The OFT has found that charges for purchasing foreign currency and using cards overseas can be confusing and often not at all clear for consumers and has secured agreement from banks and travel money providers to significantly improve matters for consumers.
The OFT has engaged closely with the industry to tackle the problems it has identified with charges for buying foreign currency and using cards overseas and has secured a raft of commitments from banks and other providers, including:
- Agreement from Lloyds/HBOS, Barclays, RBS/Natwest, Santander and the Co-operative Bank to scrap charges for consumers using their debit cards to purchase foreign currency in the UK (typically between 1.5 and 2% of the amount being purchased).
- A joint agreement from the UK Cards Association and the British Bankers Association, on behalf of their members, that they will give clearer, more accessible information about their charges for using cards abroad, on websites, statements and through call centres.
- Lloyds/HBOS, HSBC, Co-operative Bank, Capital One, RBS/Natwest and American Express have agreed to display the actual charges incurred by customers for using cards abroad far more clearly on their monthly and annual statements.
- Many foreign currency businesses have agreed to review their marketing to make the various costs and conditions that apply clearer, particularly those applicable to ‘0% commission’ deals.
According to the OFT, in 2010 travel money providers earned an estimated £1.1 billion from those buying foreign currency using their debit and credit cards.
John Fingleton, OFT Chief Executive, said: “Companies should be earning profits by competing to provide the best value products and services, not through charges that are hard for customers to identify or interpret.
‘We are very pleased that the travel money industry has agreed, following a OFT short investigation, to make these significant voluntary changes. We believe they will reduce confusion about the charges that apply when buying travel money in the UK or using cards overseas, and hope they will allow holidaymakers to be far better informed when making choices about how they spend abroad.
“This should drive greater competition in the UK travel money market.”
Stephen Heath, CEO of FairFX.com, a prepaid currency card provider, said “The OFT have done a great job by getting 5 of the biggest UK banks to agree to scrap debit card charges for purchasing foreign currency whilst in the UK. It is important that consumers keep a close eye on the banks exchange rates in light of this news to make sure they do not try and pass those charges back in the way of less competitive rates in future.
“The OFT has also gained assurances from travel money providers that they will review their marketing of travel money to make it more transparent in light of this report. Amongst those is the Post Office who currently use ‘0% commission’ advertising in store and online, where 60% of all consumers get their travel money from. It will be interesting to see if they continue to use that form of advertising. Our own survey showed that 93% of consumers found ‘0% commission’ advertising to be misleading and would like to see it banned.
“Over the last 5 years, we have launched our own complaints to the OFT, ASA and alerted the national press to the less scrupulous advertising tactics imposed by some companies operating in the travel money sector. With other travel money providers adopting new clear and transparent advertising, consumers stand to make significant savings. Today’s news is definitely a step in the right direction.”
“Overall, the OFT’s investigation into the travel money sector has been a great success. In light of their recommendations, some travel money providers will have to be more transparent with their fees and adopt a new approach to how they advertise and market their services. Consumers stand to gain significantly in light of this as they can will now be able to compare travel money providers more easily.”
MoneyHighStreet comments: “This move by the OFT is good news for consumers – greater transparency of costs associated with buying travel money will enable easier comparison of the currency exchange deals offered by the different providers.
“Many holidaymakers are already turning to use prepaid currency cards, offering security and the ability to purchase foreign currency at a time that suits, knowing that you don’t have additional exchange costs to deal with.
“To help you assess these, you may find our article on our top four prepaid currency card providers – complete with a rundown of what makes them stand out. Just click here to view it.”