Tesco hidden fx rip-off

A_nice_fellow

Interesting, and I have to say pretty sneaky, thanks OP.

BTW I am pretty sure if this was changed without explicitly drawing your attention to it a complain to the FOS would win, as it is a significant and pretty onerous change.

[Deleted User]

every little helps.........helps tesco that is !

Thrugelmir

bigboyeast wrote: »

Just a quick update. Contacted Tesco Finance today. The “gentleman” was unable and unwilling to discuss how they get their daily FX rate. I asked to be put through to the Complaints Department but he said that they would be unable to help as well. :mad::mad::mad:


If I wanted to complain I had to put it in writing. So that will be my task today.

As I used the table on Martin’s excellent guide to “Cheap Travel Money” I decided to take a look at the T&Cs of some of the other cards he listed. This is what I have found:-

Alliance & Leicester - FX conversion at payment scheme provider rate
( now Santander ) (note load is now 2.95% note 2,75%)

ASDA (Mastercard) - FX conversion at payment scheme provider rate

Co-Op (VISA) - Reference rate by VISA

Halifax - FX rate set by payment system

HSBC (MasterCard) - Market rate set by MasterCard

Lloyds TSB - Visa or MasterCard rate

M&S (MasterCard) - Wholesale market rate

MBNA - Wholesale Market Rate

Mint - MasterCard rate of day

Nationwide (VISA) - Visa wholesale rate

Post Office - Rate set by MasterCard

Sainsbury’s - Rate set by payment system

Virgin Money - Wholesale market rate

Basically I cannot find anyone else who has moved away from using the official MasterCard or Visa wholesale rate except Tesco. They now appear to be setting their own FX rate which includes a hidden 2.25% load factor.

Just a point, Martin in his article picked on a number of debit cards as “Cards from Hell” because that have a spending penalty of £1 - £1.50 per transaction. Because of Tesco hidden FX load factor my trip cost me an extra £15.75 for using my card three times in one day. I would have been better off using one of Martin’s “Cards from Hell” or even using Auchan own Dynamic Currency Conversion rate of 1.15 rather than my Tesco Mastercard.

WHICH IS THE CARD FROM HELL

I intend to contact Martin via the news link on this site. This is one that I think he should have fun pursuing particularly as we are entering the holiday period.:money:

Thanks for pointing this out.

bigboyeast

I sent complaint to Tesco claiming that the exchange rate used in my three euro transactions were Excessive.

I asked eight detailed questions and got back very evasive answers:mad::mad::mad::mad:. I even referenced the UK Payment Services Regulations 2009 (PSR) that now governs how a payment transaction (including debit and credit cards) should be handled but Tesco noted my points but didn't comment.


The only real answer that Tesco were willing to give was that The Royal Bank of Scotland Group sets the exchange rate used in the currency conversion and that the wholesale rate on which their exchange rate is based is “business sensitive” and cannot be divulged. In other words that can set whatever rate they like.

I have now done a lot more investigation and it would appear that any Debit or Credit Card from within the Royal Bank of Scotland Group or third parties such as Tesco that uses RBS as the issuing bank have General Terms (or Terms and Conditions) that have words like

“..the transaction will be converted to sterling at an exchange rate determined by us (either our own or a rate provided by Visa or MasterCard)…”.

This compares to those used by Co-op for example

All Transactions will be in sterling or the currency of the country where you use your Card. Transactions made in currencies other than sterling will be converted into sterling using a reference exchange rate set by Visa, which is available at visaeurope.com

In terms of the PSR this is known as defining the reference exchange rate. However, for RBS cards they have defined two reference rates and have the right to choose which they apply, their rate (much worse for the card holder) or the public MasterCard rate. Guess which one they choose.

I have sent the last 36 hours trying to find some way within the regulations to show that this practice is in breach of the PSR. My best hope is to reference regulation 42(6) which states:-

Any change in the interest or exchange rate used in payment transactions must be implemented and calculated in a neutral manner that does not discriminate against payment service users.

Having talked to a couple of people I know in the E-commerce industry and looking briefly at the MasterCard GCMS Reference Manual it would appear that when MasterCard settlement occurs between the Merchant’s bank and the Issuer’s Bank they use published MasterCard cross-rates for the settlement day (not quite but close enough). So in effect Tesco (or any member of the RBS Group) bill the customer using their reference exchange rate, and then send to the merchant’s bank a lesser amount based on the MasterCard rate. They then pocket the difference.

I am now trying to draft a follow-up complaint letter to Tesco claiming they are in break of regulation 42(6) of the PSR because they changed the exchange rate used in a payment transaction in a manner that is not neutral to the card holder (payment system user), and clearly discriminates against the payment service user to about 2.45% of the transaction value.

Remember this is in addition to the 2.75% they already take as their Foreign Currency Transaction fee.

Any comments or suggestion would be most helpful particularly from people with RBS Group credit and debit cards. Examples of their reference exchange rate clause from General Terms or Terms and Conditions would be welcome.

THIS IS NOW A MUCH BIGGER ISSUE THAN JUST TESCO