Time to Stop the Bleeding by Reigning in Credit Card Merchant Fees

Carol Hughes, MP
Carol Hughes, MP

Canada recently  marked Small Business Week which featured a lot of political support for our hard-working small and medium sized businesses, but on certain fronts many supportive MPs  consistently drag their feet and even drop the ball altogether.  Nowhere is that more obvious than the refusal of successive governments to help these businesses deal with costly transaction fees that cut into their bottom line, increase costs to consumers, and make it difficult for these important job creators to compete.

That’s why New Democrats are pushing for some much needed relief by proposing a hard cap on the transaction fees merchants are charged when customers pay with credit cards. The fees in Canada, which are among the highest in the world, cost merchants $4 billion every year. That’s money that goes straight to the banks that issue the credit cards.

Not surprisingly, the banks are doing fine and consistently post record profits, year after year.  A large part of their fortune is accrued through service charges that skim fees from every transaction between consumers and businesses.  Although debit card fees factor into this, it’s the credit card fees that really add up.  This can drive up prices too, which means consumers could be paying more than necessary for goods and services, or the business is taking a hit.

Unlike debit card merchant fees, which are set at a flat rate of a few cents per transaction no matter the size, merchant fees for credit cards are charged by a percentage of each purchase.  These fees have fluctuated over the years between 1.69% and 2.39% depending on the card. With so many small businesses working on razor-thin margins, it only makes sense that MPs would champion their bottom line – especially when the challenge comes from heavy-weights like banks, but that isn’t always the case.

In some instances it’s easy to wonder if the tail is wagging the dog.  This month, a government MP failed to show up for debate on their own Private Members’ Bill that would have regulated these merchant fees. The no-show happened after the Member delayed debate on the bill more than 10 times over 2 years.  That meant the legislation that many retailers and business owners were waiting for died of the Order Paper without ever being debated in the House.  It’s no secret why either.  The government has its own ‘solution’ which amounts to non-binding, voluntary agreements.  Any recognition that it isn’t working from within their own ranks would have been a black-eye for the government.

Meanwhile, Canadian retailers continue to pay $4 billion in merchant fees every year.  New Democrats are proposing a permanent cap of one percent on credit card fees that would save Canadian small and medium sized businesses over a billion dollars every year.

Relief like that would help boost consumer buying power, inject much-need resources into our local economies, and help create jobs. It would also make Canada more competitive with Europe and strengthen our advantage with US competitors.  Perhaps most importantly, it would show small business owners that their federal representatives are squarely on their side by giving them a fair shot and an opportunity to grow.

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Carol is a three-term MP who has worked hard for Algoma-Manitoulin-Kapuskasing since being elected in 2008. In addition to her role as MP, Carol serves as Assistant Deputy Speaker and Chair of Committees of the Whole in Canada’s 42nd Parliament. A tireless advocate for the communities she serves, Carol was a leading figure in the fight to preserve ten federal constituencies for Northern Ontario. She has been a prominent spokesperson for passenger rail service, preserving postal service outlets, and good jobs in the region. Carol has worked with First Nations on local and national issues and served as the New Democrat critic for First Nations Health prior to assuming the responsibilities of Assistant Deputy Speaker. With decades of labour experience, Carol understands the priorities of hardworking families. She has introduced legislation to expand access to Employment Insurance benefits and to require mandatory reporting of workplace accidents and occupational diseases. She has also worked with veterans on legislation that will create a Defence of Canada Medal to honour those who served domestically to protect Canada during the Cold War. Committed to serving all her constituents, Carol maintains full constituency offices in both Kapuskasing and Elliot Lake. She also holds regular clinics in communities throughout the riding. Before entering politics, Carol was a regional representative for the Canadian Labour Congress. Earlier, she worked for Probation and Parole Services in Elliot Lake and Youth Justice Services in Sudbury. A long-time community volunteer and activist, Carol lived in Elliot Lake for nearly three decades with her husband Kieth. And as a proud mother and grandmother, Carol is committed to building a better Canada for future generations.


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