Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 13 - Evidence - June 19, 2014

OTTAWA, Thursday, June 19, 2014

The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill S-202, An Act to amend the Payment Card Networks Act (credit card acceptance fees), met this day at 10:30 a.m. to give consideration to the bill.

Senator Irving Gerstein (Chair) in the chair.


The Chair: Good morning. I call this meeting of the Standing Senate Committee on Banking, Trade and Commerce to order. Today the committee is holding its second meeting on Bill S-202, An Act to amend the Payment Card Networks Act (credit card acceptance fees), introduced by our colleague Senator Ringuette.

At our first meeting, held on May 29, 2014, we heard from the sponsor, Senator Ringuette, and from officials at both the Department of Finance and the Financial Consumer Agency of Canada as well as officials from the Competition Bureau of Canada.

During the first hour today we shall hear from two private sector associations — one in person and one by video conference.

I would like to first introduce those joining us in person. From the Retail Council of Canada, always a pleasure to have you with us, Diane J. Brisebois, President and Chief Executive Officer, accompanied by Karl Littler, Vice President.

Joining us by video conference from Toronto is Dan Kelly, President and Chief Executive Officer of the Canadian Federation of Independent Business.

I will turn the floor over to Ms. Brisebois first, to be followed by Mr. Kelly.

Diane J. Brisebois, President and Chief Executive Officer, Retail Council of Canada: Thank you so much. On behalf of Canada's retail merchants, I want to thank the committee for the invitation to comment on Bill S-202 and on the issue of credit card acceptance fees more generally.

It's fitting that we're meeting here today, as it was this committee, in March 2009, which began the first serious examination in Canada of the acceptance-fee issue. Those efforts were led by Senator Ringuette, and by the summer of 2009 had engaged the whole committee on both sides of the chamber. The resulting study has helped shape all subsequent public debate on this issue.

The intervening five years have seen many important developments, both here and abroad. So first a little on the international context, if you don't mind. When we first began this fight, Australia had just introduced regulation of fee levels, but otherwise they were largely unchecked. Five years on, and fees have been sharply reduced in the EU for cross-border transactions and shortly for domestic transactions as well.

There are now either regulated or subject-to-consent orders in France, Israel, Switzerland, China, India, New Zealand and a host of other countries. These moves have variously involved parliamentarians, central banks and competition authorities, acting against the negative effects of inflated acceptance fees on merchants and consumers.

At home in Canada, the next milestone after this committee's 2009 report was the government's 2010 code of conduct, which helped protect Canada's excellent low-fee debit system, the Interac system.

This was followed by the 2013 findings of the Competition Tribunal which identified a clear problem in the marketplace and recommended that credit card fees be addressed by public policy.

Then, of course, there was the big decision in this government's 2014 Budget to improve fairness in the marketplace and help reduce credit card acceptance fees. It was and remains an immensely encouraging stand taken by this government, notwithstanding efforts by others in the payments industry to forestall any action.

So where does that leave us today? Though we do not have a date certain, we understand that the government's formal implementation of the 2014 Budget will be issued this year, likely in the fall.

High time, we say, as the industry is evolving rapidly and acceptance costs continue to escalate. Far from constraining the growth in the market penetration of premium cards and now super premium credit cards, issuers seem to have redoubled their efforts since the introduction of the code of conduct in 2010.

The consequence is significantly higher fees, with zero incremental value to merchants. The real problem was identified in 2009 by this committee and by then Senator Goldstein specifically. Though he did not use these precise words, I would characterize it as a reverse Robin Hood problem. When Canadians of modest incomes buy groceries and other basics, they are cross-subsidizing the purchases of premium card holders, even though they themselves could never qualify for those premium cards on an income basis.

Simply put, these fees do carry a benefit for some but drive up prices for everyone. It is not the existence of acceptance fees that is in itself the problem, but the ability of a duopoly to maintain them at far higher levels than they would be in a competitive marketplace. Just how much higher is evidenced by the delta between these fees in Canada and what merchants pay in other jurisdictions for the same services — fees that are fourfold those in Australia and fivefold those in France, by way of example.

The costs to Canadian merchants and ultimately to consumers are more than $5 billion annually. That's well over $20 billion since this committee first looked at this issue. It's indeed time, retailers say, for the government to move forward and implement its 2014 Budget commitment.

Once again, we want to thank this committee, and Senator Ringuette in particular, for her amazing efforts. I can't find a better word than that. I also want to give credit where it is clearly due, to this government for recognizing the problem, stepping up and committing to address it.

Lastly, I would be remiss if I did not thank retired Senators Meighen and Goldstein, former chair and deputy chair respectively, of this committee for the leadership they showed in 2009, without which we would not be where we are today.

The Chair: Thank you, Ms. Brisebois.

Mr. Kelly, the floor is yours, sir.

Dan Kelly, President and Chief Executive Officer, Canadian Federation of Independent Business: Thank you very much. I hope you have the deck that we shared with your committee in advance. I'll be referring to that over the course of my presentation.

I certainly support our friends at the Retail Council of Canada and many of the statements that they've made about the credit card issue in general. I also want to talk a bit about where we've come from CFIB's perspective on this file over the last couple of years.

When premium cards were introduced in the Canadian marketplace in 2008, we had an explosion of concerns from small and medium-sized firms. All of our members, of course, are small and medium-sized, independently owned and operated businesses across Canada — 109,000 members.

Fees increased by 30 to 40 per cent month over month on the same volume of transactions. Of course our lobbying efforts took hold right away. We noted some of the problems with the Canadian payment system, which is on slide 3. Cost was number one, particularly the cost of accepting premium cards, the cross-subsidization that Diane mentioned, particularly cash and Interac payers, to those that have premium cards and are able to reap the benefits from them.

There are a lot of other issues that I think need to be explored further: contracts with unjust clauses, a bunch of predatory practices from some in the industry with respect to credit card processing services; no dispute settlement process whatsoever; and little consumer awareness of the fact that Canadians pay $5 billion to $7 billion each year in embedded credit card processing fees.

The other problem associated with many of these cards is that this points addiction in Canada has led to a growing problem of mounting consumer debt that we have to take seriously.

Our members find it difficult to understand their costs of accepting credit cards — slide 4. Almost 75 per cent said it is very or somewhat difficult for them to understand how credit card processing fees happen. Their number one complaint is the cost of non-qualified premium card transactions. Small businesses are big fans of Interac debit. They understand the costs of Visa and MasterCard regular-cost cards. There were some grumbles in the industry years ago prior to the introduction of premium cards about credit card processing fees, but it was the premium cards that caused things to explode.

There is not a formal dispute settlement for this industry, but two thirds of our members think it's important to have one. As Diane mentioned, after considerable lobbying by the CFIB, the RCC and many other associates, the government intervened by adopting a Code of Conduct for the Credit and Debit Card Industry in Canada. The most important accomplishment there was to protect Canada's system of low-cost, flat-fee Interac debit card acceptance. We are in a weird world in Canada. We have among the lowest costs in the world for accepting debit card transactions because of the creation of Interac, and we have among the highest fees in the world for accepting credit cards.

The code of conduct, beyond saving debit, cleaned up a lot of bad practices in the industry. We at CFIB have been trying to find ways to use market forces to change things, thinking that would offer better long-term protection in terms of pricing and practices for small and medium-sized firms. For example, we have worked to expose which cards are lower-cost cards — regular-cost cards, and which cards are premium-cost cards. It is a very confusing exercise.

We surveyed our members and even now only half of our members could possibly get right which cards are premium versus which cards are regular cost. We have also done campaigns — slide 10 — to promote the use of Interac and to steer transactions to Interac, which is now allowed under the code of conduct. In fact, merchants are able to discount, but they still don't have the full range of pricing options available to them. They are not allowed to surcharge and they are not allowed to refuse high-cost cards. Of course, that was the issue before the Competition Tribunal. Unfortunately, merchants lost out in that decision.

