Canadian Merchants May See Discounts After Fee Settlement With Visa, MasterCard Deal

Businesses in Canada may be eligible to seek refunds on credit card processing fees 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 2011 class action lawsuit comes after the pandemic accelerated a shift toward 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 the CFIB.

“Credit cards have become much more common, so the fees that merchants pay have also increased.”

A fee is charged each time the card is used

Credit cards charge merchants what’s called interchange rates for purchases, a fee shared by credit card companies, payment processors, and banks.

These fees can range from just about 1 percent for basic cards to nearly 3 percent for cards that offer rewards like cashback or loyalty points.

“The more perks that are on a card, the more expensive it is for a merchant to accept it,” Pohlmann said. “I don’t think consumers understand how high the cost to a retailer can be.”

While the settlement doesn’t change the fees, it does allow businesses to request a refund of some of the fees paid since 2021.

All Canadian merchants who accepted MasterCard and Visa credit cards between 2001 and 2021 and incurred merchant rebate fees are eligible for a rebate ranging from $30 per year or up to $600 total for small merchants up to $250 per year or $5,000 for larger dealers.

Fees can soon be billed directly to the customer

The comparison also gives merchants the opportunity to pass on credit card fees to customers from autumn.

While very few merchants are expected to levy surcharges for accepting credit cards, Pohlmann said allowing businesses to recoup those fees will help them ward off future fee increases.

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

“They have promised to reduce fees for small and medium-sized businesses to rates similar to what large companies enjoy,” said Gary Sands, senior vice president of public policy and advocacy at the Canadian Federation of Independent Grocery Stores.

“But there was a deafening silence from Ottawa.”

Sands said the amount reimbursed by Visa and MasterCard is a tiny fraction of the fees paid. He also expressed concerns that the comparison could be used by credit card companies as “a cover in their fight against lowering their credit card fees.”

“The contract is not a solution,” he said. “What company intentionally puts itself at a competitive disadvantage by passing these fees on to customers?”

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