8.3 We are pleased to report that there has been clear progress, with the majority of initiatives now implemented. While some remain outstanding, the OFT expects the majority of these to be implemented during 2013.
We expect these initiatives to lead to significant benefits for consumers in the overseas use of credit and debit cards and in purchasing foreign currency in the UK.
The super-complaint and OFT's response
8.4 In its super-complaint, Consumer Focus identified three features which it called on the OFT to investigate:
• The charges applied when using credit or debit cards abroad which it considered were complex, unclear and confusing and may prevent consumers from making well informed choices.
248 See www.consumerfocus.org.uk/files/2011/09/The-hidden-costs-of-holidays-Consumer-Focus-super-complaint.pdf for details.
249 See www.oft.gov.uk/OFTwork/markets-work/super-complaints/travel-money for details.
• The charges applied by some banks and credit card providers for purchases of foreign currency within the UK which it considered were unfair and may restrict competition and consumer choice.
• The use by some UK foreign currency retailers of phrases promising zero per cent commission and competitive exchange rates which it considered may mislead consumers and prevent them from
shopping around.
8.5 Our analysis of the available evidence supported the first two of the three concerns set out above. The key findings from this analysis were as follows:
• Most consumers did not think (or were unaware) that a fee included in the exchange rate was applied to their card when using it abroad.
Card providers typically used an exchange rate that had been adjusted to include an exchange rate fee which was in addition to other foreign use charges that may apply.
• Most card purchases of foreign currency in the UK were by debit card. We found that consumers were in general unaware of the practice by some banks of charging for use of debit cards to purchase foreign currency in the UK.
• On the marketing of foreign currency in the UK, we found that claims such as zero per cent commission and competitive exchange rates may in some cases be misleading. However, we considered that consumers were able to shop around effectively on the exchange rates offered.
8.6 In advance of publication of its response to the super-complaint, the OFT engaged closely with the industry and agreed a number of initiatives concerning the above three areas of concern. In relation to charges for the use of debit and credit cards abroad, the OFT secured the following:
• Consistent terminology for foreign use charges to be agreed across the industry.
• Improved presentation of foreign use charges in credit card and (to the extent they are already provided) personal current account summary boxes, making it clear where charges are cumulative.
• Changes to call centre processes, so that where the payment card provider requires or encourages them to do so, customers
telephoning payment card providers in advance of travel250
• Improvements to website travel pages, such as accessible links to foreign use charges, worked examples of how foreign use charges apply, and links to historic exchange rate information.
will be asked whether they want an explanation of foreign use charges.
• All major payment card providers to break out and show the
£sterling amount of the exchange rate fee on monthly statements.
• Annual statements to show the GBP amount of foreign use charges that have been applied, where these are shown on monthly
statements.
8.7 In relation to charges for using a debit card to purchase foreign currency in the UK, the OFT secured voluntary agreements from all five banks that charge for debit card purchases of foreign currency in the UK to drop the charge entirely.251
8.8 In relation to foreign currency bought in the UK, the OFT received agreements from most large foreign currency vendors in the UK to review and amend their advertising in light of the OFT’s concerns.
Foreign currency vendors also agreed to improve the availability of
exchange rate information on websites and provide greater clarity on the sales channels to which particular interest rates apply.
250 Some providers ask card holders to contact them before travelling so they know to expect foreign transactions on the account.
251 Visa has reminded its members of their obligations not to treat foreign currency sales by non-banks in a way that results in a charge to the card provider. Furthermore, Visa consulted its members on changes to the scheme rules such that foreign currency sales in the UK by banks may not be treated in a way that results in a charge to the issuing bank.
8.9 We found less evidence to support Consumer Focus’ argument that use of the phrase zero per cent commission misleads consumers into thinking that they cannot get a better deal elsewhere. Consumer Focus
suggested that the phrase may mislead consumers because, ‘the
difference between the buy and sell prices of foreign exchange is what we understand to be commission.’ We consider that the majority of consumers understand that the cost of purchasing foreign currency in the UK depends on the exchange rate offered and that the phrase zero per cent commission does not imply that the exchange rate is as
favourable as it could be.
8.10 We also considered that there was scope for the Department for Business, Innovation and Skills (BIS) to consider expanding its Pricing Practices Guide to include specific advice in relation to sales of foreign currency.