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Following a series of hearings concerning credit and debit cards, Canada's Standing Committee on Banking, Trade and Commerce has issued several recommendations that could affect financial institutions wanting to issue PIN-debit cards from Visa Inc. and MasterCard Worldwide in the country.
The recommendations, however, are resolutions, not legislation, and Jim Flaherty, Canada's finance minister, does not have to act on or even respond to them, Sen. Michael Meighen, the committee's chairman, tells ATM&Debit News.
However, if Flaherty does not respond to the resolutions, Meighen says he will raise the issue when the Senate reconvenes following its summer recess.
The committee wants the Canadian government to set the interchange rate at zero on all debit card transactions in that country for three years. The committee members had no particular reason to select that time period, Meighen says. "It's not too long; it's not too short," he says.
Committee members also want the government to require switch fees and interchange rates to be based on a flat fee for debit card transactions because, they contend, there is no risk involved with issuing PIN-debit cards. "Once a person pays with his debit card, the merchant receives his money," Meighen says.
The committee's report "Transparency, Balance and Choice: Canada's Credit Card and Debit Card Systems" also recommends the government create a payment system oversight board to "ensure fairness for participants in the credit and debit card payments systems."
Despite the committee's recommendation, Meighen says he and other committee members are "hesitant" to let government set debit and credit card rates.
The committee issued its report as banks consider bringing Visa's and MasterCard's PIN-debit products to Canada.
The Canadian Federation of Independent Business, which represents 105,000 companies, wants the card brands' Canadian operations to charge a flat, per-transaction interchange rate instead of a percentage of the sale when banks associated with the card networks begin issuing their PIN-debit cards this fall.
The federation wants MasterCard and Visa to charge between C7 cents to C8 cents per transaction, says Catherine Swift, the organization's president and CEO.
Currently, Interac operates Canada's sole debit card network.
Interac, which is nonprofit entity, is seeking to change its charter to a profit-making business to attract investors to compete with Visa and MasterCard.