We have done some lobbying campaigns to initiate credit-free Fridays, encouraging consumers to put their credit cards on hold for a day and pay with cash or debit. We've had some success in that but awareness on the part of consumers is still very low.

Where do we stand today? As Diane mentioned, we have a commitment on the part of the federal government in the 2014 Budget. The late Minister Flaherty announced and used for the first time the words "the government will work to help lower credit card acceptance costs for merchants." That was good news from our perspective. We have been working since that announcement to try to operationalize the commitment, and we are close. We are expecting in the months ahead to have some decisions out of the federal government that we believe will help, for the first time, lower credit card acceptance costs in Canada; and it can't come soon enough.

Certainly, we thank the leadership of this committee and Senator Ringuette, in particular, for raising awareness of this issue. She has been a terrific champion for small businesses. The committee has done some excellent work in highlighting this issue to the point where we have the federal government close to taking some action on this front, and we are delighted.

The Chair: Thank you for your opening comments.

Ms. Brisebois, in order to frame this, do you view this as a consumer issue or a merchant issue? That leads me to the next question: Do you have evidence that lower acceptance fees result in lower consumer prices?

Ms. Brisebois: I will invite our vice-president, Karl Littler, to respond. He has done quite a bit of work on the consumer side of this issue, so I invite him to speak, if I may.

Karl Littler, Vice President, Retail Council of Canada: Only one study has looked at this issue head on. It was done by Robert J. Shapiro in the United States. The reference point was the U.S. Fed's decision to lower debit fees in the United States, which subsequently was overturned in court. They were sent back to sharpen their pencils and lower them further. Dr. Shapiro studied the price impact in the first year and found that 69 per cent of the $8.5 billion in savings — I think $5.85 billion — had already been passed on to consumers in the first year. I have a copy of that study.

The Chair: Was that a direct result?

Mr. Littler: It was a direct result of lowering the fees.

The Chair: Could you specifically reference the study?

Mr. Littler: Yes. It is a study by Dr. Shapiro. I have a copy here that I could provide to the clerk of the committee for distribution.

The Chair: That would be excellent. Thank you for that response.

I will go to my list of questioners, beginning with the sponsor of the bill, Senator Ringuette.

Senator Ringuette: Thank you both, Diane and Dan, for being with us this morning in our mutual pursuit to deal with this issue. As both of you mentioned, I have looked at the words in the budget speech and am still holding my breath to see what will come of them.

The bill in front of us is a mirror image of what was done in Australia in 2002, I believe. Last July, 28 countries in the EU Parliament introduced legislation to regulate immediately the interstate prices for interchange fees. There is a two-year transition period for the 28 state legislatures to introduce the same bill to fix the rate at 0.3 per cent for all 28 countries.

Certainly, I'm adamant about having decent interchange fees in Canada. The bill in front of us is based on the Australian model. However, I would like to hear the perspectives of both witnesses — and I don't mind amending my bill — on whether it would be preferable in Canada to have the same EU legislation at a fixed rate of 0.3 per cent or whether the Australian interchange fee is adequate.

Mr. Kelly: As you know, Senator Ringuette, CFIB has pursued a different approach rather than the capping of rates as the solution. It's not that we reject that out of hand, but we have tried to use market forces as much as possible to try to come to some long-term solution.

One of our concerns about capping interchange rates is the unintended consequence of the regulation. For example, in Australia where they capped rates at a much lower level, I am sure at a level that most merchants in Canada would welcome, the fees for small business, according to the Reserve Bank of Australia, increased by 24 per cent for small businesses over three years.

Here is my question: If interchange rates were cut significantly, let us say $2 billion to $3 billion was taken out of the credit card processing world by a cap on interchange, would our banking system in Canada just say, "Oh well; we lost $2 billion or $3 billion" and move on, saying "We're just going to permanently accept that?" I suspect not.

We saw this happen also in the United States, where they capped debit card fees because the U.S. had even worse debit card fees than we have in Canada. What happened was that their rates ranged and there was a cap put in place of up to 24 cents per transaction. I will add that, in Canada, our small businesses pay only 5 cents per transaction in many cases here.

So it was still a much higher cap, but what happened? All of the fees went up to the maximum allowable rate. So the transactions that used to come in for lower-cost items — say, if you were buying something for $1 or $2 — instead of paying 8 cents per transaction that then rose to 24 cents per transaction.

The one thing we are concerned about is the unintended consequence of regulation. Would it mean that businesses would save money, or would the banks just find other ways of getting that money out of them in the first place?

Ms. Brisebois: Before I ask Karl to add some comments, I have to go on record to say that Dan and I rarely disagree, but I disagree on that point. So I will let Karl give you a bit more information.

Mr. Littler: There are a few points I'd like to make. One is perhaps a point to add some colour on the issue. We have seen some coverage that suggests that some public servants in Brussels are playing with the market and questioning whether they fully understand market forces.

One of the things to bear in mind is that, of the multitude of countries — and it is now in the order of 30 that have regulated rates — the ideological spectrum is broad, including countries like Switzerland, Australia and Israel all the way to India, China and France — mixed economies and markets. This does not solely involve parliamentarians; it involves central banking authorities, competition authorities. The focus has not been politics or ideology; it's been competition policy and anti-competitive behaviour.

Second, we think it is a bit simplistic to talk about voluntary versus mandatory positioning. In every country that has moved on this — and there have been some voluntary initiatives, such as Mexico and New Zealand — there have been other consent orders. One might view those as voluntary. But to be frank, they have been done with a regulatory stick in the background, so it's not that a bunch of people of their own volition came willingly to the table.

We are not utterly wedded to the outcome. We can see virtues of flexibility in the system. Obviously, it's a dynamic market and conditions change. Frankly, we are looking for a solution that works rather than being bound to any one answer.

I think the suggestion that market forces alone will work on this is an unrealistic outcome. That's why 30-plus countries of every ideological stripe and people who are looking at this from an economist's perspective have made the determination they have made, which is to bring these fees down.

Senator Black: Thank you all very much for being here and providing this perspective. It is very valuable to me.

There are a couple of points that I would like to raise with you to more comprehensively assist my understanding of the issue. I am sure some of the questions are relatively naive but bear with me on that, if you will.

Mr. Littler, are you able to tell me how many of the OECD countries or the G7 countries have moved to regulate the charges as being proposed here?

Mr. Littler: Of course, you have an overarching EU piece within the G7 countries that would affect France, Germany, Italy and the U.K.

Germany is unusual because Germany has rates that are actually comparable to Canada currently, although it would be affected by the overall EU initiative that's currently working its way now with some rapidity through the European Parliament.

France moved some time ago unilaterally, so France has been well out there for some time. That is a process that harkens back five years or so.

I cannot tell you with certainty about Italy, though, again, it would be affected by the EU, as would the U.K. In the case of Italy and the U.K., the rates are markedly lower than they are in the Canadian context.

With respect to the U.S., the rates are quite comparable to a Canadian context. I could expand on that a bit if you want.

Senator Black: Please.

Mr. Littler: We are obviously imputing motive into this, and we have to be careful doing so. There have been moves around the world, and in most cases, there has been some acceptance and restructuring by the credit card networks in order to deal with that — not necessarily enthusiastically, but nevertheless, the systems still operate, rewards cards are still in place and so on.

We tend to see Canada as so "close to home," if you like, for the U.S. market, and the pricing is very similar. We have seen a fairly strenuous defence and pushback around the Canadian context.

