Credit Card Usury
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The SME Perspective on Debit and Credit Cards Presentation to the Senate Committee on Banking, Trade and Commerce
Catherine Swift, President & CEO Corinne Pohlmann, Vice- President of National Affairs
April 1, 2009
About CFIB
Represent 105,000 independent business members across Canada Non-partisan, not-for-profit organization Deal with federal, provincial and municipal issues Represent all sectors, all regions 100% funded by members Field force visit 4,000 SMEs per week Democratic survey process sets policy agenda
www.cfib.ca
2
Most Businesses in Canada are Small Fewer than 5 employees (26.4%)
Business with no payroll employees (54.8%)
500 employees or more (0.1%) 50 to 499 20 to 49 employees employees (2.3%) (3.8%)
5 to 19 employees (12.6%)
Number of Establishments: 2.4 million Source: Statistics Canada, Business Register, June 2007
www.cfib.ca
3
Business Barometer Index
Source: CFIB Quarterly Business Barometer, March 2009, based on 1,741 responses
www.cfib.ca
4
CFIB activities on credit/debit card CFIB has collected more than 12,000 Action Alerts Letters and Action Alerts sent to Minister Flaherty and all MPs Continue to collect about one thousand Action Alerts per week Survey in field to collect more detailed information Public opinion poll
www.cfib.ca
5
SMEs that accept credit cards by sector Accept credit cards
Do not accept credit cards
Retail
96
4
Hospitality
94
6
Personal & Misc. Services
89
11
Arts, Recreation & Information
84
16
Wholesale
82
18
Social Services
69
31
Enterprises & Admin. Management
67
33
Manufacturing
56
44
FIRE
53
47
Professional Services
52
48
Transportation
52
48
Construction
38
62
Agriculture
29
71
Natural resources
27
73
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
6
Which of the following credit cards does your business accept? Visa
96
Mastercard
94
AMEX
40
Franchise Store Card
4
Other
4 0
20
40
60
80
100
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
7
Which of the following does your business use for credit card processing? Chase Paymentech
24
Moneris
21
Global Payments
7
TD First Data
7
Desjardins
4
Other
9
0
10
20
30
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
8
What level of difficulty do you encounter in understanding your credit card fees?
32%
22%
46%
Very difficult Somewhat difficult No difficulty at all
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
9
In its 2009 budget, the federal government proposed to improve the way that banks and other financial institutions inform consumers on credit cards. Should the federal government expand this approach to include credit/debit card fees paid by merchants?
Yes 91% No 3% Don`t know 6%
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
10
Would you support or oppose tighter rules for the credit card industry in Canada? Support
BC
Oppose
80
12
Prairies
82
13
Ontario
83
12
Quebec
82
Atlantic
16
86
11 % response
Source: Environics Research Group for CFIB, Public opinion poll conducted March 5th to 8th, 2009 with 1,524 credit card holders.
www.cfib.ca
11
Recommendations Enhance oversight/scrutiny of credit and debit card industry Appoint an Agency responsible to oversee credit card and debit card fees and activities (eg. Bank of Canada) Regularly collect data and/or conduct research on the cost of merchant/ interchange fees and other activities, trends and/or practices Regularly conduct Parliamentary hearings to study impact of credit and debit cards on merchants and consumers
www.cfib.ca
12
Recommendations Enhance transparency and accountability Merchants should be able to easily understand a card`s merchant fee before accepting it for payment There should be full transparency on interchange fees and what they should cover (transaction processing, fraud, authorizing process, etc.) Fees should not be subject to change within a contract period. If the fees or conditions change, there should be no exit penalties for the merchant Create a Code of Conduct that is applied to credit and debit card activities Require fair warning of cost increases www.cfib.ca
13
Recommendations Allow merchants and consumers choice with credit cards Merchant Choice - Merchants should be allowed to refuse certain cards, create limits on their use, or offer discounts for other payment methods Consumer Choice – Banks should not be permitted to send out cards with new fees and features that have not been requested by the consumer Set up a Total Cost of Acceptance calculator to assist merchants in understanding impact to their business
www.cfib.ca
14
Recommendations Scrutinize changes to debit card system Maintain Interac as the debit transaction mechanism. It has served merchants and consumers well Debit charges should be on a cents per transaction basis and not on a percentage (of the value) Need for public hearings on any changes to the structure of debit in Canada Do not allow debit and credit features on the same card
