The UK Financial Conduct Authority (FCA) has issued a statement expressing concern that payment institutions and e-money institutions may have used currency converter tools in relation to their currency transfer services in a misleading way. Tools which convert currency at the interbank rate may be used in such a way as to give consumers the misleading impression that the interbank rates shown are available to them, rather than the materially inferior rate that customers are likely to achieve. Consumers may not become fully aware of the inferior rate they are likely to achieve until an advanced stage in the customer journey, commonly after a customer registration process has been undertaken. At that stage, consumers may be unlikely to shop around.
The FCA previously advised that if it considered that firms were not acting in accordance with expectations in this area that it may take action – including supervisory and/or enforcement action. The FCA states that it is determined to ensure that companies engaged in currency transfer services do not use the interbank rate in a potentially misleading way. Accordingly, the FCA is actively considering further investigations and action in this area. In doing so it will have particular regard to any firms which do not take appropriate steps in light of its latest statement. Additionally, following engagement with the UK Treasury, the FCA’s rule making powers are to be extended in relation to payment services, which will allow it to apply rules to financial promotions issued by payment institutions and e-money institutions. The FCA plans to consult on making new rules using these powers as a priority.