How money transfer companies calculate and publicise their fees to customers has come under the spotlight in an investigation by advertising watchdogs.
Charges for foreign currency exchange transactions have been a matter of bitter controversy for some years between banks, money exchange firms, consumers and the Office of Fair Trading.
In 2011, a number of banks agreed to drop 0% commission advertising after pressure from the OFT.
Many expats and tourists find comparing rates and fees a challenge, with a host of FX exchange firms clamouring for their business.
Meanwhile, the Advertising Standards Authority has ruled that money exchange firm TransferWise should withdraw misleading adverts that compare the prices of switching cash from pounds into other currencies with competitors.
The TransferWise web site highlighted the “True cost of sending 10,000 GBP to EUR” with those of three competitors with a graph.
Complaint from competitor
The advert said “Many banks take as much as 5% of the amount you’re sending. TransferWise charges just half-a-percent”.
The graph had the headline “Real transfer fee” and displayed the Transferwise charge for sending £10,000 as £50, while sending the same sum with Moneycorp was £182.
Text under the graph stated: “Calculations based on a mid-market GBP EUR exchange rate of 1.185.”.
The ASA received a complaint from Moneycorp about the advertising which argued the statements were misleading because different providers offered different exchange rates.
Transferwise, based at 75 Arlington Avenue, North London, explained money exchange firms generally charged two different fees on international money transfers:
- Stated fees or transactional transfer fees, which customers were told about before making a transfer
- Exchange rate mark-up, which are the difference between the mid-market exchange rate at the time of the transaction and the rate offered to the customer.
Ambiguous and misleading
Transferwise told the ASA the “Real transfer fee” was the total of those two fees and the fee” stated for Moneycorp was based on a mystery shopper exercise.
The ASA ruled against TransferWise, stating: “We considered that the reference to the “Real transfer fee” was ambiguous and that consumers could understand the ad to mean that the “Real transfer fee” related to the transactional transfer fee only.
“Because we understood the “Real transfer fee” was based on different exchange rates offered by different providers, in addition to the transactional transfer fee, and because the ad did not make that clear, we concluded that the presentation of the ad was likely to mislead.”