Exchange rate ripoffs by Australian banks

Money
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Welcome to the Community @woss

Rather than a scam it is a relic of pre-internet days when Australian businesses, and especially banks, had captive customer bases and little to no competition. It is more accurately described as a case of caveat emptor (buyer beware) not too dissimilar to a company such as Telstra charging peak prices for what has become a commodity service.

Our banks are among the worlds most profitable (2016) for a reason, and part of that reason are folks who have always used a particular bank and always will because it provides them with a comfort level of ongoing consistency and still thinking there is a relationship deeper than ‘how much profit do I provide the bank today’.

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I have a very good fx comparison website
thecurrencyshop.co.nz

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I need to send money to a relative in the UK to help pay for their wedding, they need 10,000GBP.

Through my bank with Westpac it tells me that the fee is 0.00GBP but I had a friend tell me that it will still cost me a lot because of the exchange rate Westpac use.

Sure enough when I looked into it I would have to send $19,175 AUD to make 10,000GBP whereas with another bank it might only cost $19,000AUD or even less.

How can a bank get away with telling their customers that there is no fee? That cannot possibly be legal? If I hadn’t spoken to my friend I would have been paying hundreds more than I should have!

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Welcome to the Community @digitalnomad.

I moved your post into this germane one. There are others somewhat related found using the Community search.

Australian banks are not among the most profitable in the world because of their quality customer care and highly competitive pricing.

For any transfer, and especially large ones you would be well placed to check such as wise, XE, ofx and similar 3rd party companies. You could save many $1,000s not just $100s.

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There are a number of situations where the buyers’ costs for a service are from one-off fees, a percentage levy (or interest rate) or a combination of both. Some are single transactions and others are recurring, such as loans.

Before committing yourself to any of these it is wise to ask for the total cost, as this is the key figure you need to know, the way the vendor structures their income is less important. Thinking that all banks use the same exchange rate and that the lack of up front fees would necessarily be a saving is an unwarranted assumption.

I am not a lawyer but I believe that it is legal as they have told no lies. It isn’t their fault if you assume no fees means no added cost. It’s the total on the tape that matters, not the saving on one particular item, this applies in the supermarket and many other situations.

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Ok, instead of asking if it is legal, I am going to ask should it be legal?

With a mortgage a bank is obliged to provide a comparison rate - shouldn’t a bank be required to provide reference to a similar comparison FX rate?

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As @syncretic says, it is established industry practice (not just banks) that there is
a) a buy/sell spread in the price offered (exchange rate used), and/or
b) a fee.

It is a good question as to whether the buy/sell spread could ever become so high that it would be unreasonable not to disclose it as a fee but

  • only a court can determine whether it is legal (I’m not a lawyer anyway), and
  • you would need to gauge whether there is any interest from the ACCC, if you really want to pursue this as “misleading”.

(It may well be that they have disclosed how the spread works. Did you read the fine print? All of it?)

If you tell us what the offered exchange rate in each direction is, I guess readers can form and share their own opinions as to whether the spread is “reasonable”.

Otherwise, what others have said: shop around, and look at the total cost.

The other way that they bite you is in the timing i.e. as the whole process usually takes a few days, they can potentially choose the timing that increases their margin further (but of course the currency market could move the other way and bite them - which is one reason why they need a spread).

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This is no different to lots of purchasing decisions. Westpac has chosen to offer a certain exchange rate with no fee added on. Other providers might offer a better exchange rate with an added fee. For customers sending small amounts, Westpac might be the best option. For larger amounts, as you have discovered, another provider is cheaper.

Similarly, online retailer A might offer an item for $20 plus $12 delivery fee and retailer B offering the same item for $25 with free delivery. Retailer B is not lying about the delivery cost. Basic maths lets you work out, based on the quantity you require, who you should buy from.

This would be close to pointless. With loan comparison rates they are only valid for loans of a certain value. Foreign exchange purchases have a very wide range of values, so a comparison rate would only be useful for a very small percentage of purchasers.

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But without a prompt that they may be paying large amounts that they unaware of. I didn’t know until my friend told me where the actual fee is found. I guess what I’m asking is what information would make a consumer shop around? Thanks to me friend I see the fee, but I feel like there are plenty of people who would never see it?

I don’t quibble with performing the maths - but there are people out there who can’t. Isn’t the idea of consumer protection to look at the lowest common denominator?

If they can build a calculator for me to input my specific exchange amounts, I am sure they can build a way for my FX rate to be calculated against the RBA rate.

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As mention in this thread: Consumers' Duties we have a duty to inform ourselves before proceeding with any transaction. Is it reasonable to expect vendors to do our comparison shopping for us?

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I’d have said it’s incumbent on vendors to tell their customers their prices up front!