www.cfib.ca
15
Catherine Swift, President & CEO Corinne Pohlmann, Vice- President of National Affairs
April 1, 2009
About CFIB
Represent 105,000 independent business members across Canada Non-partisan, not-for-profit organization Deal with federal, provincial and municipal issues Represent all sectors, all regions 100% funded by members Field force visit 4,000 SMEs per week Democratic survey process sets policy agenda
www.cfib.ca
2
Most Businesses in Canada are Small Fewer than 5 employees (26.4%)
Business with no payroll employees (54.8%)
500 employees or more (0.1%) 50 to 499 20 to 49 employees employees (2.3%) (3.8%)
5 to 19 employees (12.6%)
Number of Establishments: 2.4 million Source: Statistics Canada, Business Register, June 2007
www.cfib.ca
3
Business Barometer Index
Source: CFIB Quarterly Business Barometer, March 2009, based on 1,741 responses
www.cfib.ca
4
CFIB activities on credit/debit card CFIB has collected more than 12,000 Action Alerts Letters and Action Alerts sent to Minister Flaherty and all MPs Continue to collect about one thousand Action Alerts per week Survey in field to collect more detailed information Public opinion poll
www.cfib.ca
5
SMEs that accept credit cards by sector Accept credit cards
Do not accept credit cards
Retail
96
4
Hospitality
94
6
Personal & Misc. Services
89
11
Arts, Recreation & Information
84
16
Wholesale
82
18
Social Services
69
31
Enterprises & Admin. Management
67
33
Manufacturing
56
44
FIRE
53
47
Professional Services
52
48
Transportation
52
48
Construction
38
62
Agriculture
29
71
Natural resources
27
73
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
6
Which of the following credit cards does your business accept? Visa
96
Mastercard
94
AMEX
40
Franchise Store Card
4
Other
4 0
20
40
60
80
100
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
7
Which of the following does your business use for credit card processing? Chase Paymentech
24
Moneris
21
Global Payments
7
TD First Data
7
Desjardins
4
Other
9
0
10
20
30
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
8
What level of difficulty do you encounter in understanding your credit card fees?
32%
22%
46%
Very difficult Somewhat difficult No difficulty at all
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
9
In its 2009 budget, the federal government proposed to improve the way that banks and other financial institutions inform consumers on credit cards. Should the federal government expand this approach to include credit/debit card fees paid by merchants?
Yes 91% No 3% Don`t know 6%
Source: CFIB Point of View Survey on Business Financing, Preliminary data based on 3,514 responses, March 2009.
www.cfib.ca
10
Would you support or oppose tighter rules for the credit card industry in Canada? Support
BC
Oppose
80
12
Prairies
82
13
Ontario
83
12
Quebec
82
Atlantic
16
86
11 % response
Source: Environics Research Group for CFIB, Public opinion poll conducted March 5th to 8th, 2009 with 1,524 credit card holders.
www.cfib.ca
11
Recommendations Enhance oversight/scrutiny of credit and debit card industry Appoint an Agency responsible to oversee credit card and debit card fees and activities (eg. Bank of Canada) Regularly collect data and/or conduct research on the cost of merchant/ interchange fees and other activities, trends and/or practices Regularly conduct Parliamentary hearings to study impact of credit and debit cards on merchants and consumers
www.cfib.ca
12
Recommendations Enhance transparency and accountability Merchants should be able to easily understand a card`s merchant fee before accepting it for payment There should be full transparency on interchange fees and what they should cover (transaction processing, fraud, authorizing process, etc.) Fees should not be subject to change within a contract period. If the fees or conditions change, there should be no exit penalties for the merchant Create a Code of Conduct that is applied to credit and debit card activities Require fair warning of cost increases www.cfib.ca
13
Recommendations Allow merchants and consumers choice with credit cards Merchant Choice - Merchants should be allowed to refuse certain cards, create limits on their use, or offer discounts for other payment methods Consumer Choice – Banks should not be permitted to send out cards with new fees and features that have not been requested by the consumer Set up a Total Cost of Acceptance calculator to assist merchants in understanding impact to their business
www.cfib.ca
14
Recommendations Scrutinize changes to debit card system Maintain Interac as the debit transaction mechanism. It has served merchants and consumers well Debit charges should be on a cents per transaction basis and not on a percentage (of the value) Need for public hearings on any changes to the structure of debit in Canada Do not allow debit and credit features on the same card
www.cfib.ca
15
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