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Under the settlement, small merchants can receive $30 a year for each year they accepted credit-card payments, up to a maximum of $600.Ryan Remiorz/The Canadian Press

Business groups are urging merchants to sign up for a multimillion-dollar class-action settlement with Visa and MasterCard over credit-card processing fees.

Merchants have until Sept. 30 to join the claim, with amounts varying depending on the size of the business.

Small merchants – defined as those with under $5-million in annual revenue – can receive $30 a year for each year they accepted credit-card payments, up to a maximum of $600. Small merchants do not need to provide proof of their claim.

Larger merchants can claim more money from the $131-million settlement fund, but are required to submit supporting documentation.

The amounts are meant to partially recoup merchants for the transaction fees they pay to credit-card companies and banks each time a customer uses a credit card for payment.

Delays to Ottawa’s pledge to lower credit card transaction fees has small businesses worried

The fund is among the final steps to settling a long-running class-action lawsuit launched by merchants in 2010 against Visa, MasterCard and financial institutions.

Corinne Pohlmann, senior vice-president of national affairs at the Canadian Federation of Independent Business, said the settlement is positive for small businesses, but more work remains to bring down the cost of transaction fees.

“It doesn’t change the fact that merchant fees in Canada are still relatively high compared to other parts of the world,” Ms. Pohlmann said.

The more significant outcome of the settlement will come in October, when merchants will be allowed for the first time to add surcharges to customers’ bills to cover the cost of the transaction fees. Those fees are used to help fund credit-card loyalty programs and reward points and are a lucrative source of revenue for financial institutions.

Visa and MasterCard have for years included clauses in their agreements with merchants that forbid the stores from passing on transaction costs to customers.

Karl Littler, senior vice-president of the Retail Council of Canada, said the credit-card companies had opposed allowing merchants to add surcharges because they worried it would encourage customers to use debit or cash payments instead.

“The last thing they want is someone to avoid a surcharge by switching to another form of payment,” Mr. Littler said.

Business groups said they were not sure how many merchants would actually make use of the surcharging power, as it would end up raising costs for customers.

“Small merchants, in particular, are pretty sensitive to keeping their customers happy, and surcharging may be perceived as not necessarily working in that favour,” Ms. Pohlmann said.

However, she said she was glad merchants would now have the option of adding surcharges if they wanted to.

Not all business groups are in favour of the settlement.

Gary Sands of the Canadian Federation of Independent Grocers, which has frequently advocated for lower credit-card processing fees, said the amount was too small to make a difference for most merchants.

As well, he said he was worried that the federal government could use the surcharge power as a way to avoid tackling the larger issue of high fees.

Since 2019, the government has reiterated in elections and budgets a promise to force credit-card companies to lower their fees, which average 1.4 per cent of the value of each purchase. However, Ottawa has so far not acted on those promises.

“This could unfortunately provide cover for the government to break its promise to reduce credit-card fees,” Mr. Sands said.

Visa and MasterCard did not respond to a request for comment, and the Canadian Bankers Association declined to comment.

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