. Garon, gave a demonstration in which he explained that, to comply with the conditions for access to lower interchange fees, such as those that Visa and Mastercard charged the government, a restaurant had to do 240 services a year and had to sell each of its meals for $2.43 or less for Mastercard and $4.16 or less for Visa.

Ultimately, don’t the conditions of access to lower interchange rates somehow undermine competition by making them harder for small businesses to access, for example, or by reinforcing companies that are already in a dominant position on the market?

[Anthony Durocher]

We recognize that the interchange rate can have a significant impact on small businesses. That’s why, in 2010, the competition bureau went to court regarding practices by Mastercard and Visa. Since then, a more regulatory framework with a code of conduct has been in place in the industry.

At this time, our role isn’t to monitor the rate, such as it is and dwell on it, but rather to ensure that there are anti-competitive adjustments to the sector.

That said, we recognize that it’s extremely important to small and medium-sized businesses. That’s also why we promote competition in the sector to ensure that the current and future regulatory framework will be as conducive as possible to new entrants and innovation.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Savard‑Tremblay.

Mr. Généreux, be brief, because we're almost out of time.

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

I'd like to follow up on what Mr. Gaheer said earlier.

When you want to withdraw money at any courthouse in Quebec, the fees are exorbitant. Based on what we read in various articles, those fees are mandatory. I just want to draw your attention to it so that you can verify that too. Interac and the banks seem to be telling the government that the Quebec government is the one charging those fees in courthouses. That's not true.

It would be interesting to include that kind of abusive fee in your study—that's what some media are calling them. I'm only drawing this to your attention.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Généreux.

That concludes the first two-hour part of our meeting.

Again, I want to thank the competition bureau, Mr. Boswell, commissioner, who was accompanied by Mr. Anthony Durocher and Ms. Krista McWhinnie.

Thank you very much for joining us.

I will briefly suspend so we can welcome representatives from the Financial Consumer Agency of Canada.

[The Chair, Liberal, Joël Lightbound]

Colleagues, we are resuming our meeting and our study of potential anti-competitive behaviour in Canada’s e‑transfer ecosystem.

I am pleased to welcome witnesses from the second panel, who are taking part in this four-hour marathon meeting by the industry committee. From the Financial Consumer Agency of Canada, we have Shereen Benzvy Miller, commissioner. She has been in the job for 12 days, so this is her first appearance as commissioner.

Madam, congratulations on your appointment and we thank you for taking part in this exercise.

Ms. Shereen Benzvy Miller is accompanied by Frank Lofranco, deputy commissioner, supervision and enforcement; Supriya Syal, deputy commissioner, research, policy and education; and Jason Bouzanis, assistant commissioner, public affairs.

Thank you all for joining us.

You will have five minutes for your opening remarks, followed by a discussion with the committee members.

Ms. Benzvy Miller, you have five minutes.

[Shereen Benzvy Miller, Commissionner, Financial Consumer Agency of Canada]

Thank you for the introduction, Mr. Chair.

I want to thank the committee for inviting us to appear before you today.

My name is Shereen Benzvy Miller. I'm delighted to have recently been appointed commissioner of the Financial Consumer Agency of Canada or FCAC; I was appointed during financial literacy month.

I have been on the job for 12 days now, as the chair stated, and I am honoured to lead an agency with such an important mandate.

I joined the FCAC during financial literacy month, which takes place every November and is now wrapping up. The focus of this year's campaign is to encourage Canadians to talk about money and take steps to increase their financial knowledge and confidence. FCAC's research shows that money conversations can lead to better financial outcomes.

FCAC welcomes this opportunity to contribute to the committee's study of Canada's e‑transfer ecosystem and the broader electronic payments industry.

Joining me today are three members of the executive committee, and they too will be able to respond to questions from the committee. Each of these three functions work together to advance the agency's mandate, and support and protect Canadians. It is my hope that their knowledge and insights will aid the committee and inform our meeting today.

