(Reuters) - For about 10 million people who travelled abroad from 1996 to 2006 and used their credit, debit or ATM cards, a check’s in the mail -- or will be by year’s end -- following the settlement of a lawsuit over how the credit card companies charged fees when purchases were made outside the U.S.
Nearly $276 million will be paid to consumers to compensate them for the alleged hiding of fees and backroom dealings that set those fees. Lawyers in the case are due to get more than $51 million.
So, what does that work out to for consumers? Not much.
The settlement of the lawsuit, reached in 2006, was to pay recipients at least $25 a piece. However, lead attorney Merrill Davidoff says that due to “oversubscription” that has dropped to $18. Some participants could receive more depending on how much spending they did that was subject to the exchange rate fees, and the payment option they choose. The first of the checks were to be mailed this week, but due to the volume involved it is expected to take about two months to get them all distributed.
A consumer advocate active on banking issues says lawsuits like this are part of what is needed to keep the financial industry honest.
“It’s rare that class actions against the banks are settled in favour of consumers as this one was, even if most consumers will get only a few dollars,” says Ed Mierzwinski, consumer program director for U.S. PIRG. “To police the financial marketplace, we need federal regulators, state attorneys general and consumer enforcement cases.”
The period of time covered in the litigation is February 1, 1996 through November 8, 2006 and the deadline to participate in the litigation was in May 2008. Part of the delay in the payout was that it took some time to resolve 11 appeals, the last of which was decided in December.
Defendants in the case were Visa V.N, MasterCard MA.N, Bank of America BAC.N, Bank One/First USA, Chase CCF.A, Citibank, Diners Club, HSBC/Household, MBNA and Washington Mutual/Providian. All the defendants denied any wrongdoing and said they properly disclosed the fees.
American Express AXP.N was not party to this lawsuit, but rather is the subject of a related pending case in which that company is accused of colluding with Visa and MasterCard to set the fees for converting purchases made in currencies other than the U.S. dollar. American Express has denied wrongdoing.
While many cards still carry foreign transaction fees, typically around 3 percent, there are several offerings now that can help consumers to avoid paying these charges.
Just this week, Discover announced it dropped its 2 percent currency exchange fee.
“Discover is always seeking and evaluating news ways to offer more clear value to our cardmembers,” Discover spokeswoman Kathryn Henry says. “We removed our 2 percent foreign currency fee as an added convenience to our card members, so that it is one less thing for them to worry about when travelling internationally.”
Credit card expert Bill Hardekopf, who runs the site LowCards.com, notes that Capital One has never charged a foreign transaction fee. While most other issuers do assess that fee, some also have specific cards that don't -- typically those aimed at a high-end audience and already carrying annual fees.
Hardekopf says among those cards are Chase’s British Airways Visa Signature Card, Hyatt Card, Priority Club Select Visa Card, Sapphire Preferred; Citi’s ThankYou Premier and ThankYou Prestige; and the American Express Platinum card.
He points out that some credit card issuers will charge the fee if a purchase is processed by a foreign bank, even if the buyer is in the U.S. If you are travelling or buying from someone outside the U.S., Hardekopf says you ought to check your card’s terms to know what fees you could face. Consider that $5,000 in charges could lead to $150 in fees.
“Before you leave the country or order anything from a merchant that is not based in the United States, it is a good idea to call your issuer and ask about the foreign transaction fee,” he says.
-- More information about the settlement, including key court documents, is available at www.ccfsettlement.com.
The author is a Reuters contributor. The opinions expressed are his own.
Editing by Linda Stern and Beth Gladstone
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