You May Be Eligible for an Interchange Fee Rebate from this Credit Card Class Action Settlement

You May Be Eligible for an Interchange Fee Rebate from this Credit Card Class Action Settlement

Business owners in Canada pay some of the highest interchange fees in the world.

And as part of our commitment to doing what’s best for business owners, we want to do whatever we can to help them save money on the cost of payment processing.

That being said, we think it’s important to make business owners aware of a recent credit card class action settlement from which they may be eligible for a rebate on their interchange fees.

It’s not much, considering how much Canadian business owners have to pay to accept payments with credit cards, but still, every little bit counts.

So, if you’re tired of paying interchange fees, and you’d like to recoup some of what you’ve paid over the years, then you’re going to want to keep reading.

Because in this article, we’re going to discuss the details of this credit card class action settlement, and let you know how you can go about applying for a rebate on your interchange fees.

If you aren’t sure what interchange fees are, or you just want to learn more about them, you should check out our article on What You Need to Know About Interchange Rates in Canada.

Why Are These Interchange Fee Rebates Being Offered?

Interchange Fee Rebates Being Offered
These interchange fee rebates come as a result of a class action lawsuit that commenced more than a decade ago, in 2010.

According to a press release published at the end of May, this class action alleges that Visa, Mastercard, and certain banks “conspired to set higher interchange fees and to impose rules restricting merchants’ ability to surcharge or refuse higher cost Visa and Mastercard credit cards,” like the rewards cards that have become so popular in recent years.

Now, it’s important to point out that the credit card companies and banks named in the lawsuit have not admitted any wrongdoing or liability, but from our point of view, it’s obvious that they’re trying to save face with these settlements.

Because whether they have liability or not, the cost to accept payments with credit cards has skyrocketed, and it’s becoming increasingly unaffordable, especially for small business owners.

In any case, as a result of this class action, settlements totalling $131 million have been reached with Visa, Mastercard, and several banks, including Bank of Nova Scotia, BMO, CIBC, Royal Bank, and TD.

At the same time, this settlement also gives Canadian merchants the option to pass the cost of interchange fees onto customers by imposing a surcharge on credit card transactions, starting in October.

Merchants can enact a surcharge for whatever Visa and Mastercard credit cards they choose, up to a maximum of 2.4 per cent.

However, in Quebec, the provincial Consumer Protection Act prevents business owners from imposing these kinds of surcharges on customers.

How Can I Apply for an Interchange Fee Rebate?

If your business accepted payments from Visa or Mastercard credit cards at any time between March 23, 2001, and September 2, 2021, you could qualify to receive a portion of this settlement.

Businesses that had an average annual revenue of less than $5 million during the claim period are eligible to receive up to $600, while businesses that had an average annual revenue of $5 million or more during the claim period are eligible to receive up to $5,000.

If your business had an average annual revenue of less than $5 million, you can simply fill out the online claim form, and you don’t even have to provide documentation to prove you paid the interchange fees.

However, there is no way to appeal these undocumented claims. An appeal process is only available for businesses that submit a documented claim and had an average annual revenue of $5 million or more.

In any case, the undocumented claim process is pretty straightforward, and it only requires you to provide your name, contact information, annual revenues during the claim period, and an attestation that you collected credit card payments at some time after March 23, 2001.

It’s also important to point out that there is no cost for submitting your claim, and even if your business is now closed, you may still be eligible to claim money from this settlement.

The deadline to submit a claim is September 30, 2022, and claimants are supposed to receive their payments some time before the end of 2022.

If you want to learn more, the Canadian Federation of Independent Business has a handy little website that will tell you everything you need to know. And if you want to file a claim, click here.

What Does This Mean for Canadian Business Owners?

Canadian business owners rebate
This settlement is a huge win for Canadian business owners, and not just because of the rebates.

Having the ability to impose surcharges gives them greater control over what fees they choose to pay when accepting payments with credit cards.

More importantly, this is just one more indication that thankfully, the relationships between merchants, banks, and credit card companies are improving, and the cost to accept payments with credit cards is going down, as well.

The olive branch extended by this settlement is definitely proof of that, at least from our point of view.

That being said, imposing surcharges on customers is going to be a very awkward balancing act for merchants, and many of them will choose not to do this for fear of alienating their customers.

Certainly, this is going to affect the big corporations much differently than small businesses, just based on the vast differences in terms of volume of sales.

In any case, being able to download interchange fees onto customers is going to affect each industry and business in a unique way, and some will be more likely to do this than others.

For example, when it comes to businesses that do mostly debit sales, it’s not going to make much of a difference.

And for businesses that accept tips, such as restaurants or salons, it’ll probably be easier to impose a surcharge, as most people give 10 or 15 per cent for a tip anyway, so what’s another two per cent?

However, for businesses that sell higher-ticket items, it’s going to be a lot more difficult to justify, as the larger the transaction, the more expensive the surcharge will be.

At the end of the day, we think this is a good thing, as it gives merchants more autonomy, flexibility, and control.

But ultimately, business owners will have to decide for themselves where to draw the line between trying to recoup some of these interchange fees and taking the risk of possibly angering their customers.

Do you want to impose a surcharge on customers who pay with credit cards?

Are you unsure of how to go about doing this?

If you’re looking for advice on how to structure your surcharges, give us a call. We’ll look at your statement to find out where you’re spending the most, help you determine whether it’s worth it, and work with you to create a customized surcharge solution that best fits your business model.

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