One of the things that I think are worth taking notice of is that, in the context of the U.S. Fed's address of the debit issue, Canada's example was cited often and positively as a salutary example and a model for the United States. They did not necessarily see U.S. practices and financial services as always being a beacon on fairness or maintaining competitive behaviour. In this context, Canada has actually already proven to be a model for the U.S. on the debit side.

Senator Black: And on the acceptance side?

Mr. Littler: On the acceptance side, the two are essentially in lockstep currently; the rates are very similar.

Senator Black: Thank you.

Ms. Brisebois, you talked about this issue of cross-subsidization. You are aware what I am asking?

Ms. Brisebois: Yes.

Senator Black: Can you explain that, please?

Ms. Brisebois: The best way to explain it would be to take the growth of the premium credit cards.

Senator Black: Define "premium credit card," please.

Ms. Brisebois: It's a loyalty card. I have one, which is a Visa Infinite card. When I use it, the merchant pays more to accept that card, and my bank gives me points for using the card. I am sure you have noticed in the last year or so that both credit card companies have been aggressive in encouraging everyone to use that card, even to buy milk, or a Diet Coke or a beer at a hockey game, because it's more profitable.

At the end of the day, we have gone from no premium cards in the marketplace — what we could call a "standard credit card" at about 1.5 per cent — to now 30 per cent of the market or more being premium cards at above 2 per cent per transaction. That means that has an impact on retailers' margins, which means that it brings prices up for everybody.

When I walk into a store and I am not using that card, I am still paying for someone's privilege to use that card. Even more ironic — and I need to add that, because that is what I find offensive — is that when the bank is trying to convince me to use their card so that I can enjoy their loyalty program, they are not paying for the loyalty program; all the retailers in Canada are. You are asking your neighbour to pay for your own promotion and marketing.

Senator Black: That is what you meant by cross-subsidization?

Ms. Brisebois: Yes.

Senator Black: Ms. Brisebois, I believe you referred to the fact — I was left with the concept that, where acceptance fees are reduced, as the chair has asked, consumer prices have generally followed in that direction. Is that your evidence?

Mr. Littler: There has only been one definitive study. The Australian authorities looked at it and couldn't really determine anything. They believed that the price pass-through had been achieved, but they couldn't show it definitively. But Dr. Shapiro did study it directly.

The thing is to remember is that retail, as we know, is an extremely competitive market. There are a number of retail models out there trying to offer the lowest price and drive their earnings on volume. We think that Dr. Shapiro's study is very much in keeping in the anecdotal evidence we have.

We did look at some instances that rose in a different context on the tariff reductions brought forward in the 2013 Budget, and we went out and studied the impact of reductions of those margins on prices. There is very clear evidence of where a cost was reduced. We believe, based on Shapiro's empirical work and also general perception of the marketplace and its competitiveness, that it will be passed through.


Senator Hervieux-Payette: Thank you, Ms. Brisebois, for pointing out the work my colleagues did. I encouraged them to get a copy of the 2009 report since it describes the technical workings of the system, something we could briefly cover in our new report, given that people probably will not consult both reports.

It is important to understand how the entire transaction chain works: how much the bank gets, how much Visa and MasterCard get and how much the people who install the systems get. And independent businesses that put these systems in place also have costs to bear.

Mr. Kelly, in your presentation, you say that there is almost zero consumer awareness. In other words, consumers are totally in the dark when it comes to the rather excessive fees they are paying whenever they use their card. Indirect though they may be, consumers are still paying them.

When you say "almost zero," my understanding is that virtually no one in society using a Visa or MasterCard, except perhaps the committee members, is aware of the fact that both merchants and consumers pay a fee.

Do I understand you correctly?


Mr. Kelly: Yes. In fact, senator, the situation is that when a consumer has a credit card, they assume that the annual fee that they might have to receive a premium credit card, often $100 or $120 to a year, together with the interest that they may pay if they carry a balance, are the fees that in fact run the credit card industry in Canada. Of course, those are fees and significant ones, but they pale in comparison to the fees that are collected at the point of sale. In the U.S., they often refer to them as swipe fees. The average consumer has no idea that when they put the credit card into the terminal, that in fact the merchant is losing 2 to 3 per cent of the sale, as the Competition Bureau showed among the highest level of fees in the world for processing transactions.


Senator Hervieux-Payette: That lack of awareness may be why Canadians are the top, or among the top, credit card users in the world.

Earlier, you mentioned China. I do not think the average Chinese consumer receives offers for a premium card on a weekly basis. I doubt the use of such cards is as widespread in China as it is here.

I would like to get a sense of where we stand in terms of how many credit card users we have. France and Israel were two countries you talked about. As far as percentage of credit card users goes, are we among the top three in the world? Ironic though it may be, even though we are blind to the costs associated with using our credit cards, we are still prolific card users.

You also mentioned Germany. Using a credit card to pay for a loaf of bread is not necessarily standard practice there. People in some countries in Europe make limited use of their credit cards. We should not compare ourselves with them, because they tend to put more big ticket items on their credit cards, whereas we are just as likely to use ours at the drug store, supermarket or gas station.

Ms. Brisebois: I want to add to what Mr. Kelly said, if I may. It is important to recognize that one of the big problems in Canada is not that consumers are in the dark about what it costs them to use their credit cards, but rather that they do not realize what it costs us, the retailers and small merchants. The problem is especially acute given that many consumers receive a new card that charges a much higher fee, without ever having even applied for it. That happened to me, and when I tried to send it back, they would not take it.

The real problem for retailers is that this takes the fee from 1.5 per cent to between 2 per cent and 2.5 per cent. The majority of consumers do not know that their new shiny new Visa or MasterCard with the pretty logo costs merchants considerably more. So that lack of awareness is widespread.

As for credit card use elsewhere in the world, I will ask Mr. Littler to speak to that.


Mr. Littler: Anecdotally, we have very significant premium card penetration beginning, frankly, in the wake of the IPOs. MasterCard, I believe, was 2006, Visa 2008. When they became for-profit entities directly rather than associations, we saw aggressive movement to that. I don't have them on a ranked basis, on a world basis. What we did in the other place in front of a committee was bring forward evidence from grocers and general merchandisers about the penetration of premier cards into their markets. I do not have that data here but would certainly be prepared to provide it. They showed a relatively constant use of debit, a decline in cash, an uptick in the use of credit cards, unsurprisingly, but a very substantial portion of that uptick transiting over into premium cards from what had formerly been standard cards. I do have the three examples provided by the CFOs of some very large grocers and general merchandisers, so I can make that available to the committee in the wake of this meeting.


Senator Hervieux-Payette: How do retailers that offer an in-house credit card, like the Bay or Costco, benefit? Do they benefit with respect to a portion of the fee or are they simply going after customer loyalty?

Ms. Brisebois: The first reason is to generate customer loyalty. The second is that, yes, they do benefit in terms of the rate. It is important to keep in mind, however, that their in-house credit cards represent just 2 per cent of all the cards they accept. And that is why even the largest merchants, who are also banks, support our efforts as well as those Mr. Kelly and his association are making. Consumers with a retailer's in-house credit card make up a small market for that retailer. The card is mainly used, as you said, to create customer loyalty.


The Chair: Thank you, Senator Hervieux-Payette, for raising the issue of the study that was done in June 2009 entitled Transparency, Balance and Choice: Canada's Credit Card and Debit Card Systems. I will see that the clerk circulates to each member of the committee a copy of this report, and I would encourage our listening audience to type into the parliamentary website under the Banking Committee, and they will be able to see a copy of this very important report that was done.


Senator Bellemare: I would like to hear each of you respond to the following question. I appreciate that people have reservations about the idea of regulating the credit card system. They would prefer to let the market prevail.

Now an economist would normally say that, in order for that approach to work well, one of the conditions that need to be met is the consumer's having an ideal understanding of prices and opportunities so they can make a decision.

And what you have explained to us makes it quite clear that consumers do not really understand all that goes on behind the scenes, if you will, as far as their credit and debit cards are concerned. For instance, the fee associated with using a debit card is lower than it is for a Visa card, even though a young person, say, using their debit card to pull money out of a bank machine sees that they are being charged $1.50 or $1.75 for the transaction, depending on the bank machine they used.

Does that not underscore the importance of having the fees identified clearly? When people pay taxes, they know how much is going to the federal government and how much is going to the provincial government. Should we not, then, have a system where consumers know that whenever they use their premium Visa card, for example, it is going to cost them X percentage more and that if they use their debit card, it is going to cost them a dollar or what have you. That way, everything is laid out clearly and then there can be real competition, if that is possible.


Mr. Littler: We are very much in favour of disclosure, and I know that's a position that Mr. Kelly will probably want to speak to as well.

Both RCC and CFIB sit on a body called FinPay, which is an advisory body to the Department of Finance. This very issue has been discussed at some length at that committee.

The one thing to bear in mind is that cards cost different amounts in different circumstances and there is huge variability in the cost of individual cards. A particular card might cost more if it's not processed electronically, if it's keyed in, if it's used over the phone. There are "card present" and "card not present" transactions.

In addition to that, of course various individual cards carry different rights. There are three price tranches; they carry different rates in grocery and gasoline where the networks are seeking market penetration from what they do in, say, general merchandise.

An approximation of the cost would be something that's relatively easy to convey to consumers. The precise cost is actually going to be difficult to convey in real time just because of the variability between the cards. Certainly the delta between the cost of a debit card rather than a credit card as a standing proposition could be conveyed.

Mr. Kelly: I have a couple of points on this topic.

The good news is that the federal government's recent Speech from the Throne did promise to ensure that consumers were armed with more information on the cost of their payment. So we're hoping that in this next round of changes that Finance will adopt, this will be part of it.

We at CFIB had suggested that the credit card industry could be required to ensure retailers at the point of sale, on a per-transaction basis, could print the cost of the embedded credit card fees on each receipt if they chose to present that information to the consumer. That was one of recommendations we had made.

The other important part related to this is the credit card offers. When you go to the bank website to choose a credit card right now, it would be next to impossible for you to find out whether or not the card that you are looking at charges a higher fee or a lower fee compared to others as you make that decision.

One of things we have asked the federal government to do, which I believe they are thinking about, is to ensure that in the electronic or paper offers that people receive to choose a credit card it's clear to them the card they are looking at might impose a higher fee to merchants when they go and use that card. Not every consumer will care about that. Some are going to say, "I want my points regardless, I don't care how much the merchant has to pay. These are free." Of course they're wrong.

But there are many consumers, particularly in small and medium-sized businesses, who know that the guy working behind the dry cleaner counter is there 70 hours a week. If they actually knew that by using their premium card they were costing that merchant even more, they might pull out their regular credit card they might have in their wallet or, even better, pay with cash or Interac debit.


Senator Bellemare: Have any countries opted to do that and make the fees clear to consumers?

Ms. Brisebois: I am not aware of a country that has —


Mr. Kelly: I don't believe that is the case. I will say that we are lucky in Canada. We were the first country in the world to adopt a credit card industry code of conduct, and that has cleaned up many of the bad practices. Let's hope we could become the first country in the world to adopt this kind of practice too.

Ms. Brisebois: I have a different opinion on the code of conduct, as Dan knows.

Let me use this example: I think the code of conduct was amazing in relation to ensuring that our merchants could continue to rely on low-cost, flat-rate debit in their store. The code of conduct in fact acted like legislation to a degree when it came to ensuring that Visa and MasterCard could not push their debit card, which was at a percentage fee, what we call ad valorem, in the stores.

Apart from that, the code requires transparency. As one small merchant member of RCC said, it's the difference between getting beaten and being told that tomorrow you're going to get beaten. That's the only difference. I'm going to get hurt, and now the code is telling me, "I'm going to warn you when I hurt you." That's what the code does.

I know I'm contradicting both Dan and my colleague but, having been in retail for 35 years, Mr. Chairman, I can tell you that consumers, when they go to a small business or large business, want to be served well and want to have a product at a specific price and want a specific experience. They don't want an invoice with all sorts of fees on it. They want to know how much they're paying and they want to be out.

The dangerous part about showing fees is that you're in fact developing a gulf between the big businesses that have scale and the small businesses that may not always be able to compete on price.

I think it's important for all of us to not expect consumers to change their habits overnight, but to in fact ensure there's a system in place that forces the players in the payment supply chain to act in a competitive and fair manner.


Senator Massicotte: Thank you all for joining us. This is a very important issue affecting numerous consumers and merchants.

I have confidence in the market. Although I am a firm believer in it, I do clearly recognize that a third party with very little negotiating power is having to absorb the costs. And that is wrong, so I appreciate that we have a problem.

But I would like to play the devil's advocate for a moment. Let us assume that the market is doing what it should, that credit card fees come down and that, as a result, you, as retailers, are forced to lower your prices so consumers can benefit from the lower fees imposed on you. Would that be the case?

We heard about what happened in Australia and the comments of another witness. Why would you want this if it does not benefit you? If we assume the advantage of reduced fees will go straight to the consumer, you are no further ahead than you are now. Why, then, do you feel so strongly about this?

Ms. Brisebois: I am going to ask my colleagues to answer that. If the system were to change and the fees were to drop, retailers would actually benefit tremendously because, as things stand, they are having to pay rent for an apartment they do not live in and should not have to pay for. Both big and small retailers see themselves as consumer ambassadors, if you will. Not only would retailers benefit, but so too would their customers. That would be the first thing I would say. And Mr. Littler and Mr. Kelly no doubt have more to add.


Mr. Littler: Among other things, right now some of the revenues are being diverted to financial services price takers. At a minimum there would be more revenue available in a sense to the retail industry because customers would, by virtue of seeing prices reduced, have a greater amount to spend overall.

Senator Massicotte: I know I'm going to run out of time. The chairman always scolds me for taking too much time, so I'm going to cut you off.

The bottom line is it will reduce your costs. Quite frankly, you think some of that cost will remain with you, the retailer, independent business, and will not get passed to the consumer. The example you used about the American research, two thirds was passed on but one third was not. I presume that's where your self-interest lies.

Ms. Brisebois: Let me give you an example of one of our independent merchants in Fredericton.

Senator Massicotte: One is anecdotal.

Ms. Brisebois: No, it's more than anecdotal considering the costs associated with the constant increases in fees over the last five years and the growth of premium cards. He explained it by saying, "I may not be able to pass it on to the consumer like the big guys do," and I'm using his term, "but it's the difference between having a part-time employee and a full-time employee. I'm a small business. I need to reinvest in my business." Dan can certainly speak on behalf of small business, but that's where we believe a lot of the money will go from a small-business perspective.

Senator Massicotte: Go where?

Ms. Brisebois: To reinvest in their business, which in fact is good for the local economy.

Senator Massicotte: So it will not get passed on to consumers.

Ms. Brisebois: In some cases it may but, from the perspective of a small merchant, if that small merchant can save money on costs that are not necessary, in most cases good merchants will reinvest by employing more people, by enlarging their store or by remodelling their store. It's reinvesting in the community versus going to a credit card company.

Mr. Littler: I will add to that, because I think the senator's point is well taken. There will not be absolute one-to-one sensitivity on pass-through in all instances. Some retail businesses, as one can witness walking down any street or as you hear the tales of woe in some cases, are struggling significantly in order to maintain profitability. For those, the bite is likely to prove more problematic than for those who have been able, through their models, to maintain some profitability.

