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ombudsman news

issue 64

September/October 2007

banking disputes related to foreign travel

This selection of recent cases features complaints involving foreign travel and problems with credit cards, debit cards, electronic money transfers and currency exchange.

issue 64 index of case studies

  • 64/1- consumer's credit card transaction overstated by a multiple of ten
  • 64/2 - disputed credit card transactions made in a Spanish nightclub
  • 64/3 - bank "stops" customer's debit card while she was travelling abroad
  • 64/4 - delay in electronic transfer of funds abroad
  • 64/5 - wrong currency exchange rate used

consumer's credit card transaction overstated by a multiple of ten

While on a short holiday in Brittany, Mr B used his credit card to pay for several large boxes of cigarettes and cigars. When the transaction appeared on his next credit card statement, Mr B noticed that his credit card account had been greatly overcharged. The actual cost of his purchases was €291.80 but his card had been debited with €2,918.

Mr B contacted his bank to complain, but it said it was unable to help as there had been no error in processing the transaction. Mr B was certain there had been a mistake. However, he was unable to get any further with the bank so he brought his complaint to us.

complaint upheld
The receipt and other details that Mr B sent us confirmed that his purchases had totalled €291.80. And we were satisfied that he had believed he was authorising that amount on his account.

The error in entering the amount as €2,918 had been made by the retailer in France, not by Mr B's bank. However, we considered the bank to have been wrong when it had insisted it was unable to help Mr B. If it had initiated a "charge back" through the credit card network it was part of, the bank could have tried to "claw back" the money that Mr B had been charged in error. There was only a limited amount of time during which that option was available to the bank and, by the time Mr B brought his complaint to us, that time had passed.

In our view, if the bank had requested a charge back when Mr B first queried the transaction, it would probably have been successful in reclaiming the amount charged in error.

We did not think it fair that Mr B should lose out simply because he had not realised that the bank had been wrong in saying it could not help. So we said the bank should:

  • credit Mr B's account with the difference
  • adjust the interest so that he was not disadvantaged in any way by the initial higher transaction and
  • pay him £250 for the inconvenience he had been caused.

disputed credit card transactions made in a Spanish nightclub

The credit card statement that Mr L received soon after returning home from a stag weekend in Spain included several entries he did not recognise. These transactions had been made at a "gentlemen's club" in Barcelona.

Mr L was a 22-year old computer technician and lived at home with his parents. When he mentioned to his mother that there appeared to have been a mistake on his statement, she said he should complain to his credit card issuer. Several weeks later, when he had still not got round to doing this, Mrs L offered to make the complaint on his behalf.

So, with her son's consent, Mrs L contacted the card issuer. She said she thought her son's card had probably been "cloned" (copied) when he withdrew money from a cash machine shortly after he arrived in Spain. Someone must then have used the cloned credit card in the club. She told the card issuer that since her son had never visited the club, the transactions that were made there should be removed from his account.

The card issuer disputed Mrs L's explanation of events and it refused to remove the transactions. With her son's authority, Mrs L then referred the complaint to us.

complaint withdrawn
We looked at the transactions made with the card during the time Mr L was in Spain. He had only once used his card to draw money from a cash machine. And he had not done this on his arrival in Spain, as his mother had suggested, but several days later - on the day after the disputed transactions were made.

Several other transactions had been made with the card while Mr L was in Spain - for relatively small purchases at a department store. But again, these had been made the day after the disputed transactions at the club.

There did not appear to us to be any evidence that the card had been used fraudulently. We sent Mrs L details of our investigation, together with our initial view of the complaint. She contacted us a few days later to say that after discussing the matter with her son, she had decided to withdraw the complaint.

bank "stops" customer's debit card while she was travelling abroad

Shortly after retiring from her job as a primary school teacher, Mrs D went on a trip to Belize with three friends. Soon after she arrived she used her bank debit card without difficulty in several different shops. However, when she tried to make a purchase with the card a few days later she was alarmed to discover that the transaction would not go through.

Mrs D knew there were sufficient funds in her account to cover the purchase. And she had been intending to use the card later that day to withdraw the cash she needed for food and other expenses during the remainder of her trip. So she rang her bank urgently to find out what had gone wrong. The bank said its fraud department had identified some of the shops where she had used the card as "suspect".

So, thinking that a fraudster might be using the card, the bank had placed a "stop" on it. The bank agreed to get the stop lifted, but to Mrs D's considerable annoyance, it told her that somebody would need to come into her branch in person before it could arrange this.

Mrs D telephoned her daughter, Mrs J, back in the UK and arranged for her to go into the bank to get the stop lifted. However, by then it was the Saturday of a bank holiday weekend in the UK, so Mrs J was unable to do anything until the bank opened again on the Tuesday.

Meanwhile, Mrs D was unable to use the card and had to borrow some money from one of the friends who was travelling with her. When she returned to the UK she complained to the bank, saying it should compensate her for the inconvenience and worry she had been caused.

complaint upheld
After looking into the details of the case, we concluded that the bank had acted reasonably in putting a stop on the card. It had good grounds for suspecting that Mrs D's card had been used without her knowledge.

