A walk that put credit card fees in Joe Oliver’s sights
In 2013, I took a walk with then Minister of Natural Resources Joe Oliver in his Toronto riding. It was Small Business Saturday and we were visiting CFIB members shops. The clear message we received from the owners who greeted us at nearly every second door that day was that the fees imposed by credit card companies were too high, and getting worse.
I was glad Oliver was able to hear this feedback firsthand, and it seemed even more fortuitous when he was named Minister of Finance this spring. The visits served to strengthen my resolve to stop the race for ever-higher fees for small businesses.
Last November, an agreement was reached on an industry-led deal that will bring savings to merchants across the country, who, together with consumers, pay between $5 billion and $7 billion a year to process credit card transactions.
For the first time, credit card providers and banks have reduced the interchange rates charged to merchants, accepting their cards, adding up to savings for businesses of six to 22 per cent, depending on the card. Both Visa and MasterCard also pledged to freeze rates for the next five years. Merchants should pay close attention to their month-end statements for April and May to ensure they see this change.
T hi s wasn’ t t he o nl y change. A few weeks ago, I joined the finance minister at Arts Market, in Toronto, as he announced improvements to the Credit and Debit Card Code of Conduct. While the code helped save low-cost, flat fee Interac debit and stopped banks from issuing premium credit cards to consumers who had never requested them, it didn’t bring down rates.
The revisions mandate that the companies processing pay- ments pass on the Visa and MasterCard interchange fee savings to merchants. If this doesn’t happen, businesses will now be able to opt out of their contracts without penalty.
While there are many reputable players in credit card processing — including a plan for CFIB members with Chase Paymentech — sadly, there are some that operate with predatory practices. Many merchants have reported being tricked into terrible deals, including contracts with automatic-renewal clauses that trap them into another three or five years if they miss the small window to opt out. New measures dramatically improve the disclosure of rates and limit automatic renewal to six months.
As well, the code now applies to mobile and contractless payments, which comes in the nick of time, with Apple Pay set to launch in Canada. I have to admit, I smiled when I read banks concern about paying Apple 15 to 25 basis points to link an account. After hammering merchants with fee hikes for years, it’s their turn to feel the pain.
I’ve been expecting mobile fees to be the next big price hike in the industry. Fortunately, the commitments from Visa and MasterCard, combined with the revised code, should soften any fee free for all. If mobile payment fees are introduced, merchants will be able to either refuse them (while still being permitted to accept card-based transactions) or get out of their processing contract.
If consumers were made aware that the type of card they use can mean the mer- chant will lose 1.5 to three per cent of a sale in fees, they might make different choices when buying from local merchants. The code now requires banks to inform consumers of this when they are selecting a card. As well, only consumers will be allowed to set default settings when choosing mobile payment options.
I would be remiss if I didn’t acknowledge the leadership provided by the Ministry of Finance in this eight-year battle. Both the late Jim Flaherty and Joe Oliver have done merchants a great service by introducing a code and ensuring it remains a living document, as payment methods evolve with technology and new players are introduced to the marketplace.
While we didn’t always see eye to eye, the work of outgoing MasterCard president Be tt y DeVita and Visa president Rob Livingston, who played key roles in helping to improve fairness and transparency for small business, should be recognized.
We look forward to continuing to work with the industry to ensure the benefits and protections stipulated in the code are realized by merchants across Canada. Meanwhile, we are keeping an eye on the recent round of banking fee hikes, to ensure the industry is not giving with one hand, while taking away with the other.
Small Business Saturday is still six months away, and while I’m sure payments issues will continue to pop up, I’m hoping merchants can focus on other important issues, such as growing their business or hiring a new employee.
Businesses will be able to opt out of contracts with no penalty