LAWFUEL – Law Jobs, Law News – Diners Club has become the eighth financial institution to plead guilty to breaching the Fair Trading Act by failing to properly disclose its currency conversion fees.
The breaches relate to Diners charge card transactions between 3 January 2002 and 10 June 2003.
When customers used their cards overseas during that period they were charged a 1% fee for each currency conversion which was not declared on the Diners Club application forms for supplementary cards, and fee transaction schedules on its charge cards.
In the Auckland District Court today, Diners has pleaded guilty to three charges of breaching the Fair Trading Act. The company was fined a total of $67,000 and agreed to pay $140,000 in compensation to affected customers. Diners Club will also pay $20,000 in costs to the Commission.
This prosecution, along with the Commission’s actions against, ANZ National Bank, BNZ, Westpac, Kiwibank, ASB, TSB and The Warehouse Financial Services, have resulted in a total payout of $27,579,051 in compensation to customers, fines and costs.
“Customers want to be able to shop around for the best deal, but when the fees they are being charged aren’t adequately disclosed it deprives them of the opportunity to make a fair comparison,” said Commerce Commerce Chair Paula Rebstock.
“The cumulative effect of these eight cases is a significant win for consumers, and a strong signal to banks and credit providers that the Commerce Commission will take action to ensure markets are competitive and responsive and consumers are well informed,” said Ms Rebstock.
Diners charge card holders who are eligible for compensation will be contacted by Diners Club.
The fees. The ‘exchange rate’ used to convert foreign currency transactions into New Zealand dollars included a fee payable to Diners of 1%.
How compensation is paid. Under the settlement reached today Diners Club will be responsible for contacting affected cardholders, including those who are no longer customers. The $140,000 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-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, and Warehouse Financial Services for inadequate disclosure of currency conversion fees. As a result of the Commission’s actions including Diners, a total of $23,583,051 in compensation has been paid to consumers, $3,526,000 has been paid in fines, and $470,000 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.
Ongoing proceedings. The Commission’s prosecution of American Express is continuing and the Commission will not comment on the ongoing proceedings.