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The Bull Meter: Jack Layton on Canadian credit card fees

Where is the NDP getting its data?


 

[mac_quote person=”Jack Layton” date=”March 29, 2011″]Under Stephen Harper, Canadians pay some of the highest credit card fees in the world.[/mac_quote]

[mac_bull score=”4″]

When we called the NDP media headquarters to ask about where the data to substantiate Layton’s statement came from, they directed us to a press release from the Competition Bureau. In it, the Bureau wrote: “Canada has among the highest credit card fees in the world,” but it was talking about acceptance fees, i.e. the amount that merchants are charged when processing credit card transactions. Layton’s speech, on the other hand, was all about Canadian households struggling to repay credit card debt, so logic would dictate he was talking about fees charged to consumers, not retailers.

We asked the Financial Consumer Agency of Canada, the Canadian Bankers Association, and Credit Canada whether these kinds of fees are really some of the steepest in the world. Their response? They don’t know. They said that they are not aware of any research that indicates how much those fees amount to on average, or that compares Canadian fees to those of other countries. So where did the NDP find their evidence (we asked again)? We’re still waiting to know, and it looks like we’re not going to get an answer.

Heard something that doesn’t sound quite right? Send quotes from the campaign trail to macbullmeter@gmail.com and we’ll tell you just how much bull they contain.

Sources:

Transcript of Jack Layton’s speech

The Competition Bureau on high merchants’ fees


 

The Bull Meter: Jack Layton on Canadian credit card fees

  1. Huh. How can you rate this 4 bulls when you don't know even know if it's true or not.

    Sorry, but I give this post 4 bulls.

  2. I trust the moustache, but I'm not sure about its friend.

  3. Er, because Layton doesn't know either and he's the one trumpeting it as fact.

  4. I think Jack is in the right ball park. I just looked at the annual interest rate on my Visa bill and it's 19.99% or effectively 20%.
    Now I also have a bank account which the bank pays me 1.5% No wonder banks make huge profits and no wonder the banking boys didn't know what you'd expect them to know. I guess it depends on whose bull is being gored.

  5. "Layton's speech, on the other hand, was all about Canadian households struggling to repay credit card debt, so logic would dictate he was talking about fees charged to consumers, not retailers."

    From Layton's speech as linked:

    "I say now families deserve a break.

    Here's how we'll do it:

    I'll cap credit card rates at five per cent plus prime.

    I'll crack down on excessive fees on credit cards by giving federal regulators real power to go after gouging.

    And I'll make Mr. Harper's voluntary Code of Conduct on transaction fees the law.

    Canadian retailers are forced to pay among the highest credit card transaction fees in the world — money that comes out their own pocket. We'll level the playing field to give small businesses a chance to grow."

    As Robert said, something about the post deserves plenty of bulls – but it's not a speech which was misrepresented for the sake of testing a claim other than the one which was actually explained in more detail in the speech itself.

  6. You can get info on US credit cards here <a href="http:// :http://www.bankrate.com/brm/rate/brm_ccsearch_advanced.asp“ target=”_blank”> <a href="http://:http://www.bankrate.com/brm/rate/brm_ccsearch_advanced.asp” target=”_blank”>:http://www.bankrate.com/brm/rate/brm_ccsearch_advanced.asp

    Here for British cards: http://uk.creditcards.com/

    Summary for Canada, US, Mexico, England, India and China: http://www.credit.com/blog/2006/04/comparing_inte

    (Macleans should let its employees on the internet.)

  7. 1.5% is a risk-free return to you. The 20% the credit cards are charging is loaded with risk.

    I'm not quite sure I understand why credit card rates are relevant at all. Credit cards are a payment method, not a financing method. If you need credit, get yourself a line of credit with your bank (I have no idea what those rates are, but I'm going to guess Prime plus 6% or 7%).

    I have LOC with my mortgage with a really low rate – but this is because it's secured against my home. Lower the risk for the lender, lower the rate for the borrower.

  8. Well done. Ms. Alini, throw down those bulls!

  9. Invisible aliens are living with us here in Toronto. They cannot be detected by any scientific means.

    How would you score that?

  10. Merchant costs are ultimately paid for by customers, so those fees are baked into every price (even for those suckers who pay cash). I don't believe that Jack was trying to make this point, though, so I agree with the 4 bulls.

  11. The real problem with Layton's announcement isn't its accuracy, rather it is that it screws the very people he claims it helps. If rates are capped, credit card companies will limit the amount of credit they offer to Canadians – particularly bigger credit risks like poor people. While I think Canadians borrow too much, and their may be a case for reversing this trend, Layton's "screw the banks" framing of the issue was quite different. This is the paradox of most NDP-type policies:
    -rent control makes it hard for people without connections or money for bribes to get apartments
    -minimum wages make a segment of the populace unemployable
    -capping credit card rates deprives many people of access to credit

  12. Hey Stewart,

    Thanks for your comment and for reading the Bull Meter. Just a quick clarification: We're talking about fees here, such as annual fees and cash advance fees, not interest rates. And there doesn't seem to be a comprehensive estimate of how much Canadians spend of fees.

    Erica

  13. I think, as the Jurist points out below, you guys are inventing a claim that Layton isn't making. There are only two claims to this issue: the fees merchants pay are too high and interest rates are too high. I've never heard any claims about customer fees.

  14. Thanks Erica, Like everyone I knew about the 5% + prime, but I had not gone through the entire NDP policy to see they proposed limiting the charges to retailers as well.

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