In my opening statement, I will begin by outlining FCAC's mandate. Then I'll turn to FCAC's role as it relates to the payment ecosystem. I will also explain the regulatory requirements related to electronic payments that FCAC oversees. Finally, I'll address interchange fees and e‑transfers before concluding.

FCAC is an independent federal agency that protects the rights and interests of consumers of financial products and services. This includes the rights of merchants who process payment cards. The agency’s mandate includes many important elements. First, as a strong and effective regulator, we supervise the compliance of federally regulated financial entities with consumer protection measures set out in legislation, public commitments and codes of conduct. That short summary of the regulatory side of our mandate carries great significance. Compliance with market conduct obligations leads to consumer protection and, ultimately, more positive financial outcomes for Canadians. Protected consumers leads to trust and consumer confidence in financial institutions. Consumer confidence contributes to the safety and soundness of the financial system.

The financial literacy side of our mandate is equally important. Through FCAC’s national financial literacy strategy, we work with stakeholders from across the country to build the financial resilience of Canadians.

FCAC also conducts research and evidence-based analysis on trends and issues that impact financial consumers. This is particularly important as an avenue through which we inform and support the Department of Finance’s role in developing financial sector policy and legislation.

FCAC’s mandate is expanding to include responsibility for overseeing, administering, and enforcing Canada’s consumer-driven banking framework. As a leader and innovator in financial consumer protection, FCAC is well placed to take on this responsibility.

Given that the committee is furthering its study with more specific areas of focus, I'll concentrate my remarks on FCAC's mandate as it relates to the payment ecosystem.

As discussed at our previous appearance before this committee, FCAC oversees the market conduct obligations of payment card network operators, also known as PCNOs, under the code of conduct for the payment card industry. Examples of payment card network operators in Canada include Visa Canada, Mastercard Canada, American Express, Discover, UnionPay and Interac for its debit card products. Payment card network operators must incorporate the code in its entirety into their contracts, their business practices and their governing rules.

Payment card network operators are responsible for ensuring that payment-processing companies using their networks comply with the obligations under the code. That means that payment-processing companies must understand and work proactively to meet the market conduct obligations of the code.

Recently, the government announced a revised code of conduct for the payment card industry. Most elements came into effect on October 30 of this year. The remaining, more technical, elements will follow on April 30, 2025.

Merchants in Canada that process payment cards now benefit from protections designed to ensure transparency, flexibility and choice. Disclosure and complaint handling are critical components of the protection, whether that be for consumers in retail banking or for merchants. Enhanced disclosure and improved complaint handling are key elements of the new code. For example, merchants will receive more information on card-processing fees at the time of quote, when they sign their agreement with their service provider and in their monthly statements.

Importantly, merchants also now have access to a complaint-handling process that is clear, simple and transparent, and that requires that their complaint be handled in a timely manner. Importantly, merchants now have a longer period to cancel their agreements and may do so if certain fee reductions are not passed on in full.

FCAC expects payment card network operators to implement the revised code. It is our role as FCAC to supervise their compliance with their market conduct obligations.

While FCAC does not comment publicly on its ongoing supervisory activities—though I brought Mr. Lofranco here anyway—the agency's conclusions on the compliance of federally regulated financial entities are described in our annual report. I should also mention that FCAC provides unbiased and authoritative information to help merchants understand their rights under the code.

I believe it would also be valuable to take this opportunity to briefly touch on FCAC's oversight of interchange and other core payment-processing fees. Regarding payment card fees, payment card networks and their participants are expected to meet the commitments related to fees under the code. The commitments related to interchange fees are as follows: to disclose fees in language that is clear, simple and not misleading; to notify merchants of fee changes within a minimum of 90 days of the effective date; and to respect a merchant's right to cancel the agreement. It is important to note that the market sets the interchange fees or rates.

