I hate it when I’m right about something like this. A few days ago, I warned that the Credit Card Accountability Responsibility and Disclosure Act of 2009 had a gaping loophole that could force us to pay a foreign transaction fee whenever we crossed a border.
Not only is that proving accurate, but the truth is much worse. Now you don’t even have to travel to get dinged by one of these bogus surcharges.
Here’s what happened to Sunil Kadam when he booked a ticket through Expedia.
I live in Boston and I booked my parent’s tickets from Expedia.com from Mumbai to New York on Qatar Airways. When my credit card statement came, I found a foreign transaction fee of $44 which was two percent of ticket price.
When I contacted Citi Card (my credit card company), they said Qatar Air is foreign airline, hence there is foreign transaction fee. Expedia says they give the transaction to Qatar’s US office in Washington, who should process the transaction in United States. Expedia is not doing any transaction (but still charging $14 booking fee).
When I contacted Qatar’s office in D.C., they are saying this not their problem either. Qatar Air’s D.C. office process all payments through their central server. So they are telling me to check with Citi again. I tried to dispute that charge but as per Citi’s “agreement” you can dispute the foreign transaction itself but not the foreign transaction fee.
Do you think I should be paying foreign transaction fee for the transaction I have made in US with a US company (Expedia)?
Of course not.
I asked Expedia what was happening. Here’s what I heard back.
Expedia’s customer service team researched this case, and found that Expedia submitted the round-trip amount ($1,468.80) to Qatar Airlines as a U.S.-based purchase. Qatar Airlines verified that they processed the charge via their central reservation system based in Washington D.C. The customer’s credit card company, Citibank, then charged a foreign transaction fee in line with its cardholder agreement with the customer.
It is Expedia’s assessment that the customer’s credit card company is charging a fee, likely because Qatar Airlines is not a U.S.-based company, per its cardholder agreement. Because the fee was not charged by Expedia.com or Qatar Airlines, neither Expedia nor Qatar Airlines has the authority to reverse this charge.
By this logic, I could get charged a foreign transaction fee by doing business with any non-US company, even if the charge takes place in the United States. If I buy a Sony camcorder or a set of Henckels knives — ding! — there’s two percent!
The intent of the just-signed credit card bill was to stop these ridiculous foreign transaction fees, but vague language left the door open for charging them. (For the record, some concerned citizens tried to warn Rep. Barney Frank about this loophole when the bill was in committee, but to no avail.)
Now the new fees seem to be popping up everywhere.
Kadam has several options. He can complain to the Federal Trade Commission, which has oversight responsibility for credit cards. Technically, Citi may be regulated by the Office of Thrift Supervision. In the short term, a trip to small claims court might get him the $44 back, but I don’t think that’s realistic, since his court costs would almost certainly be higher than $44.
The government needs to clarify what it means by a “foreign exchange fee” — and soon. Otherwise, we’ll all be paying these fees for anything manufactured by a non-US company.
That would be madness.