Originally published by Edward Hasbrouck on his blog.

In a ruling issued 22 October 2009, the judge hearing the Federal class-action lawsuit against credit card companies for fraudulently hidden and/or inflated fees for credit, debit, and ATM transactions in foreign currencies has overruled all of the objections to the settlement and to the plan for allocating what’s left of the third of a billion dollar settlement fund after the lawyers get their fee. The only major change made by the judge was to cut the lawyers’ fee down from the US$85 million they asked for to a little over US$50 million (plus expenses).

Those who lived or travelled abroad for extended periods of time, especially if they relied on ATM cards, will be the biggest losers in the division of what is, despite its seemingly large size, a very small pot compared to the number and size of the claims. More than 10 million claims were filed, for a median of 80 days abroad, but the settlement fund will only provide a mean award of $25-30 dollars.

Ironically, several major online travel agencies (Priceline, Orbitz, and Travelocity) that used their corporate credit cards to pay hotels and other foreign suppliers were also wronged by the judge’s decision — their claims were denied, although they were clearly valid and made perfect sense to anyone familiar with standard travel industry practices, because the judge and class counsel didn’t understand their “merchant” business model and card usage.

The settlement fund wasn’t enough to pay of anyone’s claim, but the big winners in the plan of misallocation will be short-stay corporate business travellers, most of whom are double-dippers who have already been reimbursed by their employers for the fees in question, but who are extremely unlikely to pay their employers back what they receive from the settlement.

From more recent documents I’ve received from class counsel, it looks like they are still working out some of the details of the final orders, but I don’t expect any of the fundamentals to change. I can’t afford to appeal, but some of the other objectors — especially the online travel agencies, who paid millions of dollars each in currency conversion fees, may do so.

The settlement also includes an injunction restricting future fees for “foreign currency” transactions. All well and good, except that to ensure that this injunction has no effect, credit card companies and banks have already changed their terms across the board, to provide for (much higher) fees for “foreign” transactions, regardless of currency. That’s outrageous, since when the transaction is charged, billed, and settled in US dollars, it costs the card issuer and processor no more than if it were a purely domestic transaction. In some especially troubling cases, consumers have reportedly been charged “foreign” transaction fees when they bought tickets — paid for in US dollars, and processed and settled netirely in the USA — from ticket office in the USA of airlines headquartered abroad. The Consumer Travel Alliance needs your help in lobbying Congress to put a legislative stop to this scam by Federally bailed-out banks.

No one likes to sit near someone with the sniffles or a cough on the plane, but what about the very real prospect of your seatmate having swine flu? If current airline policies continue, those who have flu-like symptoms and heed the Centers for Disease Control warning to “stay home and avoid travel for 7 days” will face hundreds of dollars in airline fees and penalties. How many will still fly despite their illness and the chance of spreading it?

An unprecedented national effort is being waged to limit the impact and spread of the H1N1 flu (swine flu) virus. Millions of vaccine doses are now being distributed across the country, health care workers are being inoculated en masse, government workers have new medical leave policies, schools are being closed and the head of the Centers for Disease Control (CDC) warned, “We have not had a flu season like this in at least 50 years.”

Neither the airlines nor the Department of Transportation (DOT) have made a meaningful response to this pandemic as it sweeps the country. Basic common sense tells us that airplane flights — putting large groups of people in a small, contained space — will facilitate the spread of this virus.

So far, the airline industry’s sole response has been to remove pillows and blankets from many aircraft. Plus, spokespersons for the airlines have said, “If you are sick, stay home.” Yet, our airlines are actually punishing passengers who choose to not fly when infected. The airlines can and should change policy to help slow the spread of H1N1.

Airline passengers have to pay change fees of as much as $150 for domestic flights and $250 for international flights when they opt to change a flight. Then, they are required by the airlines to pay the difference between the original price paid for their flight and the current airline price. (When comparing the cost of an advanced-purchase ticket with the cost of a flight leaving next week, that difference can be dramatic. In fact, it can be up to four times as much or more.)

Getting more people with flu symptoms to comply with the CDC’s suggestion about travel when ill with the flu would be greatly facilitated by the airlines allowing passengers with a health professional’s letter indicating that they have or may have H1N1 to be allowed to reschedule their trip at no additional cost.

Just think of the difference airlines could make in limiting the spread of H1N1 by being proactive and making these changes immediately. But, absent any changes in policy by the airlines, the DOT, in consultation with the CDC, should get in gear and mandate that the airlines eliminate their change and cancellation rules that punish passengers for being good citizens.

During this flu season, swine flu shouldn’t fly. Dropping the airline penalties will help make this happen.

