Federal Court Dismisses Complaint Over Foreign Exchange Rates

Recently, a federal judge in the U.S. District Court for the Eastern District of Virginia dismissed a putative class action consumer complaint against two banks (the Banks), which alleged that the Banks charged cardholders “fictional” exchange rates when converting foreign transactions to U.S. currency.

The plaintiffs alleged the Banks ignored rules promulgated by credit card processors requiring the Banks to apply either wholesale foreign exchange rates or government-mandated rates when processing foreign transactions, in violation of the Banks’ agreements with card holders, which incorporated those rules. The Banks moved to dismiss the complaint on the basis that the plaintiffs did not have standing, and that they failed to state claims under their theories of relief.

Although the district court found the plaintiffs had sufficiently alleged standing, the plaintiffs failed to identify a specific contract provision that had been breached.  The district court found that the plain language of the cardholders’ agreement, which stated that the credit card processors would “use [their] own currency conversion procedures[,]” did not identify any specific rate to be applied.  Thus, the plaintiffs did not identify a contractual duty that the Banks failed to perform.

The plaintiffs also alleged that the processor’s rules regarding exchange rates were incorporated by reference into the cardholder agreement.  However, the district court found that a general reference in the agreement to the processor’s “own currency conversion procedures” did not clearly incorporate the rules into the cardholder agreements.  Therefore, the district court did not consider the language of the rules as part of the contract at issue.

The district court also dismissed the plaintiffs’ claims of unjust enrichment and the implied covenant of good faith and fair dealing, and claims brought under state consumer protection laws.

The case is Wright et al v. Capital One Bank (USA) N.A., et al, No. 21-cv-00803 (E.D. Va. 2023).