Posted on 03 June 2010
OTTAWA – Today, Senator Pierrette Ringuette congratulated the United States Senate for the bipartisan approval of US Senator Richard Durbin’s amendment to the financial reform bill.
Senator Durbin’s amendment aims to help small businesses by authorizing the US Federal Reserve to create capping rules ensuring that debit card swipe fees, also known as interchange fees, that are charged by the major credit card companies will be reasonable and proportional to the actual processing cost of the transaction.
“I would like to congratulate our counterparts in the US senate for taking such an important step towards protecting the interests of small business” said Senator Ringuette in the Senate Chamber today. “These measures will give small businesses more power in dealing with the large credit card companies and will work to limit uncompetitive practices.”
Senator Ringuette recently re-introduced Senate Public Bill S-201, An Act to amend the Office of the Superintendent of Financial Institutions Act (credit and debit cards), that will enact similar changes in Canada.
Bill S-201 arose from recommendations made by the Standing Senate Committee on Banking, Trade and Commerce during its study of credit and debit cards in Canada. The committee urged the government to create an oversight board which would monitor and ensure fairness in credit and debit card payments systems through recommendations on fees and rates to the Minister of Finance. Bill S-201takes this mandate and applies it to the existing Office of the Superintendent of Financial Institutions, which already has access to and works with the Canadian financial industry.
Senator Ringuette is urging Senators from all parties to support the measure, saying “let us not be the last developed country to adopt changes that would provide reasonable fees and rates for Canadian small consumers and Canadian small business.”
A copy of the full text of the statement is below.
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For Additional Information:
Tim Rosenburgh
Office of Senator Pierrette Ringuette
(613) 943-3645
Remarks regarding Senator Richard Durbin’s financial reform amendment regarding debit card transactions
Hon. Pierrette Ringuette:
Honourable Senators, on May 13th the US Senate approved an amendment to the financial reform bill that will help small businesses by reducing the swipe fees, also known as interchange fees, that are 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 US senate for taking such an important step towards protecting the interests of small business.
In the US, these debit interchange fees are around 1-2%, far higher than the cost to process the transaction and cutting into the razor thin profit margins of small businesses on every sale using a credit card for debit transactions.
Senator Durbin’s amendment will authorize the US Federal Reserve to create 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, cheque, or debit cards. It will also 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 which 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 to a healthy economy, however, as shown by the US experience, these new competitors used their significant network of credit card holders and considerable assets to drive small players out of the market place and quickly achieve market dominance.
As their market share increased, so did their fees. 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 process costs being even across all transactions regardless of amount, there is no reason for these types of practices to exist.
Honourable senators, the approval of US Senator Durbin’s amendment shows that this is an issue that transcends partisan politics and that proper legislation has a place in ensuring a healthy, competitive marketplace for all citizens; this issue has no border. I am happy to see that the US Senate is following the steps of Australia, New Zealand, and other nations.
I urge my fellow 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 business.
Thank you.