Commerce Commission commences legal action against eight credit card providers
The Commerce Commission will file criminal proceedings against five banks, two credit card companies and one financial
services company following an industry-wide investigation into the disclosure of international currency conversion fees.
The Commission investigated alleged misleading practices of companies in the credit services market after the Banking
Ombudsman referred several complaints to the Commission.
As a result, the Commission has informed ANZ National Bank Limited (incorporating both ANZ and The National Bank of New
Zealand), ASB Bank Limited, Bank of New Zealand Limited, Westpac Banking Corporation (New Zealand Division), TSB Bank
Limited, American Express International (NZ) Inc, Diners Club (New Zealand) Limited and The Warehouse Financial Services
Limited of its decision to take criminal action under the Fair Trading Act. The case against ANZ National Bank Limited
will include charges in relation to The National Bank of New Zealand.
Chair Paula Rebstock said the Commission was concerned about behaviour which may amount to misleading conduct in
relation to how currency conversion fees on overseas transactions involving foreign currencies were and are currently
disclosed to customers. The conversion fees charged for credit card transactions involving overseas currencies also
affect overseas debit card transactions.
For overseas purchases, a credit card statement typically sets out the foreign purchase price on a transaction alongside
the New Zealand dollar amount for payment. In addition, some statements quote an exchange rate for the conversion from
the foreign currency into New Zealand currency.
“The Commission alleges that the fact these statements represent to cardholders that overseas purchases made on their
credit/debit cards are converted into New Zealand dollars at a prevailing exchange rate is likely to be misleading
because the exchange rate includes embedded and undisclosed conversion fees,” said Ms Rebstock.
“In some cases, these fees can add up to 2.5 percent on the New Zealand dollar cost of the overseas currency transaction
for cardholders.”
The New Zealand dollar amount charged to the cardholder is actually the overseas transaction converted at a prevailing
exchange rate plus, in most cases, two fees, payable to the issuing bank and the relevant credit card scheme such as
Visa or MasterCard. Where the cards are directly issued by the credit card scheme provider to customers, as is the case
with American Express International or Diners Club, one fee is usually charged.
“In the Commission’s view, it is vital that all representations made to customers are accurate, including telling
cardholders whether or not the exchange rate in their credit card statement includes fees.
“The disclosure of fees charged would create an incentive for credit card providers to compete on the level of fees
charged to customers, thereby creating the potential to reduce costs associated with foreign currency transactions to
the benefit of consumers,” Ms Rebstock said.
While there has been some movement by the banks and credit card providers in disclosure of conversion fees to
cardholders since the start of the Commission’s investigation into this issue, in the Commission’s view this has not
gone far enough to properly disclose to cardholders and the public the nature of these transactions, whether the
transaction includes fees and the amount of fees being taken as conversion fees on overseas transactions.
Ms Rebstock added that as the matter will be before the courts, the Commission is unable to provide any further comment
at this stage.