Right on the Money: Hertz in Trouble for Currency Conversion Fees

A New Jersey resident has filed a class action lawsuit accusing Hertz, the international car rental company, of illegally profiting from hidden currency conversion fees. Daniel Margulis filed the claim in the state’s federal court after finding that cars he rented in England and Italy had been charged to him in U.S dollars at an exchange rate far above the usual amount.

The company claims that by using his U.S. card to pay, Margulis made his choice, and agreed to pay in dollars.

How can a company get in trouble for using foreign currency when carrying out transactions abroad? It all comes down to how much Hertz charges for doing just that.

Margulis’ accusations stem from the fact that Hertz accepts both foreign and domestic credit card payments for rental vehicles. While traveling, Margulis was able to use his U.S. credit card to pay for cars in Europe, but was presented with a bill in dollars. So far, so good – it’s a situation travelers have faced hundreds of times before. However, Margulis alleges that Hertz converted Italian Euros and British pounds into dollars at a rate 4.5% higher than the actual conversion rate at the time. Hertz company policy, it turns out, is to convert bills into the customer’s native currency. So, use a U.S. card, pay in U.S. dollars.

But is that fair, and aren’t U.S. customers effectively paying an additional 4.5% fee on top of their bill – a fee that ends up in Hertz’s pockets?

Margulis thinks so, and is accusing Hertz of unjust enrichment, breach of contract, fraud and violations of consumer protection laws. The company, in its defense, has argued that Margulis was given the choice of which currency he wanted to pay in (though Margulis claims that, once the bill was presented, Hertz’s employees would not convert the bills back to European currencies). In fact, the company claims that by using his U.S. card to pay, Margulis made his choice, and agreed to pay in dollars.

Even if that were true (and it seems shaky ground that using a card registered in the U.S. equates to de facto agreement to pay only in dollars), should choosing to pay in foreign currency warrant a 4.5% fee on top of the existing rental price? The lawsuit, filed at the end of February, accuses Hertz of blatantly misrepresenting the price of its rental vehicles around the world.

At this point, Hertz and Margulis seem to be stuck arguing semantics, jostling about whether Margulis chose to pay in dollars and accepted the fees. The New Jersey Law Journal reported on February 27 that the class membership could reach tens of thousands nationwide, pointing out that because Hertz’s headquarters are in New Jersey, the New Jersey Consumer Fraud Act also applies.

The case is being heard by Judge William. J. Martini as Margulis v. The Hertz Corp. If you have comments or questions about this class action, be sure to comment in the section below.