Statement made on 03 June 2010 by Senator Pierrette Ringuette
Hon. Pierrette Ringuette:
Honourable senators, on May 13, the United States Senate approved an amendment to their financial reform bill that will help small businesses by reducing swipe fees, also known as interchange fees, charged by major credit card companies on every debit transaction. The amendment received broad and bipartisan support, even from some of the most conservative of Republican senators.
I would like to congratulate our counterparts in the U.S. Senate for taking such an important step towards protecting the interests of small business.
In the U.S., these debit interchange fees are around 1 to 2 per cent — far higher than the cost to process the transaction. These fees cut into the razor-thin profit margins of small businesses on every sale using a credit or debit card.
Senator Durbin's amendment will authorize the U.S. Federal Reserve to create capping rules that will ensure that debit interchange fees are reasonable and proportional to the actual processing cost of the transaction. The amendment will also prevent credit card companies from penalizing businesses for offering discounts to consumers using competing card networks, cash, cheques or debit cards. It will allow businesses to decline credit cards for small purchases, as the fees may be higher than the profit of the sale.
These measures will give small businesses more power in dealing with the large credit card companies and will work to limit uncompetitive practices.
Honourable senators, we have the same issue in Canada and we should not sit back and allow our small businesses to be taken advantage of.
Last year, a number of recommendations were made by the Standing Senate Committee on Banking, Trade and Commerce during its study of credit and debit cards in Canada that would help put control back into the hands of small businesses and consumers.
One recommendation was that the federal government create an oversight board that would monitor and ensure fairness in credit and debit card payments systems through recommendations on fees and rates to the Minister of Finance. The government should extend this mandate to the existing Office of the Superintendent of Financial Institutions, which already has access to and works with the Canadian financial industry.
Increased competition is often cited as the cornerstone of a healthy economy. However, as shown by the U.S. experience, these new competitors use their significant network of credit card holders and considerable assets to drive small players out of the marketplace to quickly achieve market dominance.
As their market share increases, so do their fees, with one particular point of concern being the introduction of fees that reflect a percentage of the purchase cost. With zero risk involved in the transaction, and processing costs being even, honourable senators, the approval of the U.S. Senator Durbin's amendment shows that this is an issue that transcends political partisanship and that proper legislation has a place in ensuring a healthy, competitive marketplace.
I am happy to see the U.S. Senate is following the steps of Australia, New Zealand and other nations. I urge honourable senators to listen to the needs of Canadians. Let us not be the last developed country to adopt changes that would provide reasonable fees and rates for Canadian consumers and Canadian small businesses.