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Legal Matters: Banks must disclose service fees

A customer walks into a Westminster branch of a national bank to buy euros. A teller advises the customer that for $300, he will receive 205 euros.

“How much of the difference is in the exchange rate, and how much is the bank’s currency conversion fee?” the customer asks.

“Oh, it’s all in the exchange rate,” says another teller.

The customer questions the answer, but the tellers insist the bank does not charge its account holders for such transactions. Later, the customer looks up the exchange rate. On the date of the transaction, one euro was worth 1.3869 dollars. If the bank did not impose any currency conversion fee and there are no other unknown charges, the customer calculates that he should receive approximately 215 euros for his $300. He concludes that the difference between 215 euros and the 205 euros he will receive is probably the bank’s hidden currency conversion fee.

If the customer is right, there is a three percent difference, a fee in line with average currency conversion fees of 2 to 4 percent reported online. The customer calls the bank’s customer service number, and several transfers later, a representative admits the bank does charge and quotes the fee at 1.48 percent. If correct, the difference may be in other undisclosed charges.

Can a bank refuse to disclose fees it charges for services? The federal Truth in Savings Act requires “the clear and uniform disclosure of ... the fees that are assessable against deposit accounts, so that consumers can make a meaningful comparison between the competing claims of depository institutions with regard to deposit accounts.”

The bank may be on shaky legal ground by refusing to disclose a fee when asked directly. No record of a legal challenge in Maryland could be found. But in 2003, a California judge ordered Visa and MasterCard to refund millions of dollars in foreign currency exchange fees. The judge ruled the credit card issuers violated California’s unfair competition law by not properly disclosing conversion fees charged on purchases priced in foreign currencies and bought using Visa or MasterCard.

If our euro-buying customer challenged the bank’s actions in court, the bank might win if it can point to a disclosure buried in the terms and conditions papers given customers when they open accounts. If the disclosure is in the document, even if it is in tiny type on page 133, the bank may have met federal law requirements.

Some savvy travelers avoided currency conversion fees in the past by using their U.S. bank cards to withdraw local money in countries they visited. They used it and credit cards rather than buying foreign currency before leaving the U.S. But many banks and credit card issuers now charge fees for use of bank or credit cards overseas.

“These fees are often hidden in a total dollar charge on your bank/credit card statement, which makes it next to impossible to know how much the actual fee was that the bank/credit card company charged to your account,” Credit.com reported in 2013 (https://www.credit.com/credit-cards/foreign-currency-conversion-fees/).

Donna Engle is a retired Westminster attorney. Reach her with questions or feedback at 410-840-2354 or denglelaw@gmail.com. Her column, which provides legal information but not legal advice, appears on the second and fourth Sunday each month in Life & Times.

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