Sep 23, 2016
A government review of the interchange fee structures of two of Canada’s leading credit card firms may lead to legislative changes, according to some legal practitioners. In the article “‘New laws likely’ as Canada reviews interchange fees,” PaymentsCompliance reporter Jimmy Nicholls looks at the Department of Finance Canada’s examination, which began last week.
The investigation reviewed whether Visa and MasterCard have kept their commitments to reduce processing fees for merchants – both credit card firms had “voluntarily agreed to reduce the average annual effective interchange fee to 1.5% between May 2015 and April 2020.” Independent audit findings confirmed that they had kept their promises. The government will also examine the effect of the fees reductions as well as assess the overall credit card market, considering goals around “competition and utility” and the recently updated Code of Conduct for the Credit and Debit Card Industry in Canada.
Kashif Zaman, a partner in Osler’s Financial Services Practice Group, tells PaymentsCompliance that he “wasn’t surprised” the government wanted to conduct a review a year in since the rates came into effect. “But if they feel comfortable after the first year they may decide they don’t need to do it every year and may do it less frequently,” states Kashif, who believes the review may be dependent on whether authorities will allow for some leeway around the 1.5% average fee.
“Nobody can predict what the effective interchange is going to be down the road, because it’s going to be determined by a mix of factors such as volume on different types of credit card products with different interchange rates applicable to them,” he says.
If you subscribe to PaymentsCompliance, you can find out more by reading Jimmy Nicholls’ full article, “‘New laws likely’ as Canada reviews interchange fees.”