Our assumption, and obviously the Shapiro study is only one year and is a particular slice, is that the lion's share will be passed on, but it won't be identical for each and every merchant in each and every setting. There will be cases certainly where merchants, frankly, are struggling to maintain an acceptable return and where some part of that is apt to remain in the merchant and, as noted, potentially be invested in job creation and otherwise capitalized in the business adequately.

Mr. Kelly: We also have to do a reality check here. While Senator Ringuette's bill does propose significant rate reductions, I would hazard a guess that what the federal government comes up with will be far more modest than what she is proposing. If there is a small rate reduction, I have to tell you that we have merchants who have been swallowing 30 to 40 per cent increases in these fees over the last several years. Of course those fees ultimately have to be embedded in consumer prices but, along the way, many merchants are saying they are having to swallow those fee increases because they can't increase their prices. Otherwise, they price themselves out of competitiveness. For a small merchant, that can be a really critical issue.

I agree. I don't think there will be a dollar-for-dollar reduction in these fees. Yes, some will rest with the merchant, but the merchant has also been taking it on the chin for years and years, enduring these rapid fee increases. If there is a bit of a break, I think that that would be quite welcome news from a merchant's perspective, and I have to tell you also from an economy-wide perspective if we do increase the competitiveness and the sustainability of our retail community, our merchant community, in Canada.

Senator Massicotte: We get position papers ahead of the hearing here, but we're getting some feedback, some push back, from the consumer associations, for instance, saying, "Consumers benefit from the existing program, so why would we reduce the fees? We won't see a benefit." That will probably be the most significant concern re my colleague's bill, which has a lot of merit given the configuration of the structure. If that's the case, would you agree that her bill should be amended to make sure that the federal government oversees it to make sure the cost savings goes down and benefits consumers?

Mr. Kelly: The federal government actually in the budget passage with respect to —

Senator Massicotte: Would you agree to amend the bill to simply say that?

Mr. Kelly: The budget does say, by Minister Flaherty, that when the government reduces or lowers credit card acceptance fees for merchants while encouraging merchants to lower fees for consumers. I think the federal government is quite attentive to the fact and is not looking to have a win for merchants and zero win for consumers. Their hope is they would be overseeing this to ensure that there are savings to merchants. We have to remember that right now we're dealing with an oligopoly of credit card companies with no government —

The Chair: Concluding question, Senator Massicotte?

Mr. Kelly: — tens of thousands of merchants —

Senator Massicotte: Just to make the point, if that is the case, you would not object to more strict wording in a proposed bill to make sure the saving does go down to consumers. What you read to me about Minister Flaherty, which I have a lot of respect for, as we all do, is very generic. How about stronger wording to make sure those savings go down to consumers?

Mr. Kelly: We'd be delighted to review any words around that. I suspect that the lion's share —

The Chair: Thank you, Mr. Kelly. The point has been established.

Mr. Kelly: — would go to consumers. Ultimately —

The Chair: Thank you, Mr. Kelly. I'm going to Senator Unger.

Senator Unger: Thank you, everyone. Your presentations are most enlightening. I would like to ask a general question, and a ballpark answer is all I'm looking for. I carry an American Express card as well. How do their fees compare with Visa and MasterCard? I have been asked by some businesses when I was going to use my AmEx card to consider using Visa or MasterCard, so I assume it's higher. Do you have just a ballpark figure of how much higher?

Mr. Littler: I don't have the American Express numbers on me. Traditionally, it has been higher. They have a different model because they are both the acquirer and the network, so they have to go out and negotiate individually. For certain kinds of businesses, particularly in the hospitality industry and travel, it's proved fairly attractive. It's obviously a card that's quite present in that market. The fundamental difference here is they actually have to go out and negotiate essentially in their own right. There are limits to their market penetration, so we see more balance with American Express. I think you would rightly state that even as against super premium cards, the new high rate cards, in most cases, American Express would be higher. There are exceptions to that. Costco has a proprietary American Express card, and that would clearly be offering Costco a notably lower rate. They have made some attempts to break into broader merchandising in a relatively small market share. The two networks are at 90 per cent level of market share.

Mr. Kelly: The Visa-MasterCard fees range between 1.5 to 3 per cent, on average. The 1.5 per cent is rare. The American Express cards would be 3 per cent or higher. Generally, for a small merchant, it would be somewhere between 3 and 4.5 per cent to accept an American Express card versus a card that would be 2 to 3 per cent for a Visa or MasterCard, even at the high end.

Small firms have a love-hate relationship with American Express. The one thing that we do like about the American Express model is that all American Express cards, even the gold or platinum or whatever, carry the same fee, so the merchant does know when they receive an American Express transaction what they are going to be paying, especially given that they have negotiated that directly with American Express itself. That, from a transparency perspective, is good, but from a rate perspective, not so good.

The Chair: That concludes round 1. I will go to round 2 and the deputy chair, Senator Hervieux-Payette, please.

Senator Hervieux-Payette: I have just two short questions. Percentage versus flat fee.


Which do you prefer? Also, I want to ask you about regulations and statutes elsewhere. Where lower fees exist, did the government get involved, generally speaking? I am referring to involvement in the form of regulations or statutes. Are there any cases in which a lower rate was achieved country-wide by mutual agreement? Or in those places that have a reasonable rate, was it thanks to government involvement?

Ms. Brisebois: The short answer is no. It was not achieved in that way. No one willingly came to the table to say they would try to lower the fees absorbed by poor merchants.


This is a windfall. Who wouldn't want to be in that business today? It's quite amazing. So no.

In regards to ad valorem versus flat fee, obviously that's one of the reasons why the retail council fought so hard to make sure that Interac debit remained viable in Canada, number one, because it is a flat fee. It is a cost-effective flat fee. At the end of the month or the end the week, the merchant knows exactly how much it costs. It's not Russian roulette. They can calculate and take it into account when they price their goods. Ad valorem is acceptable if, as Dan mentioned in the example with American Express, you have negotiated and you know what the fee is and all the cards under that brand that are presented in your store carry that rate. That's assuming the rate is reasonable, obviously.

Ad velorum, when it moves, is indeed challenging. A merchant at the end of the month does not know what the cost will be. When the merchant accepts a card today, as you know you insert your card and the cashier does not usually touch the card; so there is no way to even know what kind of card you are using.


Senator Bellemare: I may sound a bit naive with this question, but I would like to know the answer. Occasionally, when I was about to pay for a purchase in a store, the clerk would tell me that if I paid in cash, the price would be lower, so I would hesitate as to my method of payment. Why not make price reductions common practice depending on whether a debit card or a credit card was being used?


Mr. Littler: A lot of hope was placed in the notion of discounting around the time of the Code of Conduct for the Credit and Debit Card Industry in Canada, but not by us as it was a position of the Department of Finance. There were several problems with it. Some merchants use it on a broader basis. Mountain Equipment Co-op used to regularly provide a discount for cash, but they abandoned the practice.

First, you may have an existing customer base that is already paying with cash and with debit. In order to discount and provide them with an incentive, you have a significant payout to people for doing what they would do already before you get one marginal user that you would bring over from credit. You would have to adjust your prices in effect to gross them up for that additional payout.

Second, it is a dynamic and competitive market. Given the ability of the networks to dictate prices more or less at will, then if there's an incentive on the cash and debit side you get a counter-proposal from the credit side and you are in a kind of bidding war for the customer's business.

