Brits pay too much for foreign currency, OFT to investigate

Wednesday, 21 September 2011 10:50

Brits are paying too much for foreign currency because of complex charges and misleading information, according to Consumer Focus.

The watchdog has issued a super-complaint to the Office of Fair Trading (OFT) over the way banks charge customers for holiday money services, estimating the total cost of these payments at around £1 billion per year.

Consumer Focus said it is calling on the OFT to carry out an investigation to find out whether these costs are justified or over the odds.

It claimed the charges for using debit or credit cards overseas are "unnecessarily complex and confusing", while the use of phrases such as "zero per cent commission" and "competitive exchange rates" can often be misleading.

Mike O'Connor, Consumer Focus chief executive, commented: "Almost half of us travel abroad every year and we face a confusing array of often hidden charges every time we buy currency. Converting £500 into euros can cost from under £10 to over £30 depending on where you switch your money. This is a huge difference for essentially providing the same service and typically banks offer the worst deals.

"We are calling on the OFT to investigate and work with the industry to send these dubious and complex charges packing," he added.

Jon Beddell, Managing Director of TorFX said: "Exchange rates offered by high street banks can vary widely and are usually at least 5% worse than the underlying market rate at the time. Consumers often don’t realise that there are alternatives to the banks when it comes to buying foreign currency."  

Melanie Johnson, who chairs the UK Cards Association, said the organisation will go through the report to check the claims made.

"Customers increasingly choose to use their cards abroad because they are convenient, secure and flexible and offer greater protection than other types of payment. Despite the fact that providing this service comes at a cost they are often the most competitive option," she added.

The OFT now has 90 days to come up with a response to the super-complaint and reveal what action, if any, it plans to take.

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