In the wake of the Credit Card Accountability Responsibility and Disclosure Act of 2009, banks are desperately searching for ways to replace the unfair and excessive fees they once imposed with near impunity. One such fee consumers should watch out for is the foreign transaction fee for domestic purchases.
Historically, foreign transaction fees were charged on purchases made in foreign currencies, and reflected the expense banks incurred when exchanging currency. However, many credit card issuers are now 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 the payment to the vendor is frequently deposited in a U.S. bank account. While the fee itself is unwarranted (because the banks incur no transaction costs), the lack of a clear disclosure of this practice is unconscionable. In fact, credit card companies typically only inform customers that they will assess foreign transaction fees, not that such fees will be charged even for purchases made in U.S. dollars and processed in the U.S.
Consumers should be particularly diligent when making airline reservations for travel to foreign countries. Some consumers booking foreign travel in U.S. dollars on domestic airlines using reward points have reported being charged foreign transaction fees on the taxes and other charges they have to pay in addition to reward miles, even though most or all of the fees are paid to the domestic airline or cover U.S. airport fees. Other consumers report having to pay a foreign transaction fee when they book flights through on-line travel sites such as Orbitz or Expedia, even though the purchase is in U.S. dollars, is processed in the U.S., and the payment is deposited into a U.S. bank account.
Some travelers even 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.
These 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.