That, in the opinion of the House, small- and medium-sized business owners are the driving force of job creation in Canada, and Canadian retailers and merchants pay credit card merchant fees that are among the highest in the world, and therefore the government should take immediate steps to make the cost of living more affordable for the middle class by: (a) lowering costs for businesses and consumers by reducing transaction fees charged to merchants; and (b) allowing merchants to disclose to the consumer the transaction costs relating to the payment method chosen at the point of sale.
Mr. Speaker, this motion has to do with credit card fees. Unfortunately, Canada has the highest fees in the world. Countries around the world have made attempts to address this problem.
More and more Canadians are making payments with credit cards, which really end up being payment cards in many cases. The problem is that the fees can vary considerably and that some new credit cards being issued—loyalty cards in particular—offer travel points.
However, credit card companies do not pay for these plane tickets. They send the bill to merchants, which means that some credit cards carry fees of 4% or higher. The problem is that many small businesses have a profit margin that varies between 2.25% and 2.75%, especially in the retail food sector. This means that when a customer pays with this new credit card, the small business owner actually loses money.
The goal is to limit this type of abuse, but it is important to do so without destroying a payment system that must be preserved. Canada needs to be able to use credit cards in small businesses. However, small businesses want to remain profitable, which is only natural. The problem is that credit cards often do not let them do that, particularly the new credit cards with really high rates, which are becoming more popular.
I am sure, Mr. Speaker, that you would not mind taking a little trip down south for two weeks in the dead of winter. If you have a credit card that offers that sort of opportunity, you would be quite happy to use it. The problem is that small businesses are the ones that are paying for the plane tickets. When small business have to pay fees of 4% while their profit margin is only 2.5%, it is clear that they are headed for bankruptcy.
Small business owners have it tough these days. They are asking us to do the same thing that is being done in many other countries. As far as I know, Australia's Conservative government would certainly never be accused of having socialist sympathies. Similarly, in England, under Mr. Cameron's government, these rates were greatly limited to 0.5% and they have even been limited to 0.3% elsewhere in Europe. That is one-eighth of what is charged in Canada. It is a discrepancy that ranges between 300% and 800%. As for the infamous credit cards with a rate of 4% or higher, they turn out to be 12 times more expensive. This nonsense has to stop. People cannot pay such high credit card fees.
Let us also note that credit card terminals alone often cost $30 a month. That is an added cost.
What we are proposing is that we work together to figure out a rate that allows small businesses to survive while maintaining a payment system that works. This is not a threat to credit card companies, as we know from precedents set in Europe, Australia and England.
Even the U.S. Senate, which had the same problem, wanted to see if regulating credit card fees had had a negative impact on the economies of those countries. It concluded that there was no negative impact and that credit card companies are still doing very well in those countries.
People still use credit cards; in fact, they are using them more than ever.
However, small businesses do not want to pay 4% to 4.25% for the so-called privilege credit cards. That is unreasonable. By comparison, a debit card costs five cents to use whether the transaction is for $3, $4 or $3,000. The fee is not a percentage. It is a fixed amount. Considering that 1.5% of $1,000 is $15, that shows how much more one costs than the other. This is not a new problem. Many businesses have been asking for this for many years.
The 90,000 small and medium-sized businesses that belong to the Small Business Matters Coalition would like to have a chance to breathe one of these days, as would members of the Canadian Convenience Stores Association, the Association des marchands dépanneurs et épiciers du Québec, the Retail Council of Canada and Restaurants Canada. All of these people have been telling us that they can no longer survive. People in my riding tell me that the fees cost them $15,000 to $25,000 for a small business with six or seven employees. They say it is not working anymore. Small and medium-sized businesses have no choice but to refuse credit card payments. That is how serious the problem is.
Not only do we risk losing SMEs, but the entire credit card system as a payment method could be in jeopardy.
In a 2013 ruling, the Competition Tribunal called on the government to take action, because it found that there was a non-competitive situation. The government responded by saying that it hoped that credit card companies would limit the rate to 1.5%, but on a voluntary basis. Even that percentage is 500% higher than in Europe. I do not want to hear anyone say that in Europe countries are too consumer friendly and they want to destroy private enterprise. A 500% disparity is huge, and that is on a voluntary basis. That pertains only to standard credit cards.
If you have to deal with a premium credit card, this becomes totally unmanageable. However, those kinds of cards are becoming increasingly popular. Everyone loves to travel and book flights using a credit card, except that the plane ticket does nothing for the merchant. When he goes to the bank to ask for a loan guarantee to pay for new inventory, he is told that his operating costs are too high. He can only reduce wages so much.
One merchant I know, Mr. Bélisle, who owns a pub called Bière au menu in Bois-des-Filion, told me that he cannot automatically pass the cost on to consumers because he cannot sell hamburgers for $25. There comes a point when the cost simply cannot be passed on to consumers, because they just will not buy a $25 hamburger. His problem is that he also owns a sausage shop. He said that at that business, he does not even accept credit cards. There is also Mr. Gaudreau from Laval, who told me that he thought he could start a small business with three or four employees, but with the extra costs of 1.6% for Visa, 2.6% for AMEX and 1.55% for Mastercard, he could not do it.
His profit margin is about 2%. Three-quarters of his profit will basically go to a company that will do nothing for him. It will not do any marketing or advertising, and it will not attract customers. For this business owner it is simply a bill he must pay, and for that reason he is asking for regulations.
For our part, we are going to get together to analyze the situation and what happens in other countries. We are going to drastically reduce the interest rate, although we will exercise caution.
We are not going to jeopardize the credit card system. It will continue to exist. As demonstrated by the U.S. Senate, regulations will not destroy this payment method. We will keep it. When we sit around the table to establish the interest rate, the credit card companies will be there as well and they will have to justify what they charge.
It goes without saying that some payment methods, like high interest rate cards, will disappear. We cannot ask a business owner to go bankrupt because he sells things to people with specific credit cards.
Transparency is another important aspect. When we get a bill, the taxes, the GST and the QST, are listed on it. What people are asking for is that the cost of the credit card also be included on the bill. There is currently a clause in the contract we sign to use a credit card that prohibits that very thing. Transparency is not allowed.
If we have the right to review the GST and QST amounts, then I think people should also have the right to review what it costs them to use a credit card. This is especially important because some of the costs have gone down in the past few years. For better or worse, the sales tax has been reduced.
The problem is that these tax cuts were clawed back because credit card margins went up. They increased from 1.5% to 4% and any economic benefit that consumers might have derived from the tax cuts voted in by this government was absorbed by the credit card companies. This needs to stop.
For retailers alone, the credit card fees amount to more than $850 million, and that is just for the retail sales sector. Obviously this has to stop sooner or later. Enough is enough.
As I said earlier, and it bears repeating, we have to be competitive internationally. If the tourists who travel through Europe pay less there for goods and services than they would pay in Canada, then there is a good chance that we are losing business. We must remain competitive, and a 500% difference is obviously unreasonable.
I am therefore pleased to say that this resolution is supported by the small business community, a very important community in Canada that accounts for 40% of our GDP.
One day we will have to think of them and return the favour.