Class Action Alleging Failure to Disclose Profit in Currency Exchange Transactions Fails Illinois Court Holds
Plaintiffs filed a class action in Illinois state court against various American Express Travel Related Services Company alleging violations of the state’s Consumer Fraud and Deceptive Business Practices Act in connection with foreign currency conversions services; specifically, the class action challenged Amex’s failure to disclose the exchange rate at which it would convert currency purchased from its customers. Sanchez v. American Express Travel Related Servs. Co., Inc., ___ N.E.2d ___ (Ill.App. March 29, 2007) [Slip Opn., at 1-3]. A defense motion to dismiss the class action was denied, id., at 3-4. Defense attorneys then moved for summary judgment arguing that each travel office sets the per transaction fee it charges, that the per transaction fee is not intended to be a representation that Amex will not receive any additional profit out of the transaction, and that Amex could not disclose the “float” because it buys and sells currency in bulk and does not know at the time it exchanges currency for a customer the rate that it will receive for that currency. Id., at 5-8. The deposition testimony elicited during discovery in the class action revealed further that the mark-up on the sale of currency to customers varies from travel office to travel office, and that the exchange rate for the purchase of currency is set by each travel office based on the local market and competition. Id., at 10-13. Further, Amex admitted that it hoped to profit by more than $3 per transaction, id., at 13-14. The trial court granted the defense summary judgment motion because plaintiff had no evidence that Amex represented the $3 transaction fee to be its net profit, id., at 14-15, and because plaintiff failed to prove that he suffered any damage, id., at 17. The appellate court affirmed.
The class action complaint alleged that, in addition to the posted $3 service fee for each currency exchange, Amex profited from the “float” between the rate it paid for the foreign currency and the rate at which it sold the currency. Sanchez, at 2-3. The appellate opinion quotes from the class action complaint at page 3 as follows: “In addition to profiting by charging each of its customers a ‘fee’ for the [foreign currency exchange service], American Express also profits by skimming the difference between the exchange rate it receives and the exchange rate it uses to convert a customer’s currency. The difference between the two exchange rates is a hidden, undisclosed charge it assesses to each of its customers that use the Service (hereafter ‘the Money Skimming Scheme’).”
Plaintiff’s “entire argument” was based on his interpretation of Covarrubias v. Bancomer, 351 Ill.App.3d 737 (Ill.App. 2004). Sanchez, at 17. In Covarrubias, the plaintiff wanted to send $100 to a relative in Mexico; the defendant agreed to send the funds for a “Net Sale Fee” of $12 at an exchange rate of 9.71 pesos to the dollar, and provided a transaction receipt reflecting that 971 pesos were sent to plaintiff’s relative and that the “current interbank exchange rate” was “0,” id. Plaintiff later filed suit alleging that defendant received a profit above and beyond the $12 “net sale fee”; the trial court dismissed the lawsuit but the appellate court reversed. Id., at 17-18.
The Sanchez court recognized the “factual similarities” between the two cases but refused to follow Bancomer because (1) the cases upon which Bancomer relied were distinguishable from this case, as the defendants in those cases misrepresented to customers that certain fees identified on receipts represented payments to third parties when in fact the represented, in whole or in part, additional profits of the defendants, and (2) Bancomer procedurally involved a motion to dismiss, whereas this case involved a motion for summary judgment. Sanchez, at 18-22. The court found persuasive the reasoning in In re Mexico Money Transfer Litig., 267 F.3d 743, 749 (7th Cir. 2001), which held:
Money is just a commodity in an international market. [Citation.] Pesos are for sale-at one price for those who buy in bulk (parcels of $5 million or more) and at another, higher price for those who buy at retail and must compensate the middlemen for the expense of holding an inventory, providing retail outlets, keeping records, ensuring that the recipient is the one designated by the sender, and so on. Neiman Marcus does not tell customers what it paid for the clothes they buy, nor need an auto dealer reveal rebates and incentives it receives to sell cars. This is true in financial markets no less than markets for physical goods.
Sanchez thus affirmed the judgment in favor of the defense, concluding at page 24:
Defendant at bar, much like a retailer in any other industry, failed to disclose to plaintiff that it purchased a commodity at a wholesale rate, which it then sold to the plaintiff at a marked-up retail rate. Despite plaintiff’s protestations, we do not find that such behavior constitutes a deceptive act. To conclude otherwise would discriminate against defendant simply based on the commodity – currency – that it buys and sells. As such, we conclude that plaintiff cannot establish that defendant committed a deceptive act by labeling the $3 service fee as “total fees” on plaintiff’s receipt.
NOTE: The appellate court held further that the trial court properly granted summary judgment on its alternative ground, agreeing that plaintiff failed to establish damages. Sanchez, at 24-25.