We also recognize the committee's interest in e-transfer, which is a service provided by the Interac Corporation. Data from Payments Canada continues to suggest that Canadians use online transfer services, such as Interac e-transfer, primarily for peer-to-peer money transfers, rather than for purchasing goods and services. Interac is one of the payment card network operators that have signed on to the code of conduct for the payment card industry.

FCAC protects both consumers and merchants with regard to services offered by Interac. For consumers, e-transfers are a service provided by banks. Banks must disclose the fees that they charge for Interac e-transfers to their customers. There are very specific and stringent rules around the disclosure of fees charged by banks to their customers. These are one of the many obligations overseen by FCAC under the financial consumer protection framework. For merchants, Interac must ensure that payment-processing companies that enable merchants to accept debit cards at point of sale disclose the fees charged for this service. This is one of the many requirements under the code of conduct for the payment card industry that is overseen by FCAC. In both of these cases, whether it's for consumers or for merchants, disclosure of fee information enables these parties to make informed decisions about the products and services available to them. Interac fees themselves are a commercial decision.

To conclude, I have briefly outlined FCAC's mandate and how we protect financial consumers and merchants. I have described FCAC's role in the payment ecosystem. I have addressed FCAC's oversight as it relates to interchange fees and e-transfers.

FCAC's role is an important one. We safeguard consumers and merchants, and we equip them with knowledge to make informed decisions. FCAC's regulatory, research and financial education resources all work together and contribute to supporting a strong, safe and stable financial system for the benefit of Canadians. Through effective consumer protection and a commitment to strengthening financial literacy, FCAC fosters trust, a trust that enables Canadians to navigate their financial journeys with confidence and peace of mind.

Mr. Chair, that concludes my opening remarks. I look forward to the committee's questions.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

To start the discussion, I'll yield the floor to MP Rempel Garner for six minutes.

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

Thank you, Chair.

About this time last year, an article from Postmedia, I believe, based on access to information records, said that the FCAC “received 27,323 complaints about breaches of the Bank Act since 2019, and none received a response.”

How many have received a response since then, in the last year, of those 27,000 that had not received a response?

[Shereen Benzvy Miller]

If a customer is not satisfied with a service or product from their bank or their financial institution, FCAC encourages them to file a complaint with their financial institution.

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

I have the Financial Consumer Agency of Canada Act in front of me, and it's fairly clear on what your organization's mandate is, including “strive to protect the rights...of consumers of financial products and services and the public, taking into account the need of financial institutions to efficiently manage their business operations”.

I'll ask again. Of the 27,000 complaints about breaches of the Bank Act since 2019, how many have received a response? This article was published a year ago. Were any of those resolved or responded to?

[Shereen Benzvy Miller]

Do you want to take it?

[Frank Lofranco, Deputy Commissioner, Supervision and Enforcement, Financial Consumer Agency of Canada]

With respect to complaints, there are two regimes in place—

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

How many of those were responded to? There are 27,000. Did your organization respond to any of those after that article came out?

[Frank Lofranco]

Under our mandate, we are not in place to resolve complaints, but we do get reported—

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

Did you respond to any of them? The operative word was “respond”.

You had 27,000 people take the time to write to your agency. How many did you write back to out of that number?

[Frank Lofranco]

The large majority of those are reported complaints by the banks. Some of those are complaints—

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

I'm asking how many were responded to.

[Frank Lofranco]

Data from the banks that we receive as a requirement suggests that more than two-thirds since 2022, when the enhanced requirements came in for complaint handling—

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

Again, 27,000 people wrote to your agency. We fund you. We allocate money to you. We pay your salaries. How many of those 27,000 even got a “file under garbage” response?

[Frank Lofranco]

I just have to correct—

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

Do you know? Is it more than zero?

[Frank Lofranco]

The 27,000 complaints were—

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

Yes, according to an access to information record, 27,323 complaints received no response. How many of those received a response in the year since this information was made public?

[Frank Lofranco]

The majority of those complaints are received by the requirement for banks to report the complaints they received and how they're handled. They're not all directly into the FCAC from—