The foreign currency gouge

For years some major credit card companies failed to adequately disclose the fees for overseas transactions.
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03.Overseas crackdown

New Zealand regulator gets tough

In 2002, New Zealand’s Commerce Commission commenced a widespread investigation after consumers complained about undisclosed currency fees being charged on top of exchange rates for credit and debit card transactions. The first cases were concluded in 2006; the rest are ongoing. The situation in New Zealand seems to have been worse than in Australia: in some cases banks didn’t disclose any currency fees — including the scheme fee (as in Australia) or their own fee.

Some of those prosecuted are affiliated to Australian banking groups:

  • ANZ National Bank: In March 2006, ANZ National Bank pleaded guilty to 45 charges of breaching the Fair Trading Act by failing to properly disclose fees charged for overseas credit card transactions. The bank agreed to pay NZ$10 million in refunds to customers and NZ$1.3 million in fines, the highest ever fines imposed under the Act. The transactions occurred from 2001 to 2004, with customers paying fees between 2% and 2.5%. More info: ANZ National Bank pleads gulity over credit card fees.
  • BNZ: In July 2006, BNZ (part of the National Australia Bank group) pleaded guilty to similar charges, agreeing to pay NZ$5 million in compensation to customers and $550,000 in fines. More info: BNZ pleads guilty over card fees.
  • Westpac: In September 2006, Westpac pleaded guilty over failure to disclose the fees for overseas transactions made between April 2002 and December 2004. Customers had paid fees of just over 2.5% of the value of these transactions. The Bank agreed to pay NZ$4.5 million in compensation to customers. More info: Westpac to pay $5 million in compensation and fines.

The New Zealand Commerce Commission’s prosecutions of American Express, ASB (Commonwealth Bank’s New Zealand brand), Diners Club, Kiwibank, The Warehouse Financial Services and TSB are ongoing.

US legal actions

The New Zealand actions follow successful (and much bigger) legal cases in the US against MasterCard and Visa over similar fees, which the card companies appealed.

In 2003 in California, MasterCard's and Visa’s failure to disclose fees was found to be in violation of the state’s unfair competition law. As in some Australian examples, conversion fees were disclosed in cardholder agreements (which are sent to customers with their card), but not on monthly statements. The relevant court found that customers are much more likely to read their statements, and therefore reasoned that the currency conversion fee constituted a ‘hidden’ charge.


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