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.
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Mr. Kelly: The federal government actually in the budget passage
with respect to —
Senator Massicotte: Would you agree to amend the bill to simply
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
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: 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
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
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
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
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
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
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
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
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
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
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
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: 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,
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
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.