Did your business accept Visa and/or Mastercard credit card payments between March 23, 2001, and September 2, 2021? You may be eligible to claim up to $5,000 in a multi-million-dollar class action settlement.

The Canadian Federation of Independent Businesses (CFIB) recently announced that merchants and businesses who accepted Visa and/or Mastercard credit card payments over the last decade could apply for rebates after a settlement in a class action against Visa, Mastercard, and some banks.

Interchange Fees Spark Class Action Lawsuit

The Canadian class action was brought against Visa and Mastercard as well as certain banks, alleging that the banks in question (including Capital One, Citigroup, Bank of America, Desjardins, National Bank, CIBC, Royal Bank, Bank of Montreal, TD Bank, and Bank of Nova Scotia) conspired with Visa and Mastercard to set higher interchange fees. These credit card companies and banks also allegedly imposed rules to restrict merchants’ ability to surcharge or refuse higher-cost Visa and Mastercard credit cards.

Interchange fees are the fees collected from merchants by banks for Visa and Mastercard transactions. A CTV News article explains that these fees can be as low as one percent or climb to three percent for premium credit cards that offer rewards.

This was especially concerning and costly for businesses during the pandemic when few people were paying cash, most opting to pay with credit cards.

While the Royal Bank of Canada, The Toronto-Dominion Bank, the Canadian Imperial Bank of Commerce, the Bank of Montreal and the Bank of Nova Scotia agreed to settle the class action, they did not admit to any wrongdoing or liability.

Surcharges are Now an Option for Merchants

As well as a $188 CAD million settlement being reached, Visa and Mastercard have also agreed to adjust their no-surcharge rules. As a result, merchants will now be able to surcharge—a fee merchants can charge consumers paying by credit card to offset added fees—up to a cap. The ability to surcharge will go into effect on October 6, 2022, and the settlement allows for the ability to surcharge to remain in effect for up to five years minimum.

The exception, in this case, is for Quebec businesses, where the provincial Consumer Protection Act does not permit it.

Merchants and businesses can determine which credit cards to surcharge, but only to a maximum of 2.4 percent. The option to add a surcharge fee will also remain available for Interac debit card transactions.

Who is Eligible to Apply for a Rebate?

According to the Credit Card Class Actions website, deductions, including Class Lawyers and processing expenses, have been approved by the Courts leaving approximately $131 CAD million to be distributed to class members. 

Suppose you have accepted Visa and/or Mastercard credit card payments for goods and services in Canada from March 23, 2001, to September 2. 2021 and incurred merchant discount fees, including interchange fees. In that case, you are a settlement class member and eligible to receive a portion of the settlement.

How to Claim?

Claims can be submitted through the Credit Card Class Action Website. You will need to include your name and contact information, the size of your business and annual revenues during the claim period, and verification that you collected credit card payments during the claim period. However, no documentation will be required if your business is classified as a small business.

After submitting your claim, you will receive a confirmation, and your application will be evaluated.

Claims must be submitted by September 30, 2022. Once the claim portal closes, claims will be evaluated before payments are issued before the end of this year. After that, payments will be issued via direct deposit or cheque. However, should you choose the cheque option, there will be a $2 deduction from your claim.

How Will the Settlement be Distributed?

The Net Settlement Amount will be split into three separate funds, and payments will be issued from the fund related to your business’s average revenue.

  • Small Merchant Fund (under $5 million in average annual revenue over the claim period) – 40 percent
  • Medium Merchant Fund ($5 million to $20 million in average annual revenue over claim period) – 10 percent
  • Large Merchant Fun (more than $20 million in average annual revenue over claim period) – 50 percent

Small merchants can expect to receive $30 per year with a maximum of $600. Medium Merchants can expect $250 per year with a maximum of $5,000, and large merchants can expect $250 per year.

Contact McCay Duff LLP for Expert Business Advisory Solutions in Ottawa and Across Ontario

Keeping a thumb on the pulse of ever-evolving business regulations while still running and growing your enterprise is no easy feat. That’s where the professional accounting and business experts at McCay Duff LLP come in. Let us take the burden off your shoulders. Our experienced and highly skilled staff can provide business advisory, accounting and tax strategies to help you take your business to the next level.

To learn more about how we can help you and your business, contact us online or by telephone at 613-236-2367.