LAWFUEL – The Legal Newswire – TSB is the seventh major bank to plead guilty to breaching the Fair Trading Act by failing to properly disclose currency conversion fees paid by its credit card customers between 1 September 2002 and 19 December 2004. TSB customers paid fees of up to 1.75% of their total transactions that were not disclosed on their credit card statements.
In the Auckland District Court today, TSB pleaded guilty to 13 charges of breaching the Fair Trading Act. The company was fined a total of $280,000, and agreed to pay $151,000 in compensation to affected customers. TSB will also pay $40,000 in costs to the Commission.
This prosecution, along with the Commission’s actions against ANZ National Bank, BNZ, Westpac, Kiwibank, ASB and The Warehouse Financial Services, have resulted in a total payout of over $27.3 million in compensation to customers, fines and costs.
Affected TSB customers were those who made transactions in foreign currency between 1 September 2002 and 19 December 2004 on TSB’s Visa credit card. Customers will be contacted by TSB if they are affected.
“The Commission is pleased that TSB has admitted to the Court and its customers that it has breached the Fair Trading Act in relation to inadequate disclosure of fees, in this case currency conversion fees. Banks know that the level of fees is important to customers, and will have an impact on customers’ purchasing decisions. In other areas the banks advertise low or no fee options to try and attract business,” says Commerce Commission Chair Paula Rebstock.
“But as long as these foreign exchange fees remained hidden there was no incentive for banks to lower them,” says Ms Rebstock.
“Banks must be upfront about all their fees and charges, so that customers can shop around and get the best deal. In doing so customers will put pressure on banks to lower the charges.”
The fees. The ‘exchange rate’ used to convert foreign currency transactions into New Zealand dollars included a fee payable to TSB of 0.75% and a fee payable to the credit card provider of 1%.
Investigation of TSB. TSB admitted that foreign currency exchange fees were charged but not adequately disclosed during the period from 1 September 2002 to 19 December 2004.
How compensation is paid. Under the settlement reached today TSB will be responsible for contacting affected cardholders, including those who are no longer customers. The $151,000 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-focussed charity of the Commission’s choice.
Enforcement action to date: The Commission has previously taken action against ANZ, National Bank, BNZ, Westpac, Kiwibank, ASB, and Warehouse Financial Services for inadequate disclosure of currency conversion fees. As a result of the Commission’s actions a total of $23,443,051 in compensation has been paid to consumers, $3,459,000 has been paid in fines, and $450,000 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
Ongoing proceedings: The Commission’s prosecutions of American Express and Diners Club continue, and the Commission will not comment on the ongoing proceedings.