A multi-million-dollar class action filed in Canada against credit card companies Visa and Mastercard has drawn to a close, and local businesses may find themselves eligible for hundreds of dollars in rebates.
On Monday, May 30th, the Canadian Federation of Independent Business (CFIB) announced that businesses can apply for rebates on swipe fees that have been charged on credit card transactions over the past twenty years.
A Surprising Settlement
Stay-at-home mandates throughout the past two years of the COVID-19 pandemic precipitated a widespread shift to digital payment, seeing how cash transactions were nigh on impossible, even nonexistent.
According to CFIB’s senior vice-president for national affairs Corinne Pohlmann, consumers eschewed cash for credit cards and online payment systems. As credit cards became the coin of choice, so to speak, the amount of fees businesses have had to pay credit card companies have also gone up.
For most purchases paid for with credit cards, companies like Visa and Mastercard charge establishments what they refer to as an interchange rate per purchase. Interchange rates are fees shared between banks, credit card companies, and online payment processing companies.
For basic cards, the interchange rate may be as low as 1%. For cards that offer rewards promotions and loyalty programs, the rate may be as high as 3%.
Pohlman says that consumers have no idea how much businesses are paying credit card companies with every transaction made using a card. In fact, the more perks Visa or Mastercard offers on a card, the interchange rate the merchant needs to pay goes higher.
However, government officials say that the amount to be given back by Visa and Mastercard is but a fraction of the full amount of fees paid over the years. They also expressed concerns that this settlement may be used by credit card firms as a subterfuge against lowering credit card fees.
No Changes to Fees
Despite the settlement, the amount charged on these fees will not change. However, businesses can apply for refunds for a number of fees they’ve paid over the past couple of years.
The amount paid out for rebates ranges from $30 to $600 annually for smaller businesses, and between $250 and $5,000 for larger establishments. Come September of this year, merchants may also pass these fees on to their customers.
Canada’s federal government has also reiterated its pledge to decrease credit card processing fees for the SME sector.