From the Secretary of Transportation’s blog — August 11, 2009

What does it mean that an article from over the weekend on a nightmare flight delay is yesterday’s “Most Viewed” news item in the Minneapolis Star-Tribune? I think it means that reasonable people are outraged at the idea of being stuck on a small plane for seven hours. I think it means that flyers and those who are considering flying want to know that should a delay occur, they will be treated respectfully.
(more…)

From Elliott.org

I hate it when I’m right about something like this. A few days ago, I warned that the Credit Card Accountability Responsibility and Disclosure Act of 2009 had a gaping loophole that could force us to pay a foreign transaction fee whenever we crossed a border.

Not only is that proving accurate, but the truth is much worse. Now you don’t even have to travel to get dinged by one of these bogus surcharges.

Here’s what happened to Sunil Kadam when he booked a ticket through Expedia.

I live in Boston and I booked my parent’s tickets from Expedia.com from Mumbai to New York on Qatar Airways. When my credit card statement came, I found a foreign transaction fee of $44 which was two percent of ticket price.

When I contacted Citi Card (my credit card company), they said Qatar Air is foreign airline, hence there is foreign transaction fee. Expedia says they give the transaction to Qatar’s US office in Washington, who should process the transaction in United States. Expedia is not doing any transaction (but still charging $14 booking fee).

When I contacted Qatar’s office in D.C., they are saying this not their problem either. Qatar Air’s D.C. office process all payments through their central server. So they are telling me to check with Citi again. I tried to dispute that charge but as per Citi’s “agreement” you can dispute the foreign transaction itself but not the foreign transaction fee.

Do you think I should be paying foreign transaction fee for the transaction I have made in US with a US company (Expedia)?

Of course not.

I asked Expedia what was happening. Here’s what I heard back.

Expedia’s customer service team researched this case, and found that Expedia submitted the round-trip amount ($1,468.80) to Qatar Airlines as a U.S.-based purchase. Qatar Airlines verified that they processed the charge via their central reservation system based in Washington D.C. The customer’s credit card company, Citibank, then charged a foreign transaction fee in line with its cardholder agreement with the customer.

It is Expedia’s assessment that the customer’s credit card company is charging a fee, likely because Qatar Airlines is not a U.S.-based company, per its cardholder agreement. Because the fee was not charged by Expedia.com or Qatar Airlines, neither Expedia nor Qatar Airlines has the authority to reverse this charge.

By this logic, I could get charged a foreign transaction fee by doing business with any non-US company, even if the charge takes place in the United States. If I buy a Sony camcorder or a set of Henckels knives — ding! — there’s two percent!

The intent of the just-signed credit card bill was to stop these ridiculous foreign transaction fees, but vague language left the door open for charging them. (For the record, some concerned citizens tried to warn Rep. Barney Frank about this loophole when the bill was in committee, but to no avail.)

Now the new fees seem to be popping up everywhere.

Kadam has several options. He can complain to the Federal Trade Commission, which has oversight responsibility for credit cards. Technically, Citi may be regulated by the Office of Thrift Supervision. In the short term, a trip to small claims court might get him the $44 back, but I don’t think that’s realistic, since his court costs would almost certainly be higher than $44.

The government needs to clarify what it means by a “foreign exchange fee” — and soon. Otherwise, we’ll all be paying these fees for anything manufactured by a non-US company.

That would be madness.

Congress is racing to get legislation completed that will reset the rules for credit card issuers and many banks. Barney Frank is the Chairman of the Committee on Financial Services and, at this point, the last major legislative figure that can change this almost-finished legislation.

Clear instructions on how to register your concern with Congressman Frank are here. Plus, here is Congressman Frank’s facebook page where you can write on his wall.

————————

The Honorable Barney Frank
United States House of Representatives

Dear Congressman Frank,

Credit card fees have finally come to the attention of Congress. I applaud you for your work in this area that is so important to American consumers.

Unfortunately, foreign currency exchange fees addressed in the bill being voted on by the Senate and coming to the House for a vote this week, are already being circumvented by the credit card industry. Foreign currency exchange fees, other than the mandated one percent Visa/Mastercard exchange fee have been phased out. The new preferred fee for credit card issuers is “Foreign Transaction Fee.”

Last week I received a notice from the Bank of America that the “foreign transaction fee” was being increased and expanded to include any credit card charge handled by a non-US bank, even transactions completed in U.S. dollars. This redefinition of a fee will allow credit cards to continue to hide their fees and to fleece the American public.

If Congress is serious about limiting fees, the foreign transaction fee should be included clearly in the legislation.

A simple change such as adding it to the foreign currency exchange fee wording would do the trick. Plus, these fees should be clearly listed on credit card billing statements.

The intention of this legislation is to allow the American public to clearly see and understand fees being charged by the credit card issuers. Keeping items such as three and four percent foreign transaction fees hidden defeats much of the purpose of this bill.

