Businesses and consumers are once again bearing the brunt of poor foreign exchange (FX) practices, as banks and major FX brokers are cautioned against misleading customers into thinking they can achieve a more favourable rate through the use of inadequate currency converter tools.
The Financial Conduct Authority (FCA) has recently warned banks and other currency transfer services that they will face penalties if they continue to use the interbank rate in their online currency converter tools, which deceives consumers into believing this more favourable rate is available to them, when it is in fact likely to be a more inferior rate.
According to a statement by the FCA, “…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.” It suggests that consumers may then be unlikely to look elsewhere for a better rate once this stage has been reached.
Godi Financial has been calling for more stringent and clear standards within the FX industry since the company was formed in 2012. Godi’s managing director, Paul Langley, claims that although steps are being made to make FX practices more robust, greater force must be implemented to make the sector more transparent and subsequently increase consumer confidence.
The launch of the global FX code of conduct earlier this year by The Foreign Exchange Working Group (FXWG) under the Bank for International Settlements (BIS), has been one such move to safeguard businesses and consumers against deceptive FX practices.
The guidelines were introduced after numerous scandals in the FX market. Companies being mis-sold complex currency derivatives, which became dramatically more expensive due to the fall in the value of sterling following the UK’s vote to leave the European Union (EU), was a key area of misconduct that showed a clear need for more stringent regulations in the sector.
Langley suggests the traditional lack of transparency in the FX industry has helped high street banks and large currency providers take advantage of those that are unaware of the pitfalls of unethical practices. He said this latest instance of discreditable practice by currency transfer service providers is dangerous for the industry, as it negatively impacts the FX sector and firms that manage their services with professionalism, integrity and transparency.
“Too many organisations and consumers are continuing to be taken advantage of as a result of poor FX practices. Untrustworthy FX providers use this often poorly understood area of finance to their advantage in this way and it has to stop. Rather than educating current or potential customers on FX and the best rates that are actually available to them, they are leaving them unaware and out of pocket.
“Godi is a brand that has developed a reputation for outstanding service quality, and trusted, transparent market insights. We are proud to consistently hold transparency as central to our operations and we hope other FX companies will follow suit in light of this FSA warning. Adherence to good practice guidelines will enable a reputation of professionalism and trustworthiness for the global FX sector to be established, which we all want to see.”