Regulator leaves open possible regulation on credit card fees more broadly in the future
By Ahmad Hathout
OTTAWA – The CRTC said today that it will not allow Telus to charge credit card fees to customers in areas where its services are regulated, arguing that it would negatively impact service affordability for Canadians and said such fees could be examined more broadly under a new proposed policy direction from Innovation Canada.
In August, Telus asked the CRTC if it could charge a 1.5% fee to customers paying by credit card in areas of British Columbia and Alberta where services – often landline telephone in remote regions and certain internet services in the far north – are regulated by the CRTC, which cover “only a small portion of its customers,” the regulator said. (The CRTC does not regulate rates – also known as forbearance – in areas with adequate competition.)
The CRTC, looking at affordability and whether customers could avoid the fee, said in its decision that while credit cards are optional payment choices, there are “valid reasons for customers to prefer” that method.
“Credit cards typically offer increased fraud protection compared to alternative means of payment,” the decision read. “Additionally, credit card payments offer flexibility for those who are struggling to pay their bills; the proposed fee could have a disproportionate impact on some lower-income Canadians who cannot practically avoid such a fee.”
The regulator also dismissed Telus’s argument that forcing it to absorb the credit card costs would reduce telecom service affordability for Canadians. The decision said it is “unreasonable” for Telus to “dismiss the broad affordability impacts of an additional fee applied to customers’ bills.”
A broader implication of the decision is how it may impact unregulated services. While Telus said it was only applying to charge the fees on regulated services, other advocacy groups said the commission should look into its use industry-wide.
The CRTC left open the possibility that the new policy objectives proposed by Innovation Canada to the regulator would force it to explore those regulatory options.
“The application of a credit card processing fee would contradict these [policy objectives] and, in the Commission’s view, such a fee is unacceptable and would negatively impact the affordability of telecommunications services.
“While the Commission has previously determined that it is appropriate to forbear from certain regulatory powers with respect to unregulated services, should the practice of charging a credit processing fee continue, or should it become a practice within the telecommunications industry, the Commission is prepared to explore all available regulatory options in the near future,” the decision said.
The introduction of the application followed a decision in a class action lawsuit brought by retailers against credit card companies Visa and Mastercard that allowed businesses to pass down fees to customers; before this, the businesses had to absorb the cost. It is common practice for telecommunications companies to incent customers using perks to pay using debit or cash to avoid the credit card charges.
The Public Interest Advocacy Centre (PIAC) and the National Pensioners Federation (NPF) argued against Telus’s application, saying it is an anti-consumer choice. Some argued that allowing Telus the ability to do that would create a domino effect where the other telecoms would follow suit, though one argued that the competing telecoms may use it as an opportunity to lure customers away from the Vancouver-based company.
In a statement today, PIAC’s executive director John Lawford said the decision is a “huge consumer win” and “is also a warning to all other cellphone, Internet and home phone companies not to effectively double charge their customers for simply paying their bills with a credit card, which is normal.” He added this decision could impact other industries.
Trish McAuliffe, president of the NPF, added today: “The problem of inflation on necessities such as food, heating and communications is eating into our seniors retirement funds to the point it affects their quality of life. TELUS did not consider the larger implications of its behaviour.”
Telus did not respond to a request for comment.
