Way back in 2013 through 2015, the Consumer Financial Protection Bureau (CFPB) implemented new rules in the international consumer money transfer industry governing wires and remittances. These were early days for the CFPB and the new regulation really illustrated to the banking and payments industry the impact the new agency could bring to bear.
The new compliance measures were focused primarily on bringing disclosure standards to all remittance providers and establishing punitive consequences in the form of fines for those providers that did not comply.
The CFPB’s new money transfer rules created the need for providers to substantially change the data collection required and the disclosure to senders. The CFPB’s rules for consumer money remittance and consumer wires required that money transfer operators provide complete transparency of fees, including transaction fees and foreign exchange fees, prior to executing the transaction.
There is also an obligation to provide an understanding of the actual amount the recipient will receive. This is a bit more difficult. It requires knowledge of the fees and taxes that might be levied in the recipient’s home country.
Now, fast forward to today. The rule is up for review and potential revision by the CFPB, including the section about the pre-disclosures required for consumers. Among those providing comment to the CFB is a group of U.S. House of Representative members who are expressing their opinion that the disclosure requirements for international remittances should continue to be estimates, and not require exact fee amounts given the complexity of determining the exact fees as a remittance transaction reaches its destination. Here’s an excerpt of their letter:
Remittance transfers are an important tool for consumers to be able to transfer funds to relatives or friends abroad, pay bills or tuition internationally, or engage in other transactions. As you know, insured depository institutions often use an open network payment system to conduct remittance transfers, in which case no single institution necessarily has end-to:end control over the transaction. This also means that when depository institutions serve as remittance transfer providers, they often have no way to determine with any precision some of the fees that may be assessed while the funds are in transit. While banks and credit unions have worked to find ways to provide exact information to consumers regarding the third party fees and exchange rates, it is often difficult- if not, impossible- for depository institutions to know the exact amounts that apply.
We respectfully request that the Bureau use its statutory authority under Section 904(a) and (c) or Section 919(c) of the Electronic Fund Transfer Act, or Section 1032 of the Dodd-Frank Act, to allow insured depository institutions to continue providing estimates of third party fees and exchange rates in cases where exact disclosures are not possible. We ask that the Bureau provide any further relief that may be necessary to ensure that consumers do not lose access to remittance services. We also believe that a solution should be permanent, not temporary, so financial institutions are able to make long-term decisions regarding the provision of these services.
Here’s a link to the full contents of the letter: https://paymentsjournal.com/wp-content/uploads/2019/10/Letter-to-the-CFPB-on-the-Remittance-Rule.pdf
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group