Small businesses welcome Ottawa’s promised action on credit card fees

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Small business advocates say the government’s mention of credit card transaction fees in Thursday’s fall economic statement is a positive step, but it won’t help businesses deal with rising costs anytime soon.

The tax update said the government intends to enter into negotiations with payment networks, financial institutions, businesses and other interested parties to reduce credit card transaction fees for small businesses.

Small business advocates have long been pushing for action on these fees, which they say are harder for small businesses to swallow and are becoming a bigger problem as customers move away. of the cash.

The economic statement said the government is publishing draft legislative amendments to the Payment Card Networks Act, and if the industry is unable to come to an agreed solution in the coming months, Ottawa will introduce legislation in the new year to regulate credit card transactions. fees instead.

Gary Sands, vice president of the Canadian Federation of Independent Grocers, applauded the federal government’s move.

While he believes action could have been taken sooner, he said the threat of legislation may provide a strong incentive for interested parties to come to an agreement in the coming months.

“I think it’s a big step forward,” he said.

“It’s showing very clearly that the government is committed to finally seeing a resolution on this issue.”

Sands has been advocating for action on credit card fees for years and said the gap between what smaller retailers pay and what large companies pay is “indefensible.”

The government announced in a separate statement on Thursday that it will launch a series of consultations on the costs of small businesses, economic stability in a digital world and tax fairness. These inquiries include negotiations on credit card fees.

The Payment Card Networks Act currently provides that the federal government can make regulations regarding payment card networks, including regulations specifying disclosure, notice, and fee conditions.

The bill published on Thursday would add provisions that include that the government can make regulations to determine ranges and maximums for rates.

The government’s position has been strongly stated, but many details remain to be worked out, said Karl Littler, senior vice president for public affairs at the Retail Council of Canada.

He said any action to reduce credit card transaction fees must apply to all businesses, as the fees are paid by businesses of all sizes and, ultimately, by their consumers.

He said it’s important to frame credit card fees as a consumer issue, since consumers end up paying the lion’s share of fees, which approach a total of $10 billion across Canada.

In a written statement on Thursday, the Canadian Federation of Independent Businesses (CFIB) said the government’s tax update included a stronger commitment to lower credit card processing fees for small businesses.

However, CFIB President Dan Kelly said he is concerned that fee relief may be too slow to help with current inflationary pressures on small businesses.

New rules that allow businesses to add surcharges to credit card transactions went into effect in October, but a CFIB report found many business owners were unsure if they would do so for fear of losing customers.

The rules do not reduce the fees charged to businesses, many of which have already included the fees in their retail prices.

Kelly said the direction the government took in the economic statement is generally positive and should encourage negotiations with card networks and banks toward an early deal.

Small business advocates also argue that large companies are often charged lower rates, making pricing unfair to small and medium-sized businesses.

The government launched consultations to reduce credit card fees for businesses in August 2021, saying the pandemic has rapidly increased electronic payments and online transactions. At the time, he acknowledged that because small and medium-sized companies have less bargaining power than larger companies, they are subject to transaction fees that are “among the highest in the world.”

Littler, however, disagreed, saying the vast majority of companies pay similar rates, with a few big-name exceptions.

Other jurisdictions have already moved to lower fees by imposing caps on the amount companies can be charged, including Australia and the European Union.

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