Business group calls on government to rein in credit card companies

TORONTO—The Canadian Federation of Independent Business is calling on Ottawa to allow Canadian businesses, including restaurants, to put a surcharge on purchases made with credit cards, after this became allowed in the United States by the settlement of a lawsuit between Visa, MasterCard and merchants there.

The two credit card companies agreed to pay at least $7.25 billion to U.S. businesses to settle a lawsuit alleging a conspiracy among card issuers to fix fees that stores and restaurants had to pay for accepting credit cards.

The CFIB, which has 109,000 businesses as members, has urged Finance Minister Jim Flaherty to make changes to the Canadian government’s Code of Conduct for the credit card industry that would allow businesses to add charges to payments with credit cards, as they are now allowed to do with bank cards. The CFIB also wants the code amended to allow merchants and restaurant to refuse credit cards offering special rewards to consumers, which carry higher fees for the businesses accepting them. The credit card companies do not allow this at present.

The CFIB is also arguing that the Code of Conduct needs provisions for payments by mobile devices.

Currently the Canadian Competition Bureau is awaiting the decision of the federal Competition Tribunal on contentions from the bureau that Visa and MasterCard merchant agreements impede or constrain competition among credit card networks.

The bureau also argued that Canadian merchants pay charges for credit card transactions that are among the highest in the world. Bureau lawyer Kent Thomson told the tribunal in May that the fees add up to $5 billion annually. He said the credit card system is “perverse,” with shoppers who pay with cash or debit cards subsidizing those who pay with credit cards because merchants pass on the cost of fees to all their customers.

While the tribunal cannot impose monetary penalties, it could make credit card companies change the way they operate.

Dan Kelley, president and chief executive officer of the CFIB, commented in a release last week that he didn’t expect a lot of businesses would impose fees for credit cards. "Consumers would hate to present their credit card and be asked to pay a fee and merchants would be deathly afraid of surcharging," Kelly said. "We do not expect many small firms would ultimately use these powers, but the fact they exist would help Canadian merchants push back against the estimated $5 billion they and consumers pay each year in transaction fees.”