Foreign transaction fees

See updated story: “Currency conversion refund”

If at some point in the past decade or so you paid for a hotel room in London or dinner in Dubai using a Visa, MasterCard or Diners Club card, you may be entitled to a refund from your credit card company.

A recently settled class-action lawsuit illuminated the fact that for about 10 years, foreign transaction fees ranging from 1 percent to 3 percent of a purchase were passed on to consumers without their knowledge. These transaction fees included an undisclosed service fee by the issuing bank in addition to MasterCard’s or Visa’s 1 percent fee. The crux of the lawsuit is that these fees were levied without cardholders’ knowledge (they weren’t itemized on the statements), and that these three credit card companies engaged in price-fixing. The suit also charges that Visa and MasterCard inflated their base exchange rates before applying the fee.  They didn’t tell consumers the exchange rate they used when converting foreign currency into dollars, and the rate they charged was usually higher than the best available rate at the time of purchase.

About five years ago, “the bank fees started to happen all of a sudden,” says Robert D. Manning, a professor of humanities at the Rochester Institute of Technology and the author of “Credit Card Nation.” As a result of the lawsuit, card companies now have to disclose on the statement what they charge in transaction fees and how they determine the exchange rate. They are not required to roll back the fees, however, and in most cases the companies voluntarily began disclosing fees once the suit was filed. “The [issuing bank’s] fee used to be a pretty standard 1 percent, then it rose to 2 percent pretty much across the board,” Manning added. “The credit card industry knows that consumers focus on interest rates, so they’ve been tacking on all these fees.”

Staking a claim

The Foreign Currency Conversion Fee Antitrust Litigation was settled for plaintiffs for $336 million on July 20, 2006. Any holder of a Visa, MasterCard, or Diners Club credit, charge, or debit card issued in the United States as of Nov. 8, 2006, is a plaintiff and entitled to a refund if he or she made a foreign transaction between Feb. 1, 1996 and Nov. 8, 2006. To claim a refund, simply estimate what you charged yearly and fill out a claim form (available at www.ccfsettlement.com/claim). Or call 800-945-9890 to request a claim form in the mail. The deadline for filing is Jan. 9, 2008. You might only get a partial refund, or, in some cases, your claim could be adjusted upward for charges made in a year when a foreign fee was increased to, say, 3 percent. Purchases made with debit cards and ATM withdrawals are also eligible for reimbursement. But only one claim is allowed per person.

If you need to jog your memory of a trip abroad, banks are required to send you up to six monthly statements for free. While you are not required to submit proof of foreign purchases and transactions, claims are subject to audit. It may take several months, or years, to be reimbursed, depending on the outcome of the case, which is subject to final approval in November.