If you love your bank, set it free

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Sandra Hoboy wrote to us after many months of disenchantment with Bank of America. A longtime customer frustrated over a fee dispute, her relationship with her bank was on the verge of a break-up. How could a banking relationship once so right go so wrong?

It all started with a large purchase on her Bank of America Visa card — a $20,000 transaction — paid to a timeshare company with an office in Texas. Her payment was made in dollars, and the paperwork associated with her purchase, including her credit card information, was mailed to a post office box in Houston.

When Hoboy reviewed her bank statement, she saw the $20,000 charge, along with a little something extra. Bank of America had assessed a foreign transaction fee, because the merchant processed the payment with its bank, which happens to be in Mexico. That additional fee, a 3 percent charge, added up quickly — to the tune of $601.

Bank of America’s cards are among the vast majority of credit cards which assess foreign transaction fees for any charge made in a foreign currency and converted to dollars. Bank of America explains that this fee applies even when the transaction is in dollars but is made or processed outside the United States.

That’s where Hoboy’s case got a little tricky. The timeshare company sells properties in Mexico, but from Hoboy’s perspective, the transaction took place in the United States and was made in dollars.

Hoboy called the timeshare company, which assured her that the charge originated with Bank of America, and that it would never impose such a fee on its customers. She then argued to Bank of America that the assessment of the fee was improper, because she had no way of knowing that the company would use a foreign bank.

In response, Bank of America did what retail banks do best — it recited the policy, and insisted that upon review, “the fee was charged correctly.”

Frustrated with Bank of America, Hoboy dug in her heels and refused to pay the fee. She continued to plead her case, writing to the bank each month to insist the fee, including all associated late fees, be removed. That’s right — Bank of America was determined to get its pound of flesh, and then some.

The foreign transaction fee is one of the many ways a retail bank like Bank of America pads its bottom line. There is no real service being performed in exchange for the fee. It’s simply one of those things banks do because they can. And sometimes, it seems that’s the only reason they do it.

Hoboy wrote to her bank no less than a half dozen times over a half year, questioning the bank’s logic and standing her ground. In her last letter to the bank, she told the bank that its position was “infuriating,” and rounded it out by saying she that would stop using her card and take her banking business elsewhere.

And then she wrote to us. Hoboy was ready to break up with Bank of America. But she really didn’t want to pay that fee.

In late December, we wrote to Bank of America, which certainly didn’t make our advocacy job easy. We emailed one of the bank’s top executives, whose contact information can be found on our website. That email generated a series of automated messages to Hoboy, asking her to call a “1-800” number. Hoboy wasn’t impressed, but we encouraged her to give it a try. After all, as a consumer with a particular objective in mind, you have to play the game a little.

After a phone call and a couple of emails, on Jan. 12, Bank of America sent Hoboy a FedEx package containing a letter. You might call it a New Year’s Resolution. Or maybe it was an attempt at reconciliation. But whatever you call it, Bank of America announced in the letter that it was refunding the $601 foreign transaction fee, labeling it a “bank error.”

A few emails and nearly a month later, Hoboy informed me that all associated late fees were refunded by check. Why a check? By then, Hoboy had already ended her relationship with Bank of America.

When one door closes, another opens. Impressed by the work of our advocacy team, Hoboy joined our team of volunteers, as a writer, editor and advocate. I think this is the beginning of a beautiful friendship.

Jessica Monsell

A former legal professional who has helped hundreds of clients fight the airlines and the government following aircraft accidents. With years of research on aviation operations and the travel industry under my belt, I help the little guy win. More importantly, I love to solve a mystery. I have lived in Asia and Europe but I now call Charleston, SC home.

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  • sirwired

    If the timeshare’s bank was in Mexico, I don’t see why the foreign transaction fee WOULDN’T be charged… this was definitely the fault of the timeshare company, who chose to process the transaction in a foreign country. (Given that it’s a timeshare, I imagine they did this because a foreign transaction is harder to dispute.) The bank has no idea where you happen to be sitting when you authorize a charge; how would BofA even KNOW that the transaction was made while sitting at a desk in the US?

  • Rebecca

    Exactly what I was thinking. That and that she’s concerned about a $601 service charge and DOESN’T seem to be concerned about a $20,000 charge to a timeshare company in Mexico. I assumed this article would be about the thousands of dollars spent on a timeshare, but I was wrong.

  • James

    You have to love the logic of banks.

    In the late 90’s, I had a credit card from a bank that I’d use for emergencies. One month, it had one charge: $20. This was the era before on-line banking and on-line bilkl payments, so I wrote a check and mailed it a week or so ahead of the official due date. They credited the check one day late, assessed a $39 late fee and jacked up the itnerest rate to 29.98%. When they refused to reverse any of that, I cut the card and canceled the account.

    Same bank later acquired my bank in the banking crisis. I closed the account — upon which time they hit me for a $0 balance fee, fees for not having the cash in the account to cover the fees — and they did this two months in a row. The clain was I didn’t complete their special account closure paperwork. (The original account did not have that type of paperwork.)

    Credit Union only for me.

