Canadian merchants may see rebates after fee settlement with Visa, MasterCard deal

Businesses in Canada may be eligible to claim credit card processing fee rebates following a multimillion-dollar class action settlement with Visa and MasterCard.

Merchants can now apply for rebates on so-called swipe fees charged on credit card transactions dating back two decades, the Canadian Federation of Independent Business (CFIB) said Monday.

The settlement for the class action, launched in 2011, comes after the pandemic quickened a shift towards digital payments as more consumers shopped online.

"During COVID, cash disappeared and everyone started paying with plastic," said Corinne Pohlmann, senior vice-president of national affairs and partnerships at CFIB.

"Credit cards became much more prevalent so the amount of fees merchants are paying has also increased."

Fee charged every time card is used

Credit cards charge merchants so-called interchange rates on purchases, a fee shared between credit card companies, payment processors and banks.

Those fees can range from as low as around one per cent for basic cards to nearly three per cent for cards that offer rewards such as cash back or loyalty points.

"The more perks on a card, the more expensive it is for a merchant to accept," Pohlmann said. "I don't think consumers understand how big a cost it could be for a merchant."

While the settlement doesn't change the fees, it does allow businesses to apply for a rebate of some of the fees paid since 2021.

Any Canadian merchant that accepted MasterCard and Visa credit cards between 2001 and 2021 and incurred merchant discount fees is eligible for a rebate, ranging from $30 a year or up to $600 total for small merchants, to $250 a year or $5,000 for larger merchants.

Customers can soon be charged fees directly

The settlement also gives merchants the power to pass credit card fees on to customers, starting this fall.

While very few merchants are expected to add surcharges for accepting credit cards, Pohlmann said giving businesses the ability to recoup those fees will help them push back against future fee hikes.

Meanwhile, the federal government has repeatedly pledged to lower credit card processing fees for small businesses.

"They've promised to reduce fees for small- and medium-sized businesses to rates that are similar to what ... big businesses enjoy," said Gary Sands, senior vice-president of public policy and advocacy with the Canadian Federation of Independent Grocers.

"But there's been a deafening silence from Ottawa."

Sands said the amount being reimbursed by Visa and MasterCard represents a tiny fraction of fees paid. He also expressed concern that the settlement could be used by credit card companies as "camouflage in their battle to resist lowering their credit card fees."

"The surcharge isn't a solution," he said. "What business is going to deliberately put themselves at a competitive disadvantage by passing those fees on to customers?"

When approached for comment by CBC News, MasterCard Canada and Visa Canada did not immediately respond.