The federal government hopes to lower prices for consumers by asking credit card companies to reduce fees charged to retailers, but an MLI analysis shows that such measures don’t achieve their desired effect.
OTTAWA, Sept. 5, 2014 – The federal government’s request to credit card companies that they lower the fees charged to retailers will do nothing to help lower-income consumers and small merchants, according to an analysis by the Macdonald-Laurier Institute.
Federal Finance Minister Joe Oliver said Thursday he is asking credit card companies and banks to reduce the transaction fees retailers pay “on a voluntary basis at this point”. He hopes the lower fees for merchants will be passed along to consumers in the form of lower prices.
However a report MLI produced in 2013, titled “Credit Where It’s Due”, says that such price controls usually fail to achieve the desired effect.
Instead, such measures as interchange fee regulations, interference with surcharging rules and restrictions on the “honour-all-cards” rule increase costs for the banks and credit card companies.
These higher costs for the banks are then passed onto consumers in the form of higher fees, which tend to disproportionately affect lower-income consumers.
And while these regulations might be a boon to large, “big box retailers”, they actually result in a small increase in costs for smaller merchants.
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The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank in Ottawa focusing on the full range of issues that fall under the jurisdiction of the federal government.
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