Mr. Kelly: I want to add on that point that there have been many studies about the impact of discounting versus surcharging. When you look at the plastic bag fee that was added in Toronto — 5 cents for a plastic bag — consumption of plastic bags dropped by 70 per cent in that instance because consumers hate surcharges. Unfortunately, surcharging is disallowed by the credit card industry. It was the subject of a review by the Competition Bureau and the Competition Tribunal. The Competition Bureau wanted to add that to the list of options and the Competition Tribunal said there were anti-competitive practices but agreed that consumers would dislike surcharging and kicked the ball to the federal government to ask them to take action. Surcharging would be far more effective in changing consumer behaviour than discounting would be.

Ms. Brisebois: May I add?

The Chair: It is very tight and we are running short of time. Senator Rivard.


Senator Rivard: I may not sound naive with my question, but I would like to give an example that ties in to the senator's question earlier. What can we do to find out the true cost of using a credit card? One thing, in particular, surprised me. If you buy a plane ticket through a travel agent, you might be surprised to find out that the airline, Air Canada, for instance, is still the one you settle up with. The travel agent's profit margin is so slim on the sale of a plane ticket that they prefer to let the airline absorb the fee associated with payment via credit card. But if you choose a trip package with airfare included, and the travel agent is the one who adds tour and hotel costs, two amounts will appear on your bill: the amount that was paid by cheque or cash and the amount that was paid by credit card. The difference is equivalent to somewhere between 2 per cent and 2.5 per cent. And there you can see the fee associated with a payment via credit card. That was just a comment.

Picking up on Senator Bellemare's example, I want to discuss the matter of the bill listing two separate amounts, or prices. In some countries, businesses in the tourism industry especially will ask you whether you are using a credit card to pay and let you know that if you pay with cash, the price will be lower. That practice, which is quite common in the hospitality sector in some countries, leads me to wonder whether those businesses are not trying to lower their tax bill and evade taxes. So, across the board, that may be the risk associated with cash payments.


The Chair: Senator Rivard, I think you've asked the question. Can we have the answer please?

Mr. Littler: One person's discount could conceivably be another person's surcharge, depending on how you structured your prices at the outset. If you had set your prices at a level such that you could give a discount, then that is conceivably how it could be done.

I should note on behalf of the RCC that I think Diane was going to do this. We have not favoured surcharging for a variety of reasons. First, it is imprecise; and second, it's susceptible to gouging, although one could impose a cap on surcharges. This is where we part company with the CFIB on this issue. Third, we don't think it is especially appealing to consumers.

The Chair: Thank you, Mr. Littler. If you have parted company, we will let Mr. Kelly have a word.

Mr. Kelly: The two pricing tiers is an option that we think has some value in Canada. I should note two quick things. The federal government allows surcharging. When you pay your taxes to the CRA, you can pay by credit card if you agree to pay an additional fee. Some companies, Ottawa taxis included, allow surcharging where governments allow surcharging to happen; but that option is not available to retail merchants across Canada.

The Chair: For the concluding question, I go to the sponsor of the bill, Senator Ringuette.

Senator Ringuette: Thank you all for being here. Collectively we must acknowledge that the 2010 code of conduct was a mild advancement but did not address the key issue: the cost to merchants that is passed on to consumers in Canada to the tune of more than $5 billion in excessive fees. We are looking at $20 billion from the Canadian economy that has not been activated for consumers and for our small and medium-sized businesses. The Competition Tribunal indicated that legislation was necessary.

I go back to my original question: Are we less intelligent with regard to putting maximum fees on the use of credit cards for merchants in Canada than in the 28 EU countries? Can we expect our merchants, who are being asked to compete, to have to compete on such an uneven playing field?

The Chair: Final question; final answers. Ms. Brisebois?

Ms. Brisebois: I will let Mr. Littler answer.

Mr. Littler: There are various models on this around the world. I don't think any one of them has given us a perfect or precise answer. It is well beyond the EU. Many other countries have taken this path in some very large economies.

We believe that it is appropriate to move against the rates. We do not see this as something that will be solved with a voluntary outcome. A shotgun wedding possibly, but a truly voluntary outcome we do not see. We believe it is entirely appropriate that the government use public policy to combat monopolistic, anti-competitive behaviour and its negative impact ultimately on consumers.

The Chair: Concluding answer for Mr. Kelly.

Mr. Kelly: You have done on awesome job of raising awareness on this issue. We are so close to having some progress on this from the federal government. We are holding out hope that there will be a meaningful rate reduction announced in the weeks ahead by the federal government through negotiation with the credit card companies. We are holding the federal government to its commitment in the budget.

However, if that does not work, the appetite for regulation amongst small and medium-sized firms will rise. Your bill is certainly a welcome measure in that process.

The Chair: To our panelists, you can tell by the spirited questions and answers that it has been an extremely good session. You have been very helpful to our deliberations. On behalf of each member of the committee, I thank you.

Colleagues, as I mentioned in my opening remarks, in this last hour, the committee is holding its second meeting on Bill S-202, An Act to amend the Payment Card Networks Act (credit card acceptance fees). We shall hear from representatives from three conservation associations. We have in the committee room Greg Farrant, Manager of Government Affairs and Policy, Ontario Federation of Anglers and Hunters. By video conference from Vancouver, we have Sarah McNeil, Development Coordinator for the B.C. Wildlife Federation. And I gather not yet plugged in, we will have Darrell Crabbe, Executive Director of the Saskatchewan Wildlife Federation.

It is my view that we should move forward even though we do not have Mr. Crabbe at the moment. Hopefully, we will plug in at some point. With that, I turn the floor over to Mr. Farrant for your opening remarks. Thank you for being with us.

Greg Farrant, Manager, Government Affairs and Policy, Ontario Federation of Anglers and Hunters: Good morning, Mr. Chair, honourable senators, ladies and gentlemen and my colleagues in B.C. and Saskatchewan.

On behalf of the Ontario Federation of Anglers and Hunters, our 150,000 members, supporters and subscribers and our 720 member clubs across Ontario, I am pleased to appear before you this morning to speak briefly on Bill S-202.

The OFAH was founded as an organization in 1928 and is the largest non-profit charitable conservation-based organization in Ontario and one of the largest in this country. We work extensively with a broad cross-section of federal and provincial departments and our provincial and territorial affiliates with respect to national and regional programs impacting on fish and wildlife populations. We also deliver a number of province-wide conservation-based programs through our head office in Peterborough, Ontario, including the Lake Ontario Atlantic Salmon Restoration Program and our award-winning Invading Species Awareness Program and Community Stream Steward Program.

During my appearance here today, my colleagues at the Manitoba Wildlife Federation who could not be present have asked me to represent their organization as well, their 14,000 members and 150 member clubs across Manitoba, given that they concur with our position on the bill. They were founded in 1944, and, like us, they are dedicated to the conservation and sustainable use of fish and wildlife habitat and the continuation of healthy fish and wildlife populations.

Although the OFAH and I personally have had many occasions to appear before standing committees of the house, including Finance to speak on specific budget items, our appearances before committees are usually confined to those dealing with the environment, fisheries and oceans, and legal and public safety issues, so my appearance here today is a bit unusual. However, such is the importance of this bill to us, and, in particular, a portion of the bill to which I will refer momentarily, that it is of critical importance to our organization and to many of our partner organizations across the country, including those you will be hearing from today.

As a background to my comments, I will give you just an idea of who we are and what we do to give you our raison d'être for appearing here today. We employ a large number of fish and wildlife biologists who work on the development and delivery of dozens of conservation programs across the province. We are also involved in a number of national programs in cooperation with the federal government and national and international partners.

However, as a solely member-based organization, we also employ a significant number of staff at our head office who maintain and service a very large membership base that is the underpinning of our organization. Given this large membership, you can imagine the number of transaction that our staff process each year, as new members join the organization, current members renew their membership and others provide support through a variety of financial avenues.

