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Do Canadian consumers really have a new ally with the Competition Bureau in their fight against high priced credit cards companies?
Ottawa (20 Dec. 2010) - The federal government's Competition Bureau has put two of the world's biggest credit card companies – VISA and MasterCard – in its sights for “anti-competitive practices that hurt merchants and consumers and drive up prices at the cash register.“
Legal action has been launched against the companies alleging that the “restrictive” rules on credit cards cost retailers about $5 billion a year in fees. These fees are usually passed on to the customer through higher merchandise prices – whether or not a credit card is actually used in the transaction.
The bureau has reported that the fees, which typically range from $1.50 to $3 for every $100 transaction, are nearly twice as high as the charges retailers pay in Europe, Australia and New Zealand.
”In the end, consumers are the ones who are hurt again by the credit card companies' rules”, says James Clancy, national president of the National Union of Public and General Employees (NUPGE).
Retailers pay higher costs to both VISA and MasterCard for the use of their services in stores and are unable to charge more to customers who use these methods of payment than customers who do not. They are also not allowed to urge customers to the use of the less expensive methods, such as interact or cash payments. So all customers end up paying higher fees.
“What makes this situation worse is the lack of government regulation on the credit card industry as a whole," says Clancy.
"The voluntary code of conduct for the industry was touted as a way for retailers to have more leverage in negotiating with credit card companies but since it's a code without teeth, the industry continues to act as it will while retailers and ultimately consumers are exploited,” he adds.
“While we are happy to see the Competition Bureau trying to strike down the rules credit card companies impose on merchants that accept their cards, what we really need are stringent regulations on credit card companies that are fair, transparent and not burdensome on retailers and consumers alike.”
Over the last several years, with the economic crisis at its worst, Canadians have seen no significant change in the high interest rates on credit cards.
Consumer debt is at an all-time high and retailers are downloading even more costs to consumers because of these transaction rules.
NUPGE, through its Smart Money series, has been advocating for more consumer fairness, especially in the credit and banking industries. The union is urging the government to take a leadership role in reducing the burden on consumers by:
- Legislating a cap on interest rates for credit cards and personal loans.
- Regulating more transparency from banks and credit card companies for interest rate increases, service charges and other fees.
- Establishing a truly autonomous industry watchdog.
- Creating strong public policy to cap costs for consumers.
NUPGE
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE