After a months’ long investigation into the transaction fees UK banks have been charging debit card holders for purchasing foreign currency, the OFT released a statement that five of the major UK banks have agreed to drop these charges (transaction fees) under certain conditions.
In September, as a result of a major complaint lodged against banks by Consumer Focus, the Office of Fair Trading embarked upon an investigation into banks that had been charging unfair fees for purchasing foreign money with debit cards in the UK. Also, the OFT scrutinised how banks were going about disclosure when it came to transaction fees and charges. A huge part of the complaint was that banks were not clear on the amount and types of charges their customers would be assessed when buying foreign currency with their debit and credit cards.
The banks which have agreed to drop these fees include the RBS, Barclays, Santander, Lloyds Banking Group and the Co-operative Bank. To date, these charges for buying foreign currency amounted to anywhere from 1.5% and 2% of the amount being purchased. For example, a UK consumer was being charged an extra transaction fee of £10 plus £30 when using a debit card to purchase 500 euros. However, towards the end of next year these additional charges for buying foreign currency in the UK with debit and credit cards will be dropped.
This does not account for buying foreign currencies while out of the country. However, at least the new disclosure laws will make it clearer to consumers what and how they will be charged when using their debit cards abroad for the purchase of foreign currencies. The super complaint lodged by Consumer Focus has brought about quick results which will affect approximately 40% of purchases of foreign currencies in the UK as that is the percentage bought with cards.
According to experts in the industry, this is just the beginning of what needs to be done to end the confusion among consumers. Dropping fees at home is a step in the right direction, but banks now need to focus on better disclosure because consumers are still, in many cases, spending at least 10% more than they need to when purchasing foreign currencies.
