Is Forced DCC (Dynamic Currency Conversion) at Hotels/Lounges Illegal?

Lamudbidri on 08/01/2019 - 21:46

For those of you not familiar with the term, DCC (Dynamic Currency Conversion) is a system whereby a merchant (say a hotel, shop, restaurant, etc) in a foreign country applies their/bank's own currency exchange rate to a transaction where the "home" currency of the card (for most of us, AUD) is different to the currency of the merchant. In most, if not all cases, the rate given through DCC is a lot worse than that given by xe, MasterCard, Visa, etc. I've never heard of a case where it's more advantageous to use DCC (if a case did exist, it would be due to a very rapid change in a currency's exchange rate in a very short span of time, rapid enough that DCC doesn't correct it by the time the transaction is made).

AFAIK, a merchant must offer an overseas customer a choice - to either pay in the local currency, or to use the customer's home currency. Some customers prefer to know an exact home currency amount in which case they choose the DCC process, and whilst they get charged more, they prefer the certainty. Others, like myself, prefer to let the card scheme (MasterCard, Visa) handle the conversion at much more preferable rates.

I am in India at the moment, holding a Coles Rewards MasterCard (no international transaction fees) and at the two hotels I've stayed at, DCC has been "forced", in the sense that the terminal displays an AUD amount directly above the "Enter PIN" prompt, straight after the receptionist enters an amount in INR and presses "ENTER". There is no option presented prior to this regarding a choice of INR or AUD.

Trying to explain this to the hotel staff leads to blank stares, as they just can't understand what you're saying. The typical response is "Don't worry sir, after you enter the PIN there is an option to charge in Rupees". What they don't understand is that entering your PIN while their DCC'ed AUD amount is showing is the exact same as saying "I accept your conversion and the charge displayed". Luckily my partner had a card from a local bank which of course kept the entire transaction in INR.

I've read MasterCard's terms and conditions thoroughly, and it explicitly stated that all relevant information is available to the Cardholder at the point of sale to allow them to make an informed decision on whether to accept or decline the DCC offer.

These hotels (5 star ones at that, too) therefore seem to be acting illegally. No way can it be legal to force a foreign customer to not use local currency!

Have you experienced something like this while travelling? There's nothing that you can do when you're at the point of making a transaction, you're literally stuck there and have to accept the cost, or else you can't leave. They literally have you by the balls.

MasterCard have even written a DCC guide which states WHAT IS AUTOMATIC DCC?
✓ Automatic DCC is when a Merchant conducts DCC and submits
authorization or pre-authorization without informing or seeking
Cardholder consent. Automatic DCC is strictly forbidden under
the applicable legislation and Mastercard Rules. A Merchant
or terminal should always provide a choice to the Cardholder.

I'd rather not go through a lengthy chargeback process for each transaction (of which run into the '000s of $) just because the staff have no idea what DCC is nor how it works, nor how to disable it.

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Comments

  • bobbified on 08/01/2019 - 22:05
    +4

    Local laws apply so why don't you take it up with the local Indian authorities or Mastercard?

    Not exactly much we can do from here where we follow Australian laws.

    • amudbidri on 11/01/2019 - 02:56

      I agree. However since MasterCard is an international organisation (with arguably one of the best "reaches" globally, along with Visa), it doesn't make sense that there's merchants that just flout laws like this.

      I do remember though reading in one of the booklets in one of the hotel drawers that "As per Indian government regulations, foreign nationals must pay in foreign currency". Surely that's illegal. The fact a government of a country is promoting this is absolute fallacy.

      • bobbified on 11/01/2019 - 12:43

        "As per Indian government regulations, foreign nationals must pay in foreign currency". Surely that's illegal.

        I think you've got things the other way around. Service providers must adhere to the laws of the land (in this case, Indian laws), not the other way around.

        What is "illegal" is set by the government. Not some private organisation.

        It's similar to how the warranties work - no matter how it's written, they do not override the laws and legislation set out by the governments.

