Travelex ForEx ATM Trap For US Vulnerable Passengers?

US passengers wishing to purchase foreign currency in UK airports using Travelex cash machines may end up pay 17.8% more than what they should pay.

Reduced Mobility Rights conducted a test at the end of September 2012 to check if Travelex cash machines available in UK airports provide sufficient information to prevent vulnerable passengers from paying more than what they should pay when buying foreign currency.

Each year tens of thousands of Americans transit through UK airports, on their journey from the United States to Continental Europe. Among these, thousands of vulnerable passengers browse UK airports terminals while waiting on their connecting flights.

The outcome of the study was disturbing. On 26 September 2012, we used a MasterCard debit card (charge card) issued in US Dollars to withdraw Euro 200 from a Travelex cash machine located inside Terminal 5 at London Heathrow airport.

Upon completing the withdrawal request, a message appeared on the ATM screen. The wording states: "This ATM offers conversion to your home currency."

It then provides the cash amount requested (in foreign currency), the exchange rate, and the transaction amount with conversion in US Dollars. Oddly, it also shows that there will be no charge for "Withdrawal Access Fee."

We chose to proceed without conversion, to verify the actual charge of the credit card issuer. The charge of the credit card issuer, $ 261,90, turned out to be $ 46.62 (17.8%) lower than the hugely expensive charge proposed by Travelex on their screen message, $308.52. The Euro/ USD exchange rate of the day was 1, 21335, while Travelex applied 1, 5426.

We asked Travelex to explain the reasons behind the huge difference between the card issuer charges and those proposed by their ATM screens.

"The card issuer rate you have quoted as per your prepaid card statement is the interbank US Dollar – Euro rate," Katie Sinclair, spokesperson for Travelex explained. "As distinct from withdrawing local currency from an ATM, a currency ATM operates in the same way as a bureau de change. By using a US Dollar card to withdraw Euros from an ATM in the UK, a cross-rate has been applied, as is the common practice in the retail currency market." 

However, the spokesperson stopped short of explaining why consumers are not warned they will pay considerably more if they accept Travelex exchange rate.

"Travelex’s ATMs provide a convenient currency solution for customers and are proving increasingly popular across the world," Katie Sinclair told Reduced Mobility Rights. "The wording on Travelex ATM screens is mandated by MasterCard. These are designed to be clear, compliant and customer-friendly, providing clarity for customers."

The UK Office of Fair Trading is of the opposite opinion. "The OFT has found that charges for purchasing foreign currency and using cards overseas can be confusing and often not at all clear for consumers," the OFT found following a serious consumer complaint lodged in September 2011.

We asked Travelex if they would consider integrating their ATM screen message with a warning of possible significant differences between their proposed exchange rate and credit card issuers' rates.

"No," the Travelex spokesperson categorically stated. "As explained, obtaining foreign currency from an ATM is not the same as withdrawing local currency as such, different rates will apply. The screen provides a choice for customers to settle either in the foreign or home currencies."

Fact remains that US vulnerable passengers using Travelex ATMs at UK airport terminals may be lead to pay 17.8% more than what they would normally pay their card issuers because no clear exchange rate warning is displayed.

Reduced Mobility Rights strongly recommends vulnerable US passengers wishing to buy foreign currency using Travelex foreign exchange ATMs to always decline the conversion rate offered by the ATM.