One of Australia’s biggest banks has refunded approximately $20 million to 820,000 customers for failing to clearly disclose the types of credit card transactions that attract foreign transaction fees.
Following a customer complaint, Westpac notified ASIC that customers may have been incorrectly charged foreign transaction fees for Australian dollar transactions processed by overseas merchants.
ASIC said that, because Westpac's terms and conditions did not clearly state that foreign transaction fees would be charged for such Australian dollar transactions, the bank commenced a process to identify impacted customers and provide refunds with interest.
Westpac has updated its disclosure to clarify that Australian dollar transactions — when they are processed by overseas merchants — will also attract a foreign transaction fee.
“It is essential for consumers to know when fees will be charged, so that they can make an informed decision when using financial products and services,” ASIC deputy chairman Peter Kell said.
“ASIC acknowledges the cooperative approach taken by Westpac in its handling of this matter, and its appropriate reporting of the matter to ASIC.”
The complaint has prompted the corporate watchdog to issue a warning to consumers about unanticipated credit card foreign transaction fees.
“It may come as a surprise to consumers that transactions made in Australian dollars with overseas merchants, or processed by a business outside Australia, can attract a foreign transaction fee,” ASIC said. “This may even occur where the merchant’s website has an Australian address (domain name) or where a foreign business advertises and invoices prices in Australian dollars.”
Mr Kell said it may not always be clear to the consumer that the merchant or entity is located outside Australia, particularly in an online environment where the website uses an Australian domain name.
“We urge consumers to check whether the transaction they make is with an overseas-based merchant or processed outside Australia, especially when they shop online,” he said.
“Equally, credit card issuers need to ensure that the disclosure of such fees is clear so customers understand the fees that they are charged when using their cards.”
However, Mr Kell noted that not all cards impose foreign transaction fees.
“For consumers who make frequent overseas purchases, it is worth shopping around for a card that offers no foreign transaction fees,” he said.
ASIC is working with other industry participants on this issue, as well as working to improve disclosure by a number of credit card issuers.
[Related: ING Direct to refund $5.38m in super fees]