I urge you to insert “and foreign transaction fees” immediately following foreign currency exchange fees.

The modified section of the bill would read as follows(changes in bold type):
———————-
SEC. 103. LIMITS ON FEES AND INTEREST CHARGES.

Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is amended by adding at the end the following:

(o)(3) REASONABLE CURRENCY EXCHANGE FEE AND FOREIGN TRANSACTION FEES- With respect to a credit card account under an open end consumer credit plan, the creditor may impose a fee for exchanging United States currency with foreign currency in an account transaction or processing a foreign transaction only if–

`(A) such fee reasonably reflects the costs incurred by the creditor to perform such currency exchange;

`(B) the creditor discloses on billing statements its method for calculating such fee; and

`(C) the primary Federal regulator of such creditor determines that the method for calculating such fee complies with this paragraph.’.

———————

These small changes will make the bill far more consumer-friendly, especially for anyone traveling internationally to Canada, Mexico, the Caribbean or elsewhere. Plus it would put an end to extra hidden fees imposed whenever a U.S. dollar transaction is conducted by a foreign bank. If there is a rationale for these foreign transaction fees, so be it. However, these fees are capricious — banks charge varying percentages and CapitalOne does not impose such a fee. They are purely a hidden money grab.

I hope that you will move to insert language similar to what I have suggested in order to maintain the spirit of this credit card legislation and to thwart the credit-card-issuer attempt to get around soon-to-be-established legislation.

I would love to have an opportunity to discuss this with you or your staffers.

Sincerely,

Charles Leocha
tripso.com
Consumer Travel Alliance

PS: I am a long-time consumer advocate for travelers, author of Travel Rights, a freelancer, former weekend travel guru for MSNBC, co-founder of tripso.com and of a non-profit, Consumer Travel Alliance. I have just moved to the DC area to begin working more closely with Congress regarding travelers’ affairs.

Originally published in Tripso.com. May 7, 2009

Read ‘em and weep: Bank of America, while Congress is decrying their fees and changes to credit terms, is adding to its credit card fee gouging.

Bank of America is not alone. Many credit card issuers have similar rules. Check your fees. Don’t get stuck.

As American taxpayers are pouring more and more money into saving Bank of America and other failing financial institutions, the companies are doing their best to screw those from whom they beg. All of this in advance of the main summer travel season when these types of transactions are expected to be heaviest.

Bank of America just announced an increase in their transaction fees for using ATMs and expanded their definition of “foreign transaction fees.”

Now, for example, anyone withdrawing $200 in US dollar funds as a cash advance from an ATM in a foreign country will be faced with a $10 (minimum ATM charge) plus a 3 percent foreign transaction fee. Total: $16 to get money from the ATM. That’s 8 percent not counting the mandatory Visa/Mastercard 1 percent charge. A withdrawal of $400 would result in a total charge of 8 percent as well.

The exact wording of the new Bank of America rules regarding ATM charge increases:

Effective June 1, 2009, the transaction fee (FINANCE CHARGE) we asses on each of the transactions identified below will be equal to 4% of each such transaction (Fee: Min. $10):

• ATM Cash Advances
• Balance Transfers
• Cash Equivalents
• Check Cash Advances
• Direct Deposit Cash Advances
• Wire Transfer Purchases

The Bank of America is also expanding their Foreign Transaction Fee:

Amendment to Your Credit Card Agreement:
Effective on June 1, 2009 we are replacing the definition of “Foreign Transactions” in the section of your Agreement titled Words Used Often in this Agreement with the following:

• “Foreign Transaction” means any transaction made in a foreign currency, and any transaction made in U.S. dollars if the transaction is made or processed outside of the United States. Foreign transactions include, for example, online purchases from foreign merchants.

These “Foreign Transaction Fees” are affecting many cruise clients as well as those of us who travel anywhere outside the borders of the U.S.

The best way to avoid these credit card fees is to carefully choose the card used when traveling internationally. Of the major credit card issuers, use Capital One for purchases since they are the only major credit card issuer that doesn’t charge foreign transaction fees. (Their ATM cash advance charges are hefty, however.) Or use a credit card issued by a smaller bank or your credit union. These cards, especially the credit union credit cards, rarely have foreign transaction fees or additional ATM fees built into their agreements. Some even rebate most ATM charges.

These articles, written years ago, still tell the true story for credit card use overseas or across the border:

7 rules for using your credit card overseas

Beware hidden card fees

These truly hidden fees, obscurely nested in dense agreement verbage, are far more expensive than any first-check-bag charge assessed by the airlines. Again, with the banks as with the airlines, those whom the American taxpayers bail out seem intent on gouging their benefactors.