Credit Card Users Get Over $24m Back
A sentencing in the Auckland District Court today has brought to a close three years of action by the Commerce Commission to expose and seek redress for undisclosed and inadequately disclosed overseas transaction fees.
During the three years, the Commission has obtained more than $24 million in compensation to customers with the parties to the proceedings paying more than $29,214,305 in total including fines and costs.
American Express International (NZ) Ltd has become the ninth financial institution to plead guilty to breaching the Fair Trading Act by failing to properly disclose its currency conversion fees.
"This has been a landmark investigation which has sent a very strong message to the banking industry that banks must not be misleading about the existence and extent of fees. It has resulted in changes to the way banks and credit card companies disclose that information," says Commerce Commission Chair Paula Rebstock.
"The breaches uncovered by the Commission affected many thousands of credit card users, and as a result they have received refunds of the fees not properly disclosed. The cumulative effect of these nine cases has been a significant win for consumers," says Ms Rebstock.
"Competition results from informed consumers. Not only were consumers paying fees they did not know about, but banks were not motivated to compete on fees while they remained hidden," says Ms Rebstock.
"In that context, these cases have wide implications across a range of industries. The Commerce Commission will continue to place a priority on enforcement action where fees are not fully disclosed."
The latest settlement relates to American Express credit card and charge card transactions between 1 June 2002 and 23 August 2004.
When customers used their cards overseas during that period they were charged a 2% fee for each currency conversion which was not adequately declared in American Express's Terms and Conditions, Promotional Material and Card Statements.
In the Auckland District Court today, American Express has pleaded guilty to 5 charges of breaching the Fair Trading Act. The company was fined a total of $250,000 and agreed to pay $1.3 million in compensation to affected customers. American Express will also pay $80,000 in costs to the Commission.
American Express card members who are eligible for compensation will be contacted by American Express.
The fees. The 'exchange rate' used to convert foreign currency transactions into New Zealand dollars included a fee payable to Amex of 2%.
How compensation is paid. Under the settlement reached today Amex will be responsible for contacting affected cardholders, including those who are no longer customers. The $1.3 million will be placed in an account, to be monitored by an independent auditor. Once all affected customers who can be contacted have been compensated, any money remaining will be donated to a consumer-focused charity of the Commission's choice.
Enforcement action to date: The Commission has previously taken action against ANZ National Bank, BNZ, Westpac, Kiwibank, ASB, TSB, The Warehouse Financial Services and Diners Club for inadequate disclosure of currency conversion fees. As a result of the Commission's actions including Amex, a total of $24,883,051 in compensation has been paid to consumers, $377,600 has been paid in fines, and $550,000 has been paid to the Commission in costs.
ANZ National Bank Limited pleaded guilty to 45 charges of breaching the Fair Trading Act in March 2006 in respect of ANZ Bank and The National Bank of New Zealand. ANZ National was fined a total of $1.325 million and agreed to pay reparation of $10,000,000 and costs of $160,000.
The Bank of New Zealand pleaded guilty on 17 July 2006 to 21 charges of breaching the Act. It was fined $550,000 and agreed to pay costs of $80,000 and provide a compensation fund of $5 million.
Westpac pleaded guilty on 29 September 2006 to 19 charges of breaching the Act. It was fined $570,000 and agreed to pay $4.5 million in compensation and $80,000 in costs.
Kiwibank pleaded guilty on 16 May 2007 to five charges of breaching the Act. It was fined $134,000 and agreed to pay $172,051 in compensation and $10,000 in costs.
ASB pleaded guilty on 15 June 2007 to 26 charges of breaching the Fair Trading Act. It was fined $600,000 and agreed to place $3.5 million in a compensation and $80,000 in costs.
The Warehouse Financial Services reached a settlement with the Commission on 26 July 2007. They agreed to refund $120,000, the full amount of hidden foreign exchange fees on the company's Value or Merit MasterCard cards.
TSB pleaded guilty on 3 September 2007 to 13 charges of breaching the Fair Trading Act. It was fined $280,000, and agreed to pay $151,000 in compensation to customers and $40,000 in costs in the Commission.
Diners pleaded guilty on 12 October 2007 to 3 charges of breaching the Fair Trading Act. It was fined $67,000 and agreed to pay $140,000 in compensation to affected customers and $20,000 in costs to the Commission.