However, we thought that once it had become aware that Mrs D had made the transactions herself, and that she was relying on the card while she was abroad, it should have sorted the situation out quickly. The delay had caused Mrs D considerable worry and some embarrassment, in addition to the inconvenience, so we said it should pay her £400 in compensation.

delay in electronic transfer of funds abroad

After inheriting some money, Mr and Mrs J bought a house in Malta to use as a holiday home. The house needed quite a bit of work doing to it, and as soon as they had appointed a firm of builders, the couple opened a bank account in Malta. They thought this would simplify things when paying for the renovation work, particularly since they would continue to be based in the UK for most of the year.

Several months later, Mr and Mrs J booked a short trip to Malta. They were keen to see how the building works were progressing, but they also needed to make a scheduled payment to the builder.

The builder had asked to be paid in cash - and in euros. So a few days before their trip, Mr and Mrs J instructed their UK bank to make an electronic transfer of £4,000-worth of euros to their Maltese bank account. However, when they arrived in Malta and visited the bank, they were told the money had not been transferred. Unable either to pay the builder or to discover what had happened to their money, they cut short their trip and returned home.

Mr J then complained to his UK bank. He said it should reimburse him for the cost of the wasted trip. But the bank refused, saying it had not been at fault. It told Mr J that the money had definitely reached the Maltese bank the day after he had asked for the transfer. So it said the problem must have been caused by the Maltese bank and it was down to the Maltese bank to compensate him for any losses he had incurred.

Mr J was unhappy with this response and felt certain there was more that the UK bank could do to help him. Unsure how best to pursue the matter, Mr J then contacted us.

complaint upheld
We looked into the details of Mr J's complaint. Our investigation included listening to a recording of the conversation between the member of staff dealing with the transfer at Mr and Mrs J's UK bank branch and the member of staff at the UK bank's processing centre. We also looked at communications that had passed between the UK bank and the Maltese bank, during their subsequent attempts to trace the money.

We concluded that Mr J's UK bank branch had made several errors at the outset, when sending information about the transfer to the processing centre. Some of the international identification numbers for the Maltese bank had been transposed. The UK bank branch had also made some mistaken assumptions about the name in which the Maltese bank account was held.

So although the money had arrived at the international branch of Mr J's Maltese bank the day after he requested the transfer, the staff there were unable to identify either which specific branch the money was destined for, or to which customer it belonged. They contacted the UK bank for further details. However, it was not until several days after Mr and Mrs J had arrived back in the UK that the Maltese bank finally had the information it needed - and was able to allocate the funds to the couple's account.

We were satisfied that it was a mistake by the UK bank that had caused the problem. We said it should reimburse Mr and Mrs J's travel and out-of-pocket expenses (totalling around £400). We said it should also pay the couple £250 for the worry and inconvenience they had been caused.

[If our investigation had led us to conclude that the Maltese bank had been at fault, we would have been able to forward the complaint to the relevant ombudsman service in Malta, through the European financial redress network (FIN-NET) of which we are a member. For more about FIN-NET, see issue 59 of ombudsman news.]

wrong currency exchange rate used

Miss A could not believe her luck when she won a newspaper competition for a fortnight's holiday in Barbados. She couldn't usually afford holidays of any kind and she had only been abroad once before, on a school day-trip to Belgium.

The trip to Barbados more than lived up to expectations and a couple of days after returning home, Miss A visited her bank to change her remaining Barbados dollar notes back into sterling. She also still had several traveller's cheques - issued in US dollars. She asked the bank to pay the value of these cheques - in sterling - into her account.

The cashier took a very long time processing the transactions. He seemed to be having difficulty calculating the sterling equivalent for the Barbados dollars. Eventually, he wrote down a figure and showed it to Miss A, asking if she was happy to go ahead on that basis. Miss A agreed and the cashier asked her to sign a printed receipt showing the exchange rate that would be used. The transaction was then completed.

Two weeks later, Miss A returned home to find a telephone message asking her to contact the bank. When she rang her branch the next day, she was told that the cashier had mistakenly used the exchange rate for US dollars when changing the Barbados dollar notes into sterling. As a result, Miss A had been credited with around £100 more than she should have been given. The bank said it would be debiting this sum from her account.

Miss A thought this was unfair, but the bank insisted that it was acting correctly. Miss A then complained to us.

complaint upheld
The bank strongly defended its actions in reclaiming the money. It told us it thought Miss A was trying to take advantage of a situation which had resulted from genuine confusion on the part of the cashier, who was relatively inexperienced.

We did not doubt that the cashier had made a genuine mistake when calculating how much sterling he needed to give Miss A for the Barbados dollars. However, we were equally satisfied that Miss A had acted in good faith when accepting the exchange rate she was offered.

Miss A had never been to Barbados before. Indeed, she had never had to change money into a foreign currency before. We saw no reason to doubt her statement that she had assumed the rate quoted by the cashier was correct. The situation had been made more complicated by the fact that she had been carrying out a transaction involving US dollar travellers' cheques at the same time, and also by the cashier's apparent confusion.

We told the bank we felt Miss A had acted in good faith and that it was unfair, in the circumstances, to make her pay back the £100. The bank agreed to re-credit Miss A's account and Miss A accepted that as a fair settlement of the dispute.

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ombudsman news issue 64 [PDF format]

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.