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I transferred $10K AUD to the UK (December, 2021) using Wise (after finding a similar suggestion in Choice Community, to avoid banks - as Phil T suggests above); the fee/charge was $100.

Obviously the exchange rate would have been different to yours, but the process was seamless - and fast! Very impressed with Wise.

10,100 AUD (I added the charge to the total), which converted to 5,417.51 GBP.

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You are probably right. The question is: where do you draw the line? How much responsibility do you put on the customer to a) read the fine print, and b) understand it, and c) choose the best deal for him- or herself? How much responsibility do you put on the business to do that work on the customer’s behalf?

(I’m assuming here that this is too small-time for the third option: The customer engages a qualified professional to do the work on the customer’s behalf and to act in the customer’s interests. Not for £10k though. The professional’s fee would likely exceed any saving.)

The general position of the government is that the above is all on the customer except where the government specifically intervenes because of proven problems. (For example, for some industries the government has forced them to dial back the fine print and provide something that is more readily compared. Sometimes this works, at least for a while. Sometimes this has unintended - bad - consequences. Sometimes it has no effect either way.)

My guess is that foreign exchange is too niche to interest the government.

<rant>I would also like to point the finger at the education system. How are they churning out kids that aren’t across this kind of stuff? It would be a lot more useful if kids left school armed with this kind of information. 
</rant>

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In what way did they not?

From their web page

image
image595×502 97.7 KB

image
image975×64 21.4 KB

Sorry the footnote is a bit small in this copy, it isn’t in the original.

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Can you provide the actual link to the “currency converter”?

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@digitalnomad

@evanstrish3 mentions satisfaction with WISE. I have heard similar stories. I use OFX because (a) I have happily used them for years and (b) WISE may offer a slightly better rate than OFX but both offer FAR BETTER rates than the Big Banks. When you arrange a transfer with OFX it’ll show you what you’re saving by not going to the Big Banks. It lists them one by one. For me the set up in place I have with OFX is easy to navigate. A customer like me initially sets up his profile (name, address, phone numbers etc) as well as inputting the details of where the funds are to go by inputting the recipient’s name, bank name, branch, address, SWIFT code etc; reason for the transfer; any message you want to send with the funds etc. I do this for each recipient, which in my case involves different currencies for each one. Note all of these settings can be edited by you at any time.

Once set up, I can periodically check on rates and even ask for an alert to be sent to me when rates go my way or hit the rate I want to execute the trade at.

The fee for transfer is low $10-20 from memory for under AUD 10k and no transfer fee for amounts greater than that. OFX makes its money by serving countless customers and as it’s not as greedy as the Big Banks, it can charge a smaller spread on exchange rates than the Big Banks.

Every time I used OFX it was a far better choice than the banks when looking at the ALL UP costs ie commission charged plus transfer fees.
Once you’re happy with the rate you’ll be asked to b-pay or EFT (in your case) the AUD equivalent of the GBP. With OFX you’ll be offered two Big Banks in which to deposit your AUD equivalent. Once the funds are said to be received by OFX, the FX transaction will be executed.

The “no commission” BS of some banks is a con which sadly scoops up plenty of the uniformed. As is the “no fee” smokescreens the Big Banks use.

If you really have a large bee in your bonnet on this, I suggest you write to the Australian Banking Association, see ausbanking.org.au

It has a so-called “Banking Code of Practice”, where it includes a “Statement of Guiding Principles”.
One such “Guiding Principle” is
4. Transparency and accountability.

You could tell the ABA that is seems in your case the bank’s definition of “transparency” differs from your understanding of the term:

What is transparency?
Transparency is the quality of being easily seen through, while transparency in a business or governance context refers to being open and honest.

As part of corporate governance best practices, this requires disclosure of all relevant information so that others can make informed decisions, see

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Thanks, @syncretic.

Well, that looks very transparent to me. Kudos to Westpac. You can simulate the transfer so you know exactly what it is going to cost you in total. However yes the spread is a bit high.

Thought experiment: Start with A$10,000, send it to the UK to ÂŁ. Whatever ÂŁ you end up with, now send them back to yourself to A$. See how much you lost. :open_mouth:

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Up front means not buried in small print.

The Australian Consumer Law is interpreted by the courts such that a business cannot rely on small print as an excuse for misleading or deceptive conduct.

But even if this was deemed to be legal - is it right and correct? Consumers have certain duties but if you take this to its conclusion then you’re going to get rid of things like unit pricing in Supermarkets.

I don’t like the idea of others getting ripped off because a bank like to hide its pricing for a product.

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It’s hardly transparent at all! It doesn’t show the hundreds of dollars you might pay for a transaction like mine!