  • bluesky on 08/01/2019 - 22:26
    +2

    Trying to explain this to the hotel staff leads to blank stares, as they just can't understand what you're saying.

    The more likely scenario is that the staff are not aware of the distinction between the 2 methods, and just processing payment the way they know how, rather than trying to force you to accept the DCC. Did you ask for someone more senior, to explain the problem?

    I have encountered problems of misunderstandings such as these during travels, where speaking with someone more senior can resolve the issue.

    • amudbidri on 11/01/2019 - 02:58
      +1

      Did you ask for someone more senior, to explain the problem?

      Sure did. Same response. Unfortunately, not everyone is adept as the average OzBargainer, so I get looked at as if I'm a little bit crazy when I go into the mechanics of currency conversions and using the card's currency conversion as opposed to the inflated DCC conversion.

  • RockyRaccoon on 08/01/2019 - 22:30
    -4

    "Don't worry sir, after you enter the PIN there is an option to charge in Rupees". What they don't understand….

    Most probably were previously employed in a call centre (spammer) Naturally they dont "understand", par for the course for any scammer.

  • Switchblade88 on 08/01/2019 - 22:41
    -1

    Don't show them the (Australian) card you'll be using. Show them a local card, whether expired or empty or whatever, and 'expect' them to put in a rupee value. Feign ignorance if you see an AUD balance, and get someone to 'fix it'. Don't let them assume you're paying AUD in any format.

    THEN, when you've got the rupee value showing, switch to your preferred card. DCC should then work, I would think.

    Here is a situation where knowledge of the problem may not help resolve the problem - but people skills, and pretending that you don't know will help!

    • tomsco on 09/01/2019 - 09:10
      +2

      I don't think it's them knowing whether it's a local card or not.

      I interpret it as they are scanning their Aussie card and the terminal identifies it as an Aussie card via the BIN. At no point would it be the staff selecting DCC, they would simply be putting in IDR and the terminal automatically converts it.

      In saying that, I would assume it's just a setting somewhere and if you're able to get someone to understand your issue, they may be able to change the setting.

      • amudbidri on 11/01/2019 - 03:03
        +1

        You're right tomsco - the terminal seems to be hardcoded (literally) to perform DCC on a foreign identified card.
        I've even started a transaction myself on one of the terminals (just to make sure) and sure enough, the final step of PIN entering displays an AUD amount, with no option presented along the way to get this.

        I've even dived into the "Function" menus and looked for DCC menus, for which one does exist, but pressing any of the following options then leads to errors such as "Option not allowed" or "Disabled". So these terminals literally will not let you pay in INR as soon as their identify a foreign BIN.

        Was thinking of just using my AmEx (as AmEx don't participate in DCC), but the 3% foreign currency fee makes this a lesser proposition!

        • Love a bargain on 11/01/2019 - 12:38

          maybe you can complain to your bank and Visa about this practice in India. They might not be able to do much for you (or they might refund you the difference - who knows) but, hopefully, things might change if enough people complain.

        • FirstWizard on 17/01/2019 - 17:01

          Most of the time the DCC hidden fee is more than 3%, could be worthwhile to try AMEX?

          But remember, AMEX conversion always go via USD. So in your case, it'll be INR->USD->AUD

  • Randxyz123 on 08/01/2019 - 22:44

    Have you tried using a different card? Don't have to pay for something with it but if you have a VISA for example? Just go through the steps, when it gets to the pin just say "Oh sorry, I forgot this card doesn't work overseas".

    Maybe some terminals don't automatically give you an option or the staff are selecting it for you assuming you want AUD. I've had that before and had them cancel the transaction. Many shop owners in Europe assumed I wanted to pay in AUD.

  • R-Man on 08/01/2019 - 23:02
    -1

    In most, if not all cases, the rate given through DCC is a lot worse than that given by MasterCard

    is this definitely what you have experienced? it sounds like DCC is a MasterCard feature and so it would use the MasterCard rate you would be paying even without DCC?

