Amex To Refund Millions In Foreign Exchange Fees

American Express cardholders last month received notice of a class action settlement in which the corporate card giant will refund currency conversion fees assessed between March 1997 and October 2004.

American Express will refund between $30 million and $75 million as the result of a suit filed in the U.S. District Court in the Southern District of Florida, alleging that American Express for years did not adequately disclose its foreign exchange fees. The company did not acknowledge any wrongdoing. Amex last March outlined its proposed settlement in a report filed with the Securities and Exchange Commission.

While American Express plans to refund the foreign exchange amount charged to cardholders since March 28, 1997, the company in 1999 raised its currency conversion fee from 1 percent to 2 percent. According to the preliminary settlement, refunds will reflect the change. For purchases made in Turkey after Feb. 1, 1999, cardholders "may receive an additional amount," the company said.

According to a legal notice sent to cardholders, American Express has agreed to "disclose their foreign currency conversion methods in cardholders' agreements and periodic statements, including listing, highlighting, and explaining all foreign currency conversion fees on cardholders' periodic statements." The notice goes on to say that American Express will pay a maximum amount of $75 million.

Some corporations may be left out of the settlement since it excludes parties that negotiated a "foreign currency conversion methodology for their American Express account," which could include savvy travel buyers who talked American Express down to a lower foreign exchange rate.

Court documents filed last year addressed the potentially thorny issue of whether corporate cardholders or their companies will receive the settlement amount.

"For a corporate card account as to which multiple cards have been issued and individual cardholders receive individual periodic statements, each cardholder who receives a periodic statement is considered to have a separate account," the document said. "Distributions from the Settlement Amount for such accounts may be paid either to the corporate holder of the account or to the individual cardholder, at American Express's option."

A spokesperson said American Express "will be paying the settlement amount directly to the corporation."

Corporate cardholders, however, will be responsible for filing for any refund. "A company cannot file on behalf of its cardmembers because we need the employee to answer a few questions related to their charge history during this period, and then attest to the information by signing the form," an American Express spokesperson said. Cardholders have until Apr. 13 to file for a refund on behalf of their company.

The settlement is the latest in a string of currency conversion lawsuits in the payment industry. If a California judge gets his way, companies using Visa and MasterCard will be getting a refund for every foreign-based transaction made since February 1996.

Pending appeals by Visa and MasterCard, a ruling last year concluded the card associations were deceptive in disclosing currency conversion fees and ordered the networks to refund fees charged to customers, which could total up to $800 million. The judgment applies to all Visa cardholders—since Visa is based in California—while MasterCard only would have to pay restitution to cardholders in California.