Costly forex ripoff

A question about : Costly forex ripoff

I tried to transfer some funds to a US bank account using one of the forex companies recommended here on MSE, thinking it would save a little bit of money versus using my bank. Gave them all the right account details etc, but they say the recipient bank rejected the transfer, with no reason given, and charged a $65 admin fee for the pleasure of rejecting it.

Unhappy with this, and not wanting to try, fail and be charged again, I asked the company to return the remaining funds to me. They say the American bank returned the funds in US dollars, and so they have to convert it back to GBP in order to return it - at, of course, a much worse exchange rate.

All in all they plan to return Ј126 less than I gave them, with no transfer actually having happened! This feels like a total rip off, and they are totally uninterested in my complaint. I have raised a complaint with the Financial Ombudsman so guess I will just have to see this through... but does anyone know if this behaviour is legal? It seems totally crazy that a company can rip you off like this and get away with it.

Thanks,
Poolio

Best answers:

• The way they'll see it is that they offered you service which you have had and now they are billing you for that service. They have costs they have to cover and so would have to charge you something. Converting the money back into sterling is another service for which they recover costs by applying a disadvantageous exchange rate.
  I know it's a sod but these things happen sometimes and I'm afraid there is no way round it. The ombudsman won't help I'm afraid, especially if these are published charges. Sorry to be so negative but you should use your bank next time, the transfer charges might be more but I doubt they'll charge so much for a failed transaction.
• The point is to understand why the transfer was rejected at the receiving bank as this may or may not have been your fault. If it were not your fault then any cost associated with that may be waived (I speak from experience).
  As a separate note the return of funds into your UK GBP account will unfortunately be subject to FX rates which may well have changed over the course of time. This is very much the risk with currency transfers and not one that you can avoid or that you can expect them to compensate you for. The only advice I would give other than the above is to request that they create a USD holding account for you which will allow you to choose when to convert back to GBP at a time when the rate is better.
• Thanks for your thoughts. When the company in question did actually investigate the problem they found that the account number was wrong - obviously a mistake on the part of the recipient, so our fault, which is a bit embarrassing.
  If they'd told me that in the first place I could have sorted it out straight away, and their attitude was frankly awful - it felt like they were effectively saying "tough luck, we're keeping the money and there's nothing you can do about it").
  To their credit, they did finally look into it (largely as a result of this forum post) and they've been very good about it since, actually crediting the full amount to the receiving bank account, waiving all of the charges. In the circumstances, I'm really happy with how they dealt with the issue - but they only dealt with it after receiving the Ombudsman complaint, and this post.
  As there's shared blame here I've removed the company name, but haven't deleted the post as I think others should know that in principal the same could happen to anyone, with any of these companies. Personally, in future I will be using my bank and suck up the Ј25 charge to save the hassle.
• Just for the record... I had a similar problem with www.xe.com, in that they believed that the recipient account number was wrong. However, they were professional and polite, enabling me to investigate and to confirm that the account number was in fact correct, but in a format different from that expected. There was no fee (other than their margin in the exchange rate) and the transfer was eventually completed.
  In sum: I would imagine that a transfer through a bank could well involve an equal amount of hassle, and I cannot imagine how the fee that a bank would charge could ever be regarded as good value for money.