July 2, 2009

• News:  Canadian Senate Acts on Failing CC System

  The Standing Senate Committee on Banking, Trade and Commerce presented a report with a plea to the Canadian Federal Government to act immediately to rescue the country's decaying credit and debit card systems. The Senate report also calls for the establishment of an oversight board to devise methods to produce a level playing field within the systems. The Committee listened to a number of witnesses with varying opinions regarding the position of the country's debit and credit card industry. Controversy over the financial industry's accessed fees on credit card transactions has created a battle between major card networks like Visa and MasterCard, issuing banks, and retailers. Retailers say the transaction fees are their second highest expense line item. Lenders say that retailers have a number of payment options to offer their customers, and that it's nothing more than a business decision whether or not to accept credit cards from customers or not.

  A number of activities are affecting the financial industry as card spending continues to rise. The debit card sector has greatly challenged the credit card sector with increased competition. Both Visa Canada, Inc. and MasterCard Canada, Inc., the two major competitors in the card business, have become more involved with the Interac market. The Interac links the two networks with financial organizations so that they may communicate with each other for the purpose of exchanging electronic financial information. Additionally, both Visa and MasterCard have change their fee structures pushing interchange fees up and creating a negative effect on merchants. Advocates for the merchants say that the retailers have no bargaining power in negotiating interchange fees with the two major credit card entities.

  After listening to all the witnesses, the Committee tabled the report. Their recommendation is that the Federal Government establish an oversight board that would look into solutions to meet somewhere in between taking no action and the government taking total control by regulating credit card transaction fees.
  
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