Help stop huge rip-off – all Tesco and RBS card holders

bigboyeast

As many of you will know, I have been fighting Tesco over changes to their T&Cs regarding setting exchange rates, which they introduced in Nov 2009. This same change was introduced by RBS in Jan 2008. To my knowledge they are the only UK card issuers who don’t use the official MasterCard or Visa exchange rates for foreign transactions on their credit and debit cards.

Having got nowhere via the banks complaint process I have finally gone to the press to at least make more people aware of the underhanded tactics Tesco and RBS are using to increase their margins on all overseas transactions at the expense of their cardholders

On Saturday, The Guardian published a major article on the issue. This can be found on the Guardian Money website (I can't post the link because I've only been a member on this site for 6 months and made 8 posts.) Maybe someone else with these privileges could do this for me

Their money editor Patrick Collinson also wrote a scathing editorial (also on web site) regarding the lack of regulation in this area of credit cards, and asked why the FSA has not acted to stop this unfair rip-off.

I provided an estimate to The Guardian of how much this rip-off could be costing UK cardholders based on an average 2% additional exchange rate margin. This estimate was:-

£ 12.3 million for Tesco Credit cardholders
£ 28.9 million for RBS/NatWest/Courts/Bank of Ulster credit cardholders

£41.2 million on credit cards
+
£40 million for RBS/NatWest/Courts/Bank of Ulster debit cardholders

TOTAL RIP-OFF VALUE ESTIMATED AT £81 MILLION PER YEAR


Note : figures based on The UK Card Association overseas spending on plastic in 2009 and Mintel/Datamonitor market share figures for plastic card issuers.

Because The Guardian wanted to focus on Tesco they only used the Tesco estimate in their article.

If you read Tesco’s response to the allegations in the Guardian article, they still claim their exchange rates are competitive to those used by MasterCard. This is neither my experience nor those of others on the moneysaving expert website. However, to assist in my plan to take this complaint forward to the FSA, I need more examples to show this is a systematic process and not just a few isolated incidents.

If you have a Tesco or RBS/NatWest credit or debit card and have used it abroad in the last 6 months please, please help. The information cannot be traced back to you and will not compromise your card security.

What I needed are the following transaction examples: -

Card type (Tesco/RBS/NatWest credit or debit card)
Transaction date
Posting date (this is critical as it allows me to check against the published MasterCard rates and is on your statement)
Transaction Currency
Exchange rate (in most cases this will include the banks published Foreign Transaction fee – 2.75% for most Tesco/RBS cards)

Please don’t post any other information.

With more data points to clearly confirm what RBS and Tesco are up to I will then attempt to get the FSA to investigate Tesco and RBS behaviour. I intend to go to the FSA rather than the banking ombudsman service, as the ombudsman can only rule on a particular complaint rather than the legality of the whole practice. The FSA is the regulating authority.

I will also try and get Martin Lewis interested in pursuing the story. Up to now he has not picked up on it, and his money saving tips for overseas travellers do not included the issue of banks setting their own exchange rates.

COME ON MARTIN:money: LEND A HAND

fozmcfc

Really wishing you all the best with this, hope you get the support and info you require.

YorkshireBoy

bigboyeast wrote: »

Maybe someone else with these privileges could do this for me

http://www.guardian.co.uk/money/blog/2010/dec/11/tesco-credit-card-customers

opinions4u

Is it any different to one card issuer having an APR of 12.9% and another one charging 24.9%?

At the end of the day different companies charge different prices for different services. In this case it's just a shame that Tesco and RBS didn't start offering rates favourable when compared to the Mastercard / Visa duopoly.

While I would agree with the sentiment that the price offered should be clearer to cardholders, I don't see that setting your price differently to somebody else is a bad thing.

stephane_2

It's a question of choice...don't use Tesco or RBS cards abroad...simple!

bigboyeast

Thanks Yorkshireboy, but could you also add a link to the main article on the Guardian website.

I think a couple of you miss the point. The MasterCard and Visa rate is very competitive, it is basically the market wholesale rate. Martin indicated this in his guide to overseas sending.

