Plaintiffs, top banks clash over Visa, MasterCard FX rates in Forex benchmark rate fixing case

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A Forex benchmark rate fixing case, captioned Nypl v. JP Morgan Chase & Co. et al (1:15-cv-09300), continues at the New York Southern District Court, with the parties now clashing over the way FX rates applicable to Visa and MasterCard’s credit and debit cards are determined. This argument is a part of a larger debate among the plaintiffs and the so-called non-foreign defendants – banks like JPMorgan Chase & Co. (NYSE:JPM), JPMorgan Chase Bank, N.A., Barclays Capital, Inc., Citibank, N.A., Citigroup Inc (NYSE:C), Bank of America Corp (NYSE:BAC), Bank of America, N.A, HSBC Bank USA, N.A., and HSBC North America Holdings, Inc., about the definition of retail Forex transactions.

But let’s see why the card FX rates are problematic.

According to the banks, publicly available information indicates that the card networks (e.g., Visa and MasterCard) generally set the foreign exchange rate when a card is used abroad. The banks note that Bank of America’s website includes a Foreign Exchange Rate FAQs page, which states that “the exchange rate for international purchases and foreign ATM transactions is set by Visa or MasterCard, depending on your card’s logo.”

The plaintiffs disagree with such a statement. On February 8, 2018, they filed a Letter with the Court, outlining their objections to Defendants’ offering of Bank of America’s Foreign Exchange Rate FAQ and Citi’s FAQ relative to Visa and MasterCard’s foreign exchange rates applicable to credit and debit cards. According to the plaintiffs these FAQs differ from Visa and MasterCard’s foreign exchange rate rules and regulations, as the FAQs fail to mention that the Visa and MasterCard rates are “selected from the range of rates available in wholesale currency markets” such as World Markets/ Reuters and European Central Bank exchange rates, (unless government-mandated rates apply), and that Issuer Banks have the final word under Visa Regulations.

Visa and MasterCard select, use and apply “rates available in wholesale currency markets,” which are derived from trading in the spot market, the plaintiffs say. Visa Operating Regulations 15 October 2013 at Chapter V under Exchange Rates at pp. 168-170 state that “the exchange rate between the Transaction Currency and the Billing Currency used for processing International Transactions is either: a rate selected by Visa from the range of rates available in wholesale currency markets, or the government-mandated rate in effect for the applicable Processing Date in each instance plus or minus any adjustment determined by the Issuer.”

That is why, according to the plaintiffs, the Issuer Bank makes the final plus or minus adjustment, not Visa.

Thus, according to the plaintiffs, both Visa and MasterCard use the wholesale exchange rates, such as the World/Reuters and European Central Bank wholesale rates that the defendant banks allegedly manipulated, in making currency conversion on their credit and debit cards.

The plaintiffs ask the Court not to admit the Bank of America FAQs and the Citi FAQs.

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