April 14 , 2011

Payment card industry gets failing grade from retailers on 1-year anniversary of Code of Conduct

TORONTO--On the eve of the one-year anniversary of Finance Canada's introduction of the Code of Conduct for Credit and Debit Card Industry in Canada, Retail Council of Canada (RCC) released its report card on credit and debit card industry practices.

"We are hearing loud and clear from our merchants that the payments industry has continued to engage in practices that result in high fees that have no connection to the service provided and some players have blatantly violated the voluntary code" said Diane J. Brisebois, President and CEO, Retail Council of Canada. "We think the time has come to move beyond the code to ensure flat merchant fees for debit card transactions, the elimination of higher merchant fees for premium credit card transactions, real competition for merchant acceptance and a formal stakeholder-driven mechanism for all elements of the Canadian payments system" said Brisebois.

She went on to comment "the main thing that the code accomplished is that it shined a light on the practices of the payments system and made it clear to retailers that there is no real competition in the marketplace. The only competition that exists is among the banks to provide customers with greater incentives on the backs of merchants."

"Our position has remained the same since we started this campaign almost three years ago - that regulation is the ultimate solution to bring fairness, accountability and true competition to this market," Brisebois added.

"Retailers recognize that Minister Flaherty's introduction of the code maintained the low-cost, secure, made-in-Canada Interac debit system. In order to build on this success, we encourage the Government to take the next step and work with us to ensure that Canadians have a robust and competitive payments marketplace" concluded Brisebois. Minister Flaherty has already served notice to the card companies that if the voluntary code is not sufficient, he would be prepared to look at other options. We believe that time has now come.

Key findings from RCC's member survey are:

1. Changes to Merchant Discount Rates - March 2010 to March 2011

80% of respondents indicated that their merchant discount rates have either increased or remained the same over the past 12 months. Grade: D

2. Increase in premium card use in Canada's credit card market

57% of respondents have seen an increase in premium card use in their stores over the past 12 months. Grade: C-

3. Disclosure of fees and rates on merchant statements.

54% of respondents indicate the disclosure on their monthly merchant statements has remained unchanged since the introduction of the Code. Grade: C-

4. Acquirers informing merchants of their right to cancel contracts if fees increased.

64% of respondents have not received any notification from their acquirer/processor that they have the right to cancel their current contracts with no penalties once receiving notification of a fee increase. Grade: D

5. Competition in Canada's payments market - benefits to merchants from changing acquirers/processors.

80% of respondents believe they will receive no real benefit from switching acquirers/processors if they choose to cancel their current contract. Grade: F

Retail Council of Canada (RCC) has been the Voice of Retail in Canada since 1963.


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