It is important to understand that any foreign transaction credit card payment request to Tesco or RBS from MasterCard will have already been converted into the cardholder’s local currency by MasterCard at its published rate for the settlement day. This is the only way MasterCard can determine a number of payments within the transaction handling and settlement process. Firstly the amount of money the merchant will receive from the cardholder for their good or services. Secondly, the fee Tesco/RBS will receive from the merchant for handling the transaction (known as the interchange fee usually about 1.75% of transaction value). Then the fee MasterCard gets from Tesco/RBS for carrying out the currency conversion (usually 1% of transaction value). This is then passed on by Tesco/RBS to the cardholder as part of their published Foreign Transaction Fee. Finally, the cardholders billing amount for the transaction in their local currency. It is only the exchange rate used to determine this final value that Tesco or RBS change. The only reason to change this exchange rate is to increase the margin they make on handling this transaction at the expense of the cardholder.

Tesco and RBS are already making 1.75% margin from the merchant (interchange fee) and another 1.75% margin from the cardholder (2.75% Foreign Transaction Fee minus the 1% currency conversion fee to MasterCard). To then manipulate exchange rates to make an extra 2% margin is just pure greed at the expense of their customers. I bet the banker at RBS who first thought this scheme up in 2007 received at massive bonus from Sir Fred Goodwin and the other bosses at RBS.


How can a cardholder make a choice when as The Guardian has found even credit card analysts (and I believe we can add Martin Lewis to the list) didn't know that Tesco/RBS had stop using the MasterCard rate in favour of their own worse rate.


I agree that people should stop using Tesco and RBS cards abroad, but how do you inform the masses who don't read this web site?

chattychappy

opinions4u wrote: »

Is it any different to one card issuer having an APR of 12.9% and another one charging 24.9%?

stephane wrote: »

It's a question of choice...don't use Tesco or RBS cards abroad...simple!

I think it's a question of informed choice and contracts which comply with regulation. Personally I think Tesco should be free to set any rate they like and they probably are.

However promoting a 2.75% forex loading suggests that this is what you will pay to Tesco (or its partners) for converting a currency. It conceals the reality that you will be paying more. In my opinion it is misleading or a misrepresentation.

It's perfectly true that T+Cs may state that the underlying exchange rate is their own. But there is a raft of legislation (European, statute, regulatory, case law and "soft law" - codes of conduct, advertising standards etc) that intervenes to protect consumers against misleading advertising or unfair/onerous/vague terms.

The FSA is pretty hot on its so-called "treating customers fairly" initiative and authorised businesses must comply with this in respect of their regulated activities. Whilst this probably excludes credit cards, I think the OFT should be interested if the FSA regards it as being outside of their scope. (Some activities become regulated by virtue of the provider becoming authorised as a result of carrying out other activities which must be regulated.)

opinions4u wrote: »

While I would agree with the sentiment that the price offered should be clearer to cardholders, I don't see that setting your price differently to somebody else is a bad thing.

Agreed. Personally I think it's an issue of transparency.

Degenerate

opinions4u wrote: »

Is it any different to one card issuer having an APR of 12.9% and another one charging 24.9%?

It's different because APRs are declared. If Tesco/RBS declared their intention to charge a forex loading of 5%ish instead of the 2.75% typically charged by others then there would be no cause for complaint. Instead they choose to rip people off with the deliberately deceptive practise of claiming the same forex loading as others whilst additionally loading the exchange rate with this hidden charge.

While I would agree with the sentiment that the price offered should be clearer to cardholders

That's the whole point.

chattychappy

See also: http://www.guardian.co.uk/money/2010/dec/11/foreign-exchange-tesco

richardw

I must admit that I looked at my bill in October and thought the rate was a bit poor, but thought nothing of it, but thanks for the heads up.

chattychappy

richardw wrote: »

I must admit that I looked at my bill in October and thought the rate was a bit poor, but thought nothing of it, but thanks for the heads up.

I think you're not alone. I'm sure many will have a vague (wrong) idea that they will be paying a pretty standard 2.75% and when they see their statement some time later just put any discrepency down to currency fluctuation. Afterall, exchange rates can easily vary up or down by 2 or 3% a day.

Whilst 2.75% is higher than for some cards, it it were just that it wouldn't be too bad if you're on a interest-free on purchases deal such as that which Tesco offer.