Credit cards accused of fixing currency charges
By Alison Beard in New York
Published: November 15 2001 21:02 | Last Updated: November 15 2001 23:33

visa

Leading credit card companies and their issuing banks are facing lawsuits accusing them of illegally fixing currency exchange fees on customers' international transactions.

These suits are the latest in a series of cases accusing Visa and MasterCard of anti-competitive behaviour. Others allege collusion in charging commissions to retailers and in restraining member banks from issuing credit cards from other suppliers.

Courts in California, Illinois and New York and a federal court in Manhattan are considering allegations that companies are violating state business codes and federal anti-trust and truth-in-lending laws.

The credit card companies deny the latest charges and are defending the suits.

According to the federal lawsuit, Visa and MasterCard are collectively fixing conversion commissions at 1 per cent and many of their issuing banks are tacking on another 2 per cent.

Visa, the top US credit card issuer, collected $500m in fees for purchases by Americans travelling abroad over the past four years, according to the lawsuits. The company is also being sued in New York for allegedly mispricing its currency exchange rates.

Separately, with MasterCard, it has been defending itself against anti-trust lawsuits from the US Justice Department and US retailers alleging collusion in fixing commissions from retailers.

Kelly Presta, vice-president of Visa USA, this week denied any wrongdoing with regard to foreign exchange. "When US cardholders make purchases abroad, Visa provides consumers through their issuing bank a currency conversion transaction rate that is better than converting cash at a local currency dealer," he said.

Visa charges its member banks "wholesale" rates plus the 1 per cent fee, and the banks do not have to pass the charge on to customers, he added.

James Baum of Schrag & Baum, the plaintiff firm in the California case, said: "There's abundant evidence that [the 1 per cent] is being charged directly to the cardholder." Bank of America, Citigroup and JP Morgan Chase are alleged in the federal suit to have tacked on their own 2 per cent charge. American Express is also alleged in the federal case to charge 2 per cent but it is not a defendant.

Lack of disclosure is another complaint. But Mr Presta said "details of Visa's role in the currency conversion can be found in the cardholder agreement".

Additional reporting by Abigail Rayner


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