Exchange rate risks spelled out clearly

Foreign cheques,
David would sometimes transfer money from his bank account in the United Kingdom to his bank account in New Zealand. He found the cheapest way to do this was to write a cheque in pounds sterling and present it at his local branch in New Zealand. The money would be converted at the day's exchange rate and go into his New Zealand account the same day, but held uncleared for up to 21 days.
August 2012

Twice, however, his UK bank dishonoured his cheques. On both occasions, the money was reversed from his New Zealand account at a time when the exchange rate had become less favourable, forcing him to make up the shortfall.

David complained to his New Zealand bank that it was unfair for him to bear the cost of exchange rate fluctuations. The bank referred him to the terms and conditions he signed each time he deposited a foreign cheque. These said he would pay any costs associated with exchange rate fluctuations. As a goodwill gesture, the bank offered David $1,000, half of his loss.

Our investigation

David was not happy with the bank’s offer and complained to us. We considered the bank's actions standard practice, and we considered the terms and conditions described the risks clearly.


David decided to accept the bank’s offer.

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