The vast majority of these transactions are completed using credited cards, as are the majority of purchases from our retail store and the Ontario Hunter Education Program that we deliver on behalf of the Province of Ontario. That program alone saw 25,000 students take the course last year, meaning that hundreds of instructors ordered and paid for teaching materials strictly with credit cards.

The nature of our business creates thousands of smaller transactions each year that result in more credit card fees. The current situation favours merchants and others who have a low volume of transactions for higher dollar amounts, which puts us and others like us at a decided disadvantage. For example, for the three months from March 1 to May 31, we processed on average 4,534 transactions per month with transaction fees of $8,300 per month. Over the course of a calendar year, we process approximately 55,000 transactions with transaction fees just under $100,000. As you can imagine, for a charitable non-profit, these fees are a considerable burden.

With that in mind, I will speak specifically to a small but significant section of the legislation before you. Assuming that the bill passes in its current form, proposed paragraph 10(1)(a) would provide an exemption from credit card acceptance fees for charities like ours. For an organization that depends heavily on membership fees and fundraising to fund our conservation and education programs, the cost savings would be invaluable and could be directed instead to a number of these conservation-based programs that otherwise might go begging for funds.

Members of the committee will also know that banks, as mentioned earlier today, charge higher transaction fees for these premium or affinity cards that offer a number of incentives for user and are multiplying by the hundreds. There are more added each day, and the costs of doing business, especially for charitable non-profits like us, continue to rise.

Also, as noted earlier, in the federal budget tabled this year the government made particular mention of the fact that Canada has among the highest credit card acceptance fees in the world. In light of that, they pledged to work with stakeholders like us to promote fair and transparent practices to help lower credit card acceptance costs.

Passage of Bill S-202 in its current form is another means of reaching that laudable goal and will alleviate some of the burdens faced by the charitable, non-profit sector with respect to credit card acceptance fees. We thank the Harper government for their commitment, and obviously we thank and support Senator Ringuette for her initiative which will go a long way toward that goal. We urge you to support this bill as it stands.

The Chair: Ms. McNeil, the floor is yours.

Sarah McNeil, Development Coordinator, BC Wildlife Federation: Thank you. Like my colleague from the Ontario Federation of Anglers and Hunters, I would like to thank you for the opportunity to come to speak to you today.

I'm here on behalf of my colleagues at the B.C. Wildlife Federation, our 43,000 members across the province and 110 member clubs and on behalf of all British Columbians.

Like the Ontario Federation of Anglers and Hunters and the Saskatchewan Wildlife Federation, the B.C. Wildlife Federation is a province-wide voluntary conservation organization. We represent all British Columbians whose aims are to protect, enhance and promote the wise use of the environment on behalf of present and future generations.

The B.C. Wildlife Federation can be traced back to the 1890s, which is when some of our current clubs were founded. This makes the B.C. Wildlife Federation the largest and oldest conservation organization in the province. We were incorporated in 1951 and became a registered charity in 1969, so we have a long and proud history here in British Columbia. The conservation and sustainability of B.C.'s fish, wildlife and habitat resources are the priority goal of all 43,000 members of our organization.

Briefly, a bit about the federation and what we do before I speak directly to Bill S-202.

The goal of the B.C. Wildlife Federation is to promote British Columbians' use and enjoyment of fish, wildlife and outdoor resources and to become the recognized and credible leader of conservation in British Columbia.

In order to do that, it's critical that we are able to have a strategic, effective and efficient business practice which will ensure that the organization is financially healthy moving forward.

In order to increase investment in fish, wildlife and habitat management in the province and to increase opportunities for hunting, fishing and outdoor recreation, it's imperative that we are an effective and financially sound organization that's able to serve all 43,000 members and the 4.25 million British Columbians who live in the province and enjoy the outdoor resources that the province has to offer.

We rely heavily on volunteers and voluntary stewardship in our organization. The vast majority of our 43,000 members, more than 64 per cent, engage in volunteer activities throughout the province each year. The vast majority of those donate more than 20 hours per year in volunteer stewardship. We have a strong and committed membership base.

In order to support them and the conservation efforts that they are constantly working at, it's critical that BCWF is strong financially, and that's where the proposed amendments to Bill S-202 will be incredibly impactful for the B.C. Wildlife Federation.

Like the Ontario Federation of Anglers and Hunters, our organization has a large number of credit card transactions for a small fee. For example, all 43,000 B.C. Wildlife Federation members purchase a membership each year, the vast majority of which are purchased by credit card. These are small dollar transactions, but they result in a large number of fees with a significant impact on our organization.

In 2013, the B.C. Wildlife Federation paid more than $14,000 in credit card fees, and this year we're on track to have more than $15,000 in credit card fees. For an organization as small as ours, engaging in critical conservation work across the province, this dollar figure is significant. Reducing these credit card fees would provide access to unrestricted funds that will fund our many conservation and youth programs across the province.

With that in mind, the B.C. Wildlife Federation can unequivocally support the proposed changes to Bill S-202. On behalf of the federation and my colleagues there, I would like to thank you for the opportunity to speak with you this morning.

The Chair: Thank you very much for your presentation.

Regretfully, we are still having problems tying in Mr. Crabbe, but we will continue with the questions at this point.

Senator Ringuette: I need to thank you not only for appearing in front of the committee but also for having taken notice of the bill and contacting my office in support. It is with heartfelt thanks that I acknowledge your recognition of the impact on your organization.

Mr. Farrant, you have identified $100,000 of credit card fees in your different operations that are removed from your operating budget. That's considerable.

Mr. Farrant: Yes, it is indeed. It is that amount of money. Our chief financial officer was very scrupulous in looking at those numbers. It's not just the memberships, but we have a retail operation. There are people who are engaged in a monthly giving program to the federation, and their credit cards are automatically deducted 12 times a year for that. As Sarah noted, that's 12 small transactions for just one person.

That $100,000 can go a long way in terms of providing for other conservation and education programs on the ground that we currently spend in credit card acceptance fees.

It was mentioned earlier, too, by the CFIB and the Retail Council of Canada about the different rates on premium versus regular cards. The CFIB in the past has said it's basically the difference between 1.75 and 2.71 per cent. Of course we have no control whatsoever over what cards our members will be using. As more and more of these premium cards come on the market — and there are hundreds of them now — and more and more people use them — and I have to admit I have one myself — the fees continue to go up and it's hard for us to estimate just where that will end.

Senator Ringuette: This may be a question to all three of you. Have you tried in recent years to negotiate a reduction in price as a non-profit organization with either Visa or MasterCard?

Mr. Farrant: The best answer I can give you from an OFAH perspective is if we have tried — and I can't answer for sure that we have, but we work closely with a couple of the large banks that we do our banking with — there has been no movement on that for our organization. I can't speak for B.C. or Saskatchewan in that regard.

Ms. McNeil: We have the same experience. I can't speak directly to whether or not that request has been made through our organization but, if it has been made, it has been made unsuccessfully as we're continuing to pay the very high fees.

The Chair: Thank you very much.

Mr. Crabbe is now plugged in with us. Do you have an opening statement, sir, that you would like to make?

Darrell Crabbe, Executive Director, Saskatchewan Wildlife Federation: If I could, please.

The Chair: Go ahead.

Mr. Crabbe: Thank you for this opportunity. The Saskatchewan Wildlife Federation represents 34,000 members from approximately 121 branches across our province. We have numerous programs and initiatives that we finance through fundraising, including a land trust that we presently hold 67,000 acres in; an education facility that provides outdoor education for youth, women and secondary education students; a fisheries enhancement division; and an education department.

