Visa and MasterCard are set to allow businesses in Canada to levy surcharges on certain credit cards.

The move follows a settlement agreement between Visa, MasterCard and Canadian merchants. The case, which was filed in 2011, was pursued by the Canadian Federation of Independent Business (CFIB).

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As per the lawsuit, both Visa and MasterCard forced merchants to accept all their credit cards, even ones for which retailers need to pay higher fees. Both card companies did not permit merchants to add a surcharge for customers who use these premium cards.

Without admitting any wrongdoing, Visa and MasterCard both entered into a settlement agreement recently. Both companies agreed to pay CAD19.5m ($14.7m) each and allow Canadian merchants to add surcharge fees on credit card payments with a surcharge cap.

Additionally, merchants will have to reveal their surcharging practices, and provisions to ensure a level playing field with cardholders of competing payment networks.

In a statement, Visa said that the new rules will be effective 18 months after provincial courts in British Columbia, Alberta, Saskatchewan, Ontario and Quebec approve the settlement.

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Welcoming Visa and MasterCard decision, CFIB president Dan Kelly said: “The ability to add a small surcharge to accept a credit card payment – particularly for higher cost premium credit cards – is an important power to have, but it is not expected to be widely used by smaller merchants.

“It takes a lot to get a customer into one’s store and even more to get them to the register. About the last thing most merchants would want to do is frustrate a consumer at the point of payment.”