CFPB revises international money transfer rule

The Consumer Financial Protection Bureau made changes to its international remittance (money transfer) rule now scheduled to take effect on Oct. 28, 2013. The CFPB said the revisions are intended to preserve new consumer protections provided by the rule while easing the financial services industry's compliance burden with the rule.

The new rule mandates remittance transfer providers (RTPs), such as banks and money transfer specialists like MoneyGram International and The Western Union Co., disclose exchange rates, fees and taxes to consumers, as well as make RTPs liable for the monetary losses of consumers when customer errors cause disruptions in the money transfer process. Additionally, consumers will generally have 30 minutes after money transfers are made to cancel transactions.

The final rule incorporates the following changes:

• RTPs must disclose certain fees, such as their own fees and those charged by their agents or intermediary institutions. But the CFPB is making it optional that RTPs disclose foreign taxes or, if receiving institutions are not agents of RTPs, fees imposed by receiving institutions on money transfers.
• When funds are deposited into the wrong accounts because senders provide incorrect account or bank routing numbers, and certain other conditions are satisfied, RTPs would be required to attempt to recover the funds but would not bear the cost of funds that cannot be recovered.

Reg E upgrade

The remittance rule updates Regulation E of the Electronic Fund Transfer Act, as mandated by the Dodd-Frank Act of 2010, which went into effect in October 2011. The CFPB noted that prior to passage of Dodd-Frank, international money transfers were generally not federally regulated.

The agency said Dodd-Frank changed that by mandating an expansion of the scope of the EFTA to provide protections for money transfer senders. Dodd-Frank also transferred authority to implement the new requirements from the Federal Reserve Board to the CFPB.

Following publication of the proposed rule changes in December 2012, the CFPB received public comment that pointed out it would be difficult for RTPs to comply with the rules that require them to keep accurate databases of national and local taxes, as well as other fees charged by financial institutions in various countries around the world.

RTPs also objected to incurring the liability for nondelivery, or late delivery, of money transfers when remittance senders provide incorrect account numbers.

Pros and cons

The revisions were met with approval. "The final rule provides significant and important new flexibility for compliance with the remittance rules, in response to substantial industry concerns about whether many industry participants could continue to offer remittance transfers under the prior rules," said the law firm of Sidley Austin LLP in a May 2, 2013, blog post.

The Independent Community Bankers of America, which urged in a February 2013 letter that the CFPB extend the compliance deadline, was also complimentary. "The revisions reflect the operational realities of community banks and will help ensure that their customers continue to have access to remittance services," it said in a statement.

But that approval was qualified by the National Association of Federal Credit Unions. It supports the rule changes but believes the rule will still have negative consequences for some RTPs. "We appreciate that the CFPB scaled back these requirements and eased some aspects of the 2012 rule," said NAFCU President and Chief Executive Officer Fred Becker. "However, the rule still imposes several costly requirements, and we remain concerned that many credit unions will either leave the market or sharply reduce their presence."

The rule stipulates that RTPs facilitating no more than 100 remittances per year are exempt from the rule. Becker said that threshold "remains far too low."

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