Telus Corp. is trying to add a 1.5% processing fee for customers who use a credit card after a class-action settlement allowed merchants to add the surcharge starting this fall.
In a letter to the Canadian Radio-television and Telecommunications Commission, the telecommunications giant says the surcharge is “to cover the processing costs associated with credit card payments.” The document, dated Monday, seeks permission from the regulator to add the fee to its terms of service.
Telus said in a statement Friday that the average cost each month will be around $2 per customer and they can avoid the fee by selecting an alternate bill payment option, such as debit payments or one-time bank payments.
The Vancouver-based company will be free to add the surcharge starting in October thanks to a class-action settlement over fees charged and restrictions set by banks and credit card companies. The settlement was reached in 2017, but it took time to get provincial approvals.
The settlement included $188 million in bank and credit card payments, of which approximately $131 million is available to be paid out to Canadian merchants, as well as the removal of the Visa and Mastercard surcharge restriction.
Removing the restriction allows merchants to potentially recoup processing fees for credit cards ranging from around 1% for basic cards to almost 3% for cards offering rewards such as cashback or rewards. Loyalty points.
Merchants who want to add a charge for credit cards should post signage that they have a surcharge, along with the charges explicitly listed on the receipt. Mastercard has set a maximum cap of 2.4% on the surcharges that merchants can charge.
The focus on credit card fees has increased during the pandemic as more people use credit cards for online purchases, and even small in-store purchases like a drink and snack that would have previously made in cash.
However, few smaller retailers are expected to add the charge, said Dan Kelly, chief executive of the Canadian Federation of Independent Business.
“We fought for the power to really overcharge to ensure that smaller traders have the ability to negotiate better prices. But I never thought that was a power most merchants would take.
He said it was too risky for traders to lose business in competitive markets, but it was probably less of a concern for some large companies.
“I think there will probably be some adoption and interest in overloading among oligopolies and monopolies, and obviously the telecommunications industry would definitely fall into that category.”
Kelly said he was concerned that Telus’ decision could prompt some provinces to impose restrictions on surcharges, as Quebec has already done. Telus said the fee will not apply in Quebec or to customers of its Koodo subsidiary.
Small businesses also hoped to see relief from credit card processing fees, called interchange fees, pledges from the federal government. In 2019, the Liberals promised to remove interchange fees on the sales tax portion of revenue and pledged to reduce fees in their 2021 budget, but starting with the 2022 budget, the government said that he was still “consulting with stakeholders on solutions to reduce the cost of fees for merchants.
Federal governments have already secured reductions from credit card companies. In November 2014, Visa and MasterCard voluntarily agreed to reduce their annual average effective fee to 1.5% over five years, a period that began in April 2015. The companies also agreed to reduce the average fee to 1.4% starting in 2020, which when announced in 2018, the government said it expected the reduction to save small and medium-sized businesses a total of $250 million a year.
Credit card fees in the European Union, meanwhile, are capped at 0.3% in an effort to ensure that average retailer costs are not higher for cards than for cash payments.
This report from The Canadian Press was first published on August 12, 2022