Last month we reported on a number of questionable practices in which credit card companies were engaging to maintain their profits in the wake of the Credit Card Accountability Responsibility and Disclosure Act of 2009. An additional improper charge that credit card companies are levying on consumers is the foreign transaction fee for domestic purchases.
Historically, foreign transaction fees were charged on purchases made in foreign currencies, and they were designed to recoup the higher processing expense credit card companies incurred for such transactions. Now, however, credit card companies are charging consumers a foreign transaction fee on most any purchase that in any way relates to a foreign entity. Banks increasingly charge this fee despite the fact such purchases are made in United States dollars, the vendor processes the transaction in the U.S., and in some instances, the payment to the vendor is deposited in a U.S. bank account. Not surprisingly, consumers are not adequately warned that they will incur such fees; while the credit card companies may inform customers that they will assess foreign transaction fees, they fail to disclose that such fees will be charged even for purchases made in U.S. dollars and processed in the U.S.
For example:
- Some American consumers booking foreign travel in U.S. dollars on domestic airlines using reward points are charged foreign transaction fees on the taxes and other charges incurred for booking such travel, even though most or all of the fees are paid to the domestic airline or cover U.S. airport fees;
- Other travelers booking flights going abroad making purchases in U.S. dollars through on-line travel sites such as Orbitz or Expedia are charged foreign transaction fees, even though the purchase is processed in the U.S. and the payment is deposited into a U.S. bank account;
- Similarly, travelers who purchase tickets in U.S. dollars directly from foreign or domestic airlines for travel abroad are charged foreign transaction fees on their entire purchases, even though the booking is made and processed in the U.S. and the payment is deposited into a U.S. bank account;
- Some travelers also report that they were charged foreign transaction fees for purchases made in U.S. dollars in U.S. territories such as Puerto Rico, even though such territories are, as a matter of law, not foreign countries.
Some travelers also report that they were charged foreign transaction fees for purchases made in U.S. dollars in U.S. territories such as Puerto Rico, even though such territories are, as a matter of law, not foreign countries.
Credit card companies are incurring no, or minimal, additional expenses for processing these transactions, yet they charge 1-3% of the total transaction price. Such charges are potentially fraudulent and in violation of various consumer protection laws.
If you are a credit card consumer who incurred charges as a result of these or other improper practices, please contact us to discuss your legal options.