In addition to hundreds of fundraising events and trade shows each year, we also provide for the use of credit cards for our annual convention, daily merchandise purchases online and certainly telephone donations.

Annually, the SWF expenses thousands of dollars to provide this service to our members, donors and supporters as is necessary in today's business environment.

All non-profit, registered charitable organizations strive to attain the highest possible level of funding we can generate to our programs and initiatives, with the very minimum of administrative expenses. Our patrons expect that their dollars are making a difference on the ground, and certainly the SWF and other organizations, like OFAH and B.C. Wildlife Federation, leave no stone unturned to ensure those funds are spent accordingly. However, the reality is that there is a cost to doing business, and we must stay viable to provide these services and programs that no other sector of society is providing, and credit card fees and transaction fees are part of that cost.

Another aspect I would like this committee to consider — and it certainly may already have been addressed by Mr. Farrant — is that many of our program dollars are generally able to be leveraged with other corporate, provincial or possibly federal programs. This may, in fact, double, triple or even quadruple our impact to our programs and the benefits of Canadians and the environment. Every dollar we can save can potentially generate several dollars on the ground.


Senator Rivard: We heard from witnesses about how the removal of credit card acceptance fees for charities would be applied under paragraph 10(1)(a). And you are very pleased about the fact that charities will be exempt from having to pay credit card acceptance fees.

I want to point out the difference between charities, which have the right to issue tax receipts, and other organizations. Oxfam and UNICEF come to mind. I do not see how paragraph 10(1)(a) of the bill would apply to you, as a non-profit organization.

When it comes time to propose amendments, the committee will have to decide whether it wishes to add for-profit or non-profit organizations, because as I see it, you do not qualify as a charity.


Mr. Farrant: With all respect, senator, the OFAH — and I will just speak for OFAH — is a charitable non-profit. We are a registered charity with the federal government in this country. Yes, indeed, we would benefit under those auspices.


Senator Rivard: The bill refers to charities. I recognize that yours is an extremely important organization and I would even be in favour of going down this road, but the bill would need to state that the provision also applies to non- profit organizations like yours.

If I want to join your organization, I have to pay you an annual membership fee, and that will make you, and perhaps me as well, quite happy. But I will not be entitled to receive a tax receipt that would allow me to deduct the contribution on my income tax return.

Hence the reason for the "charity" designation. The money is collected in order to be distributed. Just take OXFAM, UNICEF or the Red Cross for example, and the list goes on and on. I am not trying to minimize your organization's value, but under the bill, you are considered a non-profit organization, not a charity.


The Chair: Do I understand, Mr. Farrant, that you do issue tax receipts?

Mr. Farrant: Yes, we do, indeed.

The Chair: So you are a charitable organization.

Mr. Farrant: Our donations come in many forms, not just financially; they also come in the form of, for instance, people who have donated land. The land that our head office sits on and our fish and wildlife heritage centre next door, which is a $2 million educational facility that was built by donation — all donation, no membership fees. We are able to issue tax receipts for those donations.

The Chair: Mr. Crabbe, do you issue tax receipts?

Mr. Crabbe: Yes, sir. We also have charitable status.

The Chair: You do as well. Thank you.

Ms. McNeil, do you issue tax receipts?

Ms. McNeil: Yes, we do. We also have charitable status and can issue tax receipts for all donations.

The Chair: Thank you very much. Question answered very clearly.

Senator Greene: First of all, I would like to congratulate Senator Ringuette for her excellent bill.

I have two simple questions, and you can all answer them.

Does this represent the ideal bill for you or are there amendments you'd like to offer?

Mr. Farrant: If I may, I will speak to it quickly. The bill, as it stands right now, we support.

The Chair: Comments from Mr. Crabbe?

Mr. Crabbe: Absolutely, I would echo Mr. Farrant's statement that we support the bill as it is presented today.

The Chair: Thank you.

Ms. McNeil?

Ms. McNeil: Yes, I would agree with my colleagues in Ontario and Saskatchewan. We support the bill as it stands.

The Chair: We are getting very crisp answers to very crisp questions. It shows how wonderfully it can work.


Senator Bellemare: Some premium credit cards let holders donate their reward points to a charity. Is that a common practice as far as your organizations are concerned? Do you receive donations in the form of reward points that credit card holders have built up?


Mr. Farrant: I'm not aware that we do, senator. I can tell you that we do have an affinity card which is with one of the major banks. That particular bank, depending on the level of transactions throughout the year — and it's just a regular card; it's not a premium card; it's an affinity card — that bank turns around and gives us, or donates to us, a considerable amount of cash at our annual conference every year for fish and wildlife projects. But I'm not aware that we are able to take points or that anybody gives us any points through their cards right now, no.

Mr. Crabbe: Thank you, senator, for bringing it up. I've never heard of that option, but I'm certainly going to investigate it.

The Chair: Ms. McNeil, have you heard of that option?

Ms. McNeil: Like the Ontario federation has an affinity card where we receive a percentage donation of transactions made by cardholders throughout the year back to our organization as a donation. But I'm not aware of being able to receive points as a donation from credit cards.


Senator Bellemare: My second question has to do with the use of bitcoins, which is said to significantly lower transaction fees. Would that prompt you to encourage bitcoin donations?


The Chair: They are certainly crisp questions this morning. Mr. Farrant, are you prepared to accept bitcoins?

Mr. Farrant: They're crisp questions, and that one I don't have an answer for, senator. I'm sorry.

The Chair: We'll try with our guests on video conference. Does anyone expect to accept bitcoins for membership in your associations?

Mr. Crabbe: We would accept green and other products before that, I think.

Ms. McNeil: One comment that I'd like to make regarding bitcoins: Due to the nature of our member base and our supporters, many of whom tend to be of an older generation and from rural areas, I think there is still some hesitancy and perhaps distrust around electronic currency, such as bitcoins. I'm not sure that in the immediate future that's something that would be particularly useful, given the demographic of our members.

The Chair: So as of this moment you are not accepting bitcoins, I gather from your comment.

Ms. McNeil: No.

The Chair: Thank you for the questions. I will go to Senator Ringuette, the sponsor of the bill, for the concluding question not only of our committee meeting today but of this session.

Senator Ringuette: Certainly I would like to reiterate my thanks for your support. I guess that Senator Bellemare's question and your answers in regard to the affinity card giving you back what you call the donation, for which I suspect they would get a tax receipt for what they call a donation and what for consumers is called a cashback.

Mr. Farrant: That's a good question, senator. I don't have the answer to that. Maybe one of my colleagues — maybe Sarah in particular, since she has the same sort of arrangement — can answer that question. I don't know, honestly, whether we provide the bank with a tax receipt or not, or if it's a straight donation.

Ms. McNeil: I believe that in our arrangement they do not receive a tax receipt, because it's almost a donation in exchange for a benefit, more like a sponsorship. So it's an exchange. They get a benefit, and the benefit is our organization promoting that card to our members. So there is not a tax receipt issued in that case. But I would have to double-check, because I'm not 100 per cent certain.

Senator Ringuette: Could you check? If so, could you give the information?

Mr. Crabbe: If I could comment. We also have an affinity card. I should have brought that up. I'm an accountant by trade, one of those boring people. It's a much better option for those credit card companies to donate those dollars or give us those dollars based on a sponsorship, because then they get to write off 100 per cent of that donation, whereas a donation with a taxable receipt may not.

Senator Ringuette: Thank you very much for pointing that out to me. I guess that reinforces my determination for zero merchant fees for charities. Thank you.

The Chair: Thank you very much to our witnesses. We express our great appreciation for your appearance today. You have been very helpful in our deliberations. On behalf of the members of the committee, we thank you.

On that, I express to members of the committee a good summer to you. This meeting is terminated.

(The committee adjourned.)