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Consumer watchdog set for major crackdown on foreign transactions

Treasurer Josh Frydenberg has ordered the consumer watchdog to probe fees on foreign money transactions. Courtesy: Herald Sun

The consumer watchdog is poised to crack down on excessive foreign transaction fees, which cost Australians holidaying abroad more than $2 billion every year.

More than 10 million Australians a year who travel overseas pay at least $140 in foreign exchange transaction fees for every $5000 on their credit card, on top of exorbitant exchange rate mark-ups.

Australians also pay hundreds of dollars extra annually to send money overseas, when compared with people in other countries.

Treasurer Josh Frydenberg will on Tuesday order the Australian Competition and Consumer Commission to put the excessive foreign fees under the microscope, saying Australians “deserve a better deal”.

Travellers and those doing business overseas are now charged fees for:

CONVERTING money into a foreign currency;

TRANSFERRING money to an overseas account,

USING debit and credit cards overseas, or buying online in a foreign currency.

TRANSFERRING money to a foreign currency on a prepaid travel card.

Mr Frydenberg told the Herald Sun the ACCC would examine claims of excessive fees for currency conversion and for other services which are driving up the cost of overseas business and holidays.

“Given how widely foreign currency conversion services are used by consumers and businesses, reform in this area could make a real difference and put more money in the pockets of Australians,” Mr Frydenberg said.

The World Bank has found that the cost of sending money from Australia is “significantly higher” than the G20 average and the global average cost.

Australia is now the third most expensive G20 country from which to send money, behind South Africa and Japan.

A Productivity Commission report last year found Australians are slugged a “significant premium” to send money overseas or convert money into other currencies, compared with other countries.

Sending $1000 overseas costs, on average, about $80 in fees and exchange rate mark-ups. This is about 30 per cent more than for someone in the United States.

The ACCC has been given the power to compel companies to handover documents, which will enable the probe to seek detailed price and cost data information to inform its findings.

Consumer group CHOICE has argued the complexity system has made it difficult to know how much money financial services providers are pocketing by way of the foreign exchange process.

In 2016 it found ANZ, Westpac and NAB had exchange rates that were about 4.5 per cent higher than mid-market rates for cash and travel cards, not including fees.

Commonwealth Bank transactions were about 5.3 per cent above mid-market rates for cash and travel cards.

It is understood the commission will consider the option of using benchmark exchange rates to improve transparency of international money transfers, as well as measures to improve transparency for fees on overseas purchases.

The Productivity Commission recommendation urged the ACCC to investigate additional disclosure methods which could be used to improve consumer understanding and comparison of fees for foreign transactions levied by authorised deposit-taking institutions and other payment providers.

A report is due to be delivered to the federal government by May 31 next year.