The CFPB released the final part of its new remittance rule which amends the prior rule in a number of ways and grants relief to certain remittance transfer providers. The rule amends Regulation E, which implements the EFTA, and will take effect on February 7, 2013. International money transfers had been generally excluded from federal consumer protection regulations, but the Dodd-Frank Act expanded the scope of the EFTA to provide protections for senders of remittance transfers. The new rule is intended to provide greater protections to consumers who transfer money from the United States to foreign countries. Remittances from family members living in the United States are a key source of income for many in the developing world, totaling more than $50 billion in 2010. “With these new protections, international money transfers will be more reliable,” said Richard Cordray, CFPB director.
Safe Harbor Exemption from “Normal Course of Business”
The final rule adopts a safe harbor with respect to the phrase “normal course of business” in the definition of “remittance transfer provider.” The rule increases the maximum number of annual transactions that qualify for the safe harbor exemption to 100. This means that financial institutions that make 100 or less foreign transfers a year will be exempt from the new requirements. The CFPB said that it concluded institutions that consistently conduct 100 or fewer remittance transfers per year do not provide transfers “in the normal course of business.” The final rule increases the previous exemption of 25 transactions per year, but falls far short of the 1,000 transactions requested by the Credit Union National Association (CUNA). For institutions that are exempt but cross the 100-transfer threshold, the final rule permits a reasonable time period, not to exceed six months, to begin complying with subpart B of Regulation E.
Disclosures for Remittance Transfers Scheduled Before the Date of Transfer
The final rule modifies the Final Rule issued last February with respect to remittance transfers that are scheduled before the date of transfer, including preauthorized remittance transfers. First, when a sender schedules a one-time transfer or the first in a series of preauthorized remittance transfers five or more business days before the date of transfer, the final rule permits remittance transfer providers to estimate certain information in the pre-payment disclosure and the receipt provided when payment is made. If a provider gives disclosures that include estimates under this exception, the final rule also requires that the provider give the sender an additional receipt with accurate figures (unless a statutory exception applies), which generally must be provided no later than one business day after the date on which the transfer is made.
Second, with respect to subsequent preauthorized remittance transfers, the final rule eliminates the requirement that a remittance transfer provider mail or deliver a pre-payment disclosure for each subsequent transfer. A receipt must be sent, however, a reasonable time prior to the transfer if certain disclosed information is changed from what was disclosed regarding the first preauthorized remittance transfer. This receipt may also contain estimates. If estimates are provided or no update is necessary, the final rule also requires a remittance transfer provider to give an accurate receipt to a sender after a transfer is made.
Cancellation Period and Disclosures
The final rule modifies the February, 2012 Final Rule in several respects with regard to the disclosure requirements for remittance transfers scheduled at least three business days before the date of transfer and for preauthorized remittance transfers. First, the final rule requires a remittance transfer provider to disclose the date of transfer in the receipt provided when payment is made with respect to remittance transfers scheduled at least three business days before the date of the transfer and the initial transfer in a series of preauthorized transfers. The transfer date for a given transfer is also required to be disclosