Clive Maxwell from the Office of Fair Trading says customers will see charges laid out more clearly
20 December 2011 Last updated at 09:51
Banks and credit card companies have agreed to scrap some charges they levy on holidaymakers buying foreign currency.
The move comes after pressure from the Office of Fair Trading (OFT).
The firms are also promising to display other costs more clearly in their monthly statements.
The OFT, investigating a complaint from the watchdog Consumer Focus, found travel money charges were confusing and companies made £1bn a year from them.
The watchdog’s complaint said that converting £500 into euros could cost between £10 and £30, even though the service provided was essentially the same.
Five companies – Lloyds, Barclays, RBS, Santander and the Co-op – impose charges of between 1.5 and 2% if customers use their debit cards before leaving the UK to buy foreign currency.
They have agreed to scrap this charge. Consumer Focus estimates that this will save consumers £20m a year.
Nationwide, HSBC, First Direct and Halifax Bank of Scotland do not charge such a fee.
Banks and card companies will also show separately on statements those charges which are incurred overseas, including the typical “loading fee” of nearly 3%, rather than hiding them in the cost of the items travellers have bought.
Lloyds Banking Group, including HBOS, HSBC, Co-op, Capital One, RBS and NatWest – for credit card statements, and American Express have agreed to implement this change by the end of 2013.
Nationwide, Barclays, Santander, RBS and NatWest – for debit cards only – already provide this information.
The OFT is also forcing currency businesses to review 0% commission offers and reveal what the costs actually are.
The regulator was responding to a super-complaint about the industry from Consumer Focus. This is an official request to investigate an issue of “significant harm to the interests of consumers”.
It found that, in 2010, people from the UK spent £32bn abroad – of which £27bn was on holiday. This was spent using debit or credit cards, or with foreign currency bought in the UK.
“Companies should be earning profits by competing to provide the best value products and services, not through charges that are hard for customers to identify or interpret,” said John Fingleton, OFT chief executive.
“We are very pleased that the travel money industry has agreed, following a short OFT investigation, to make these significant voluntary changes.
“We believe they will reduce confusion about the charges that apply when buying travel money in the UK or using cards overseas, and hope they will allow holidaymakers to be far better informed when making choices about how they spend abroad.”
Consumer Focus had complained that charges for using debit or credit cards overseas were unnecessarily complex and confusing, adding that phrases such as “0% commission” and “competitive exchange rates” were misleading.
It said that exchange rates already include mark-ups levied by suppliers and so were not fee-free as the 0% commission might imply.
It welcomed the action taken by travel money providers, but called for some of the changes to happen quicker than stated.
“It is particularly welcome that the OFT has worked with the big banks to stop withdrawal fees being charged when people buy currency on their card in the UK,” said Mike O’Connor, chief executive of Consumer Focus.
“It is only right that this unfair cost, which effectively charges customers for the privilege of taking money out of their own account, is stopped.”
Around 40% of foreign currency purchases in the UK are made using cards rather than cash, while close to 80% of respondents in the OFT survey bought at least some foreign currency before travel.