  • DChamp56

    I cut up my BOA card years ago, when they announced on the same day the layoff of almost 4,000 employees, and another announcement that the CEO was stepping down early, and got a $16 million dollar golden handshake.

  • Nathan Witt

    A little bit of research shows that the credit card networks (Visa, MC, etc.) charge an additional fee to the banks for clearing transactions in other countries. They’re also flagged for review by human beings, which is why, if you’ve ever used your debit/credit card abroad, you may have noticed that foreign transactions don’t show up immediately on your account the way domestic ones do. I’m not arguing that these fees are necessary or valid; I’m just pointing out that it probably wasn’t BofA who pocketed all of the money. As an aside: I wonder if BofA contacted this customer and verified the transaction before debiting her account $20,000 for a charge that originated outside the country.

  • Charles Owen

    Sorry, you lost me at “paid to a timeshare company”… A $600 bank fee is the least of her problems.

  • MarkKelling

    The card networks charge only 1%. Most banks that still charge the fee to their customers bump it up to at least 3% as BofA did in this case. So BofA got $400 for nothing. Why? Because they can.

    I use my various credit cards in other countries often. The transactions show up just like they do when I use my card at home: no delay at all. It may have been the rule in the past that foreign transactions were manually verified before posting to your account, but I can guarantee that is no longer the case. If there is suspected fraud on your accounts then the transactions are held until they are verified by the bank with you, but this is an exception and not the common practice.

  • Flatlander

    Ugh – I’d be a lot more worried about the $20,000 Mexican Time Share than the bank fee. That is not going to end well. I have a feeling OP is going to have some serious buyers remorse.

  • Bill

    Wonder how long it will be before we see a “should I take advocate this case” post about a lady who purchased a $20,000 timeshare and is try to get out of it

  • Joe_D_Messina

    She should look for a credit union. Fees tend to be much lower than banks and some still don’t even exist in credit-union-land.

    Only slightly tongue-in-cheek: I wonder how long it will be before she figures out the timeshare purchase was the REAL financial disaster in this story, far surpassing anything with the bank fees?

  • KanExplore

    Is it still true that the vast majority of cards have this scammy junk fee? I’ve noticed that several of the cards I’m interested in have dropped it in the last year or two. If I cancel a card charging such a fee, I say, “A lot of my credit card spending happens overseas, and your card is worthless there because of this junk fee.” There are lots of good options now to avoid it, but part of the problem here was that the customer didn’t realize the transaction would process as a foreign one.

  • I am not sure why there were “associated late fees” unless Hobby was not making the minimum monthly payment on her BankAmericard; a better approach would be to pay the fee and then try to get the money back, rather than ceasing payment on the card and risking many fees.

    This is definitely a case where improved financial literacy is needed; hopefully Hobby will get that as a volunteer for Elliott.org. It appears she wrote to the bank 6 times in 6 months and they kept refusing to budge, but she didn’t complain to the CFPB, BBB, state AGO, etc.

    With banking, there are a lot of fees that are charged to the customer even for things that aren’t the customer’s fault. Consider a bounced check—the receiving party loses the money AND a $15.00 returned item fee, even though it is not necessarily the recipient’s fault. While we can argue that check recipients should vet their payors better, that is not a panacea.

    With credit cards, we see some of the same things—foreign transaction fees, having to predict whether certain purchases will be coded as cash advances or purchases, and having to predict how certain merchants will be coded for the purposes of earning categorical rewards (e.g., does a 7-Eleven without gas pumps count for a credit card’s 5% cashback at gas stations?). In all cases, money is on the table to be lost, and it’s difficult or impossible to tell ahead of time how the transaction or check will be processed.

    Of course, Bank of America is also known for it’s horrible customer service. Once, when I was using my BankAmericard at TigerDirect.com for the 5% cashback offer, I ordered a bundle item, which TigerDirect splits into two charges. Bank of America only paid the 5% on the smaller charge, since it was limited to a single “purchase.” Trying to convince them of their error by chat and on the phone was like trying to explain economics to a 2-year old. I just gave up on that one.

  • KarlaKatz

    you nailed it! There are many timeshares within the US who process their money through off-shore banks. It not only makes it much more difficult to challenge, and attempt a refund (buyer’s remorse kicks in), but it also allows that any checks they write take a little longer to process (they hang onto their money longer).

  • Some of you seem to be missing the big picture here and that is banks that pad their fees. As one who has a Bank of America account, but living in Europe, I know all too well the issues. I have tried changing banks, but since I am not a resident in the US and do not have a US driver’s license, no bank will deal with me due to terrorism or money laundering concerns.

    I have had AirBnB charge me the 27% tax for Hungary when I have used my American credit card to book a place that was in South America.

  • Éamon deValera

    Those AML concerns aren’t solely the bank’s. The ‘know your customer’ laws impose strict regulations on banks. You can get a bank to open an account for your but you’re right it is often difficult.

    Conversely as a US citizen the availability of foreign bank and securities accounts has been almost eliminated by FATCA (Foreign Account Tax Compliance Act) regulations imposed on foreign financial institutions by the US government. Why the US government can tell a bank in Poland or Ecuador what to do is beyond me, but they do it and the banks don’t want to deal with the headache so they don’t make their services available to US citizens.