11.45am
Customer complaints to the Banking Ombudsman may have helped convince the Commerce Commission to cast its eye over the currency conversion fees banks charge on overseas credit card purchases, the Dominion Post reported today.
It was reported on Monday that since last year the commission has been investigating how banks represent
the fees, and is close to completing its inquiry.
The investigation is being conducted under the terms of the Fair Trading Act. Banking Ombudsman Liz Brown said she referred several customer complaints over such fees to the commission around the middle of last year.
She said at first glance the complaints appeared to have some merit, but her office was geared to investigate individual complaints and the amounts involved for each complaint were quite small. "After consultation and discussion with the banks and complainants we referred the matter to the Commerce Commission," she said.
Though the individual sums may be small, the overall amount involved may prove more significant. Banks were reluctant to disclose the income they made from currency conversion fees, with some citing commercial sensitivity. But in the United States last year, a judge ruled that Visa and Mastercard would have to refund up to US$800 million ($1.13 billion) of currency conversion fees for not properly disclosing them to cardholders.
Visa and Mastercard charge 1 per cent and 1.1 per cent respectively of the transaction amount for that service, while banks add a further charge ranging between 1 per cent and 1.95 per cent in New Zealand.
That case revealed Visa charged more than US$630 million for that service in the four years to 2000, but providing the service cost Visa just US$6.9 million.
Consumers Institute chief executive David Russell told the Dominion Post he was "delighted" an investigation was taking place. "Most people are probably not aware of the charges -- exchange rates fluctuate and they don't separate them out... it requires a degree of sophistication and knowledge to challenge such charges," he said.
He noted fees on electronic transactions contributed significantly to the strong profits reported by New Zealand banks and New Zealand branches of overseas banks.
Banks such as the Bank of New Zealand and Westpac said the commission was entitled to investigate and they were cooperating with it. The commission is also investigating the fees banks charge each other for handling credit card payments, which is still in progress.
- NZPA
