Controls on interchange fees and rewards cards can harm the very small businesses and customers advocates purport to protect

OTTAWA – In a paper released today by the Macdonald-Laurier Institute titled "Credit Where it's Due: How payment cards benefit consumers and merchants, and how regulation can harm them," a team of prestigious authors finds that there is no evidence that proposed regulations on payment cards in the Canadian market will help lower-income consumers or small merchants, as proponents claim, and will likely hurt them.

Proposed interchange fee regulations, interference with surcharging rules, and restrictions on the "honour-all-cards" rule would cause consumers to face considerably higher banking costs, while paying the same for their consumer goods. Since the higher banking costs fall disproportionately on lower income consumers, in other jurisdictions such regulations have "literally made the poor poorer," the authors write. Moreover, while the enactment of such regulation may have proven a boon to large "big box" retailers, it has actually resulted in a price increase for small merchants.

"Sadly, rather than recognizing that the way forward for Canada is to reform its debit card system in the competitive model of its credit cards, some critics want to dictate significant business practices and impose price controls on the credit card market," the report notes. "As we demonstrate, however, the proposed interventions would almost certainly increase costs for consumers, reduce innovation, and hamper the efficiency of the Canadian payment system."

The report is co-authored by Geoffrey A. Manne, founder and executive director of the International Center for Law and Economics (ICLE), Ian Lee, a professor at the Sprott School of Business at Carleton University, Todd J. Zywiki, Professor of Law at George Mason University and senior fellow of the International Center for Law and Economics, and Julian Morris, vice-president of research at Reason Foundation.

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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For more information, please contact Geoffrey A. Manne, executive director, International Center for Law & Economics,,  503.770.0076. On Twitter @GeoffManne; or David Watson, managing editor and communications director, Macdonald-Laurier Institute, 613-482-8327 x. 103 or email at On Twitter @MLInstitute

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