Updated: Oct 7
Canadian retailers won a long-running class action suit this week that will have an impact on consumers, businesses, and credit card companies.
The impact on consumers is merchants can now pass fees charged by credit card companies and banks that administer them to consumers who make purchases using a credit card.
Those fees range from less than 1% to a cap of 2.4%.
A Canadian Class action suit claimed certain banks and credit card companies "conspired" to set higher interchange fees, impose rules restricting merchants’ ability to refuse to accept higher fee credit cards, or pass the fees on to customers.
Many consumers use their credit cards to make purchases because they get points and other benefits. Typically the cards with the most perks have the highest 'interchange fee" for the merchant. A fee the merchant is obliged to pay.
There have been allegations of an uneven playing field when it comes to how much of a fee some merchants pay.
One contentious allegation was big merchants could negotiate smaller fees with credit card providers whereas smaller businesses could not.
So it's good news for businesses but perhaps not so good for consumers who like to use their plastic.
Starting immediately, retailers and other businesses in Canada will now be allowed to pass the so-called "interchange" fee they are charged by the credit card companies and the banks that administer them to consumers who use credit cards.
How much will the surcharge be? To a large degree that depends on the card you use. If you have a card with more perks, the fee might be higher. The max amount is capped at 2.4%.
The class action suit concluded this week with the defendants (Credit card companies and banks) agreeing to settle the "Credit Card Action" and pay a total of $188 million for the benefit of the plaintiffs (businesses).
The compensatory agreement is being called "The New Settlement" in exchange for the dismissal of the class action suit.
After expenses related to the case, IE lawyers and other legal fees, are deducted $131 CAD million remains for distribution to class members.
The Canadian Federation of Independent Business or CFIB has excellent information for businesses that want to make a claim and possibly receive some of the $133 million settlement.
None of the settlements affects Quebec. The fee was not permitted under the province's Consumer Protection Act.