Watchdog issues super-complaint into forex charges
A consumer watchdog has today issued a super-complaint to the Office of Fair Tradig about the amount holidaymakers and business travellers pay for foreign currency.
Consumer Focus says a combination of complex charges and poor or misleading information means travellers are being ripped off when they exchange money or use cards overseas.
Britons spend around £27bn abroad in 2007 and Consumer Focus estimates they were charged a total of £1bn for swapping their pounds for local currency. "It is unclear how much of these charges are warranted and how much are excessive, which is why Consumer Focus is calling on the OFT to carry out its own investigation," it said in a statement.
The watchdog is asking the OFT to investigate three key areas:
- Charges for using debit or credit cards overseas, which it says are unnecessarily complex and confusing as they vary significantly, making it difficult for users to establish the full costs and shop around for better deals;
- Banks and credit card fees for buying travel money with a card in the UK, which Consumer Focus says do not reflect actual costs. It says a debit card payment costs on average 9p to process and a credit card payment 37p, yet charges for buying currency with a card are typically 1.5-2% of the amount converted (up to a ceiling of £4.50)
- The use of marketing phrases such as ‘0% commission’ and ‘competitive exchange rates’ by suppliers, which it says are misleading and make it difficult for consumers to make informed choices and compare banks with bureaux de change or the Post Office. In practice, it says, the exchange rates already include mark-ups levied by suppliers and so are not fee-free as ‘0% commission’ implies
Consumer Focus chief executive Mike O'Connor said: "Converting £500 into euros can cost from under £10 to over £30 depending on where you switch your money. This is a huge difference for essentially providing the same service and typically banks offer the worst deals.
‘If holiday makers buy their currency from the Post Office, travel agent or bureaux de change many are stung with cash withdrawal charges by their bank, effectively for the privilege of taking money out of their own accounts.
‘Individuals buy holiday money infrequently and so may not shop around much or may just stick with the same supplier. A cocktail of confusing charges and poor transparency means collectively we are losing out in a big way. We are calling on the OFT to investigate and work with the industry to send these dubious and complex charges packing."
Most holidaymakers (70%) buy foreign cash in the UK with one in five using debit or credit cards overseas.
By Linsey McNeill
Linsey McNeill
Editor Linsey McNeill has been writing about travel for more than three decades. Bylines include The Times, Telegraph, Observer, Guardian and Which? plus the South China Morning Post. She also shares insider tips on thetraveljournalist.co.uk
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