    • salmon123 on 09/01/2019 - 00:07
      +1

      it sounds like DCC is a MasterCard feature

      No - it's an acquiring bank feature. It can be done with any issuing bank card (visa, mastercard, amex, jcb, etc).

      It gives the acquiring bank the opportunity to make money on the FX transaction, rather than the issuing bank.

      is this definitely what you have experienced?

      The DCC rate is typically worse than what you would receive on fee-free cards like 28 degrees/coles mastercard/etc. However, if you have a card that charges fees on foreign transactions, then DCC should be about the same. I have seen some horrendous rates on DCC in the US/Europe though - >10% markup.

      The real clanger is when your card charges you a fee for AUD transactions conducted overseas … then you get hit with 2 sets of fees.

  • Gunther on 08/01/2019 - 23:28
    +2

    Happened to me plenty in India and I was told its just the machine and it cannot be changed. Only solution I was offered was to pay cash/rupees to work around it. Not much you can do in a foreign country to complain unfortunately.

    • salmon123 on 09/01/2019 - 00:00

      Happened to me plenty in India and I was told its just the machine and it cannot be changed.

      One thing I noticed was, most merchants (even tiny one-man stores) have a bank of terminals, typically different models. Not sure if they're different banks. Might be worth asking the merchant to use another terminal if one doesn't prompt for DCC.

  • salmon123 on 08/01/2019 - 23:58

    I've had the same observation in India.

    I think it's certain banks/terminals that are doing it, rather than the merchant. Not clear whether it's a software bug somewhere or a deliberate con-job. I had a merchant cancel the transaction and re-enter everything while I was watching and there was definitely no prompt for DCC on the terminal.

    I'd rather not go through a lengthy chargeback process for each transaction (of which run into the '000s of $) just because the staff have no idea what DCC is nor how it works, nor how to disable it.

    I would try a chargeback for few of the high value transactions, just to see how it goes down. I'm guessing the acquiring bank has some how figured out that the prompt to get you to accept the DCC is sufficient for mastercard's requirements, rather than giving you a choice for currency, so the chargeback might not go in your favor.

    In my case, it was only a few bucks, so I didn't bother and withdrawing cash was going to be equally expensive for me.

  • burningrage on 09/01/2019 - 08:33

    I had a few threads about DCC.

    https://www.ozbargain.com.au/node/250536 is one of them.

    In short, DCC will ALWAYS be worse off for customers. The AUD offered is given at the worst possible conversion rate (not Mastercard/Visa) AND the transaction itself, will attract International Transaction Fee (even if denominated in AUD) on top of the worst exchange rate.

    DCC must always be a choice otherwise you may have a ground for chargeback afterwards.

  • chumlee on 09/01/2019 - 08:37

    Is it illegal?

    What does India's laws state about it?

    Have you spoken to your card scheme about it to ask if legal?

  • [Deactivated] on 09/01/2019 - 11:15

    I was just in a few islands in the pacific and there was never an option to pay in AUD, it always went through as the local currency (which is what I wanted anyway)

  • Baysew on 10/01/2019 - 12:04
    +1

    Is it illegal?

    Dynamic currency conversion

    With DCC, the currency conversion is done by the merchant or their card processor at the point of sale.

    in 2010 Visa attempted to ban DCC - The Australian federal courts found Visa has acted anti competitively in order to protect its own revenues and was fined $20 million.

    As OP and other posters have indicated, you are supposed to get a choice and be informed. Not always the case it seems in places like India.

    Whilst Visa was found to be anti-competitive, at least there was benefit to the consumer.

    • tomsco on 10/01/2019 - 13:35

      Yep. And knowing how some cards have been treating AUD purchases from an overseas merchant (Groupon, etc), even if you're charged in AUD, you'll probably still get hit with an international TX fee (if the card issuer charges one), so I doubt there will be many, if any, cases where DCC offers a better deal to the consumer.

