House Call with Carol Hughes

Time to stop the bleeding by reigning in credit card merchant fees

Canada recently marked Small Business Week, which featured a lot of political support for our hard-working small- and medium-sized businesses, but on certain fronts many supportive MPs consistently drag their feet and even drop the ball altogether. Nowhere is that more obvious than the refusal of successive governments to help these businesses deal with costly transaction fees that cut into their bottom line, increase costs to consumers, and make it difficult for these important job creators to compete.

That’s why New Democrats are pushing for some much needed relief by proposing a hard cap on the transaction fees merchants are charged when customers pay with credit cards. The fees in Canada, which are among the highest in the world, cost merchants $4 billion every year. That’s money that goes straight to the banks that issue the credit cards.

Not surprisingly, the banks are doing fine and consistently post record profits, year after year. A large part of their fortune is accrued through service charges that skim fees from every transaction between consumers and businesses. Although debit card fees factor into this, it’s the credit card fees that really add up. This can drive up prices too, which means consumers could be paying more than necessary for goods and services, or the business is taking a hit.

Unlike debit card merchant fees, which are set at a flat rate of a few cents per transaction no matter the size, merchant fees for credit cards are charged by a percentage of each purchase. These fees have fluctuated over the years between 1.69 percent and 2.39 percent depending on the card. With so many small businesses working on razor-thin margins, it only makes sense that MPs would champion their bottom line-especially when the challenge comes from heavy-weights like banks, but that isn’t always the case.

In some instances it’s easy to wonder if the tail is wagging the dog. This month, a government MP failed to show up for debate on their own Private Members Bill that would have regulated these merchant fees. The no-show happened after the Member delayed debate on the bill more than 10 times over two years. That meant the legislation that many retailers and business owners were waiting for died of the Order Paper without ever being debated in the House. It’s no secret why either. The government has its own ‘solution’ which amounts to non-binding, voluntary agreements. Any recognition that it isn’t working from within their own ranks would have been a black-eye for the government.

Meanwhile, Canadian retailers continue to pay $4 billion in merchant fees every year. New Democrats are proposing a permanent cap of one percent on credit card fees that would save Canadian small and medium sized businesses over a billion dollars every year.

Relief like that would help boost consumer buying power, inject much-needed resources into our local economies and help create jobs. It would also make Canada more competitive with Europe and strengthen our advantage with US competitors. Perhaps most importantly it would show small business owners that their federal representatives are squarely on their side by giving them a fair shot and an opportunity to grow.