The Commerce Commission has reached a settlement with The Warehouse Financial Services Limited which will see the company refund $120,000 to customers who paid hidden foreign exchange fees on the company's Value or Merit MasterCard cards.

The Warehouse Financial Services has agreed to refund the full amount of the fees, and to round this amount up to the nearest dollar.

After reaching the settlement, the Commission has withdrawn all charges against The Warehouse Financial Services.

In previous actions relating to similar behaviour, ANZ National Bank, BNZ, Westpac, Kiwibank and ASB were fined for breaching the Fair Trading Act. In the case of The Warehouse Financial Services, the company admitted breaching the Act, and the Commission did not seek a fine as it considered the level of culpability was lower. This is because The Warehouse Financial Services passed on fees imposed by Mastercard (known as the MCCR). Unlike the banks that were fined, The Warehouse did not charge an Optional Issuer Fee (OIF) in addition to the MCCR.

"Withdrawing the charges against the Warehouse Financial Services recognises the company's lower level of culpability," says Commerce Commission Chair Paula Rebstock.

"The Commission is satisfied that a settlement with 100% refunds is the best result for consumers and the appropriate way to resolve the action brought against The Warehouse Financial Services," says Ms Rebstock.

"The Warehouse Financial Services has done the right thing in returning the full amount of the hidden fees to consumers."

Ms Rebstock says that fees in the finance sector remain a priority area for the Commission.

"Finance companies must be upfront about all their fees and charges, so that customers can shop around and get the best deal, and in doing so put pressure on companies to lower the charges," says Ms Rebstock.

Affected customers were those who made transactions in foreign currency between 1 September 2001 and 31 March 2003 on Value and Merit MasterCard cards. Consumers will be contacted by The Warehouse Financial Services if they are affected in the next month. The refunds can be received as a voucher for The Warehouse rounded up to the nearest dollar amount, or can be paid into the relevant Value or Merit MasterCard account, or if the account is no longer active, into a nominated bank account.

Background

Results to date. As a result of this settlement, and the Commission's prosecutions of ANZ, National Bank, BNZ, Westpac, Kiwibank and ASB, a total of $23,092,051 in compensation has been paid to consumers, $3,179,000 has been paid in fines, and $410,000 has been paid to the Commission in costs.

  • ANZ National Bank Limited pleaded guilty to 45 charges of breaching the Fair Trading Act in March 2006 in respect of ANZ Bank and The National Bank of New Zealand. ANZ National was fined a total of $1.325 million and agreed to pay reparation of $10,000,000 and costs of $160,000.
  • Bank of New Zealand pleaded guilty on 17 July 2006 to 21 charges of breaching the Act. It was fined $550,000 and agreed to pay costs of $80,000 and provide a compensation fund of $5 million.
  • Westpac pleaded guilty on 29 September 2006 to 19 charges of breaching the Act. It was fined $570,000 and agreed to pay $4.5 million in compensation and $80,000 in costs.
  • Kiwibank pleaded guilty on 16 May to five charges of breaching the Act. It was fined $134,000 and agreed to pay $172,051 in compensation and $10,000 in costs.
  • ASB pleaded guilty on 15 June to 26 charges of breaching the Fair Trading Act. It was fined $600,000 and agreed to place $3.5 million in a compensation and $80,000 in costs.

Ongoing proceedings:

The Commission's prosecutions of TSB, American Express, Diners Club continue, and the Commission will not comment on the ongoing proceedings.