  • [Deactivated] on 11/01/2019 - 21:25

    I'm still confused about the laws surrounding this.

    I know Taobao will automatically convert from RMB to AUD, albeit with only a small fraction of a difference in exchange rate. The service fee of 3% is higher than any perceived loss from their pseudo DCC (I think that needs to be ignored for a moment because you paid that in the past regardless of the current forced DCC). The Visa/Mastercard fee of 0.3% is higher than the conversion rate given to consumers because the actual rate on Alipay when converted is basically the spot rate.

    Taobao sales are billed in Melbourne in AUD rather than RMB as previous purchases. I heard Aliexpress will soon be billing in AUD, and in Australia (apparently via CBA???) as well rather than London?

    Are we supposed to get a choice or not? lol…

    I think we also need other rules where the DCC fee is so low e.g. 0.1% and close to the actual exchange rate that it should be allowed even if there is no option given to the consumer. I believe this needs to be in place to prevent some companies from being fined if such laws exist, because that would just disadvantage the consumer in the long term.

    So I think I've given an example of where you win with DCC…

    Wikipedia: DCC does also relate to internet payments

    DCC on the Internet and ATMs

    DCC operates similarly with Internet transactions. When payment card information is entered to finalize payment, the system can detect the home country of the cardholder and offer the cardholder the option of paying in their home currency.

    Many commercial websites can detect the country from which a query has come and quote prices in terms of the enquirer’s country. Often the prices in the local currency of the supplier are not indicated, and the exchange rate used to convert prices is often also not disclosed.

    DCC is also sometimes available for cash withdrawals at ATMs.

  • Baghern on 14/01/2019 - 20:44

    Thats interesting,

    What I don't get is, don't you already know the Rupuee price, because you already know it, shouldn't you be able to ask for that amount, not the higher amount they try to charge you

    No point in discussing the mechanics.

    Just 10,000 rupuee, not 10,500 rupee thats on the machine

  • FirstWizard on 17/01/2019 - 17:10
    +2

    Just checked VISA guidelines

    This is one of the reasons that you can request a chargeback. See reason code 76 on page 46

    ** REASON CODE 76 **
    Incorrect Currency or Transaction Code or Domestic Transaction Processing Violation
    Reason: Transaction was processed with an incorrect transaction code, or an
    incorrect currency code, or one of the following:
    • Merchant did not deposit a transaction receipt in the country where the
    transaction occurred
    • Cardholder was not advised that Dynamic Currency Conversion (DCC)
    would occur
    • Cardholder was refused the choice of paying in the merchant’s local currency
    • Merchant processed a credit refund and did not process a reversal or
    adjustment within 30 calendar days for a transaction receipt processed in
    error

    Most of the time Mastercard chargeback reasons overlap with VISA. please do check if you can dispute it.

  • Maynard7 on 10/02/2019 - 21:50

    I don't believe this is covered by local or national laws. I used to work for Visa International in San Mateo, California several years ago and I remember reading about this in company paperwork. It is the policy of Visa that DCC is allowed, but the customer must be given the choice. Sometimes the clerks aren't trained in how to process the charge in the local currency. They are just accustomed to pressing the green button at every prompt until it gets to the end. You need to watch them as they process the charge and ask them to go slowly at every step and the choice should come up on the screen at some point. But when that scream does come up if they just press the green button as they usually do then it will process in the currency of where the card is issued. The POS terminal knows where the card is issued because the first 6 digits identify that. As someone else has already mentioned, Visa does provide a chargeback code for these specific instances. The problem is some cards require you to sign a receipt and that paper receipt does say on there that "I have been given the choice to pay in the local currency or in the currency of my card and my decision is final." I don't know what would happen in a chargeback in that case. But dynamic currency conversion is just plain wrong in my opinion and it only benefits the merchant and the bank as they share in the profits from manipulating the exchange rate. American Express doesn't even allow this.

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