Wednesday, 4 November 2009
Travellers short-changed in currency conversion fee decision
In a ruling issued 22 October 2009, the judge hearing the Federal class-action lawsuit against credit card companies for fraudulently hidden and/or inflated fees for credit, debit, and ATM transactions in foreign currencies has overruled all of the objections to the settlement and to the plan for allocating what's left of the third of a billion dollar settlement fund after the lawyers get their fee. The only major change made by the judge was to cut the lawyers' fee down from the US$85 million they asked for to a little over US$50 million (plus expenses).
Those who lived or travelled abroad for extended periods of time, especially if they relied on ATM cards, will be the biggest losers in the division of what is, despite its seemingly large size, a very small pot compared to the number and size of the claims. More than 10 million claims were filed, for a median of 80 days abroad, but the settlement fund will only provide a mean award of $25-30 dollars.
Ironically, several major online travel agencies (Priceline, Orbitz, and Travelocity) that used their corporate credit cards to pay hotels and other foreign suppliers were also wronged by the judge's decision -- their claims were denied, although they were clearly valid and made perfect sense to anyone familiar with standard travel industry practices, because the judge and class counsel didn't understand their "merchant" business model and card usage.
The settlement fund wasn't enough to pay all of anyone's claim, but the big winners in the plan of misallocation will be short-stay corporate business travellers, most of whom are double-dippers who have already been reimbursed by their employers for the fees in question, but who are extremely unlikely to pay their employers back what they receive from the settlement.
From more recent documents I've received from class counsel, it looks like they are still working out some of the details of the final orders, but I don't expect any of the fundamentals to change. I can't afford to appeal, but some of the other objectors -- especially the online travel agencies, who paid millions of dollars each in currency conversion fees, may do so.
The settlement also includes an injunction restricting future fees for "foreign currency" transactions. All well and good, except that to ensure that this injunction has no effect, credit card companies and banks have already changed their terms across the board, to provide for (much higher) fees for "foreign" transactions, regardless of currency. That's outrageous, since when the transaction is charged, billed, and settled in US dollars, it costs the card issuer and processor no more than if it were a purely domestic transaction. In some especially troubling cases, consumers have reportedly been charged "foreign" transaction fees when they bought tickets -- paid for in US dollars, and processed and settled netirely in the USA -- from ticket office in the USA of airlines headquartered abroad. The Consumer Travel Alliance needs your help in lobbying Congress to put a legislative stop to this scam by Federally bailed-out banks.Link | Posted by Edward on Wednesday, 4 November 2009, 19:14 ( 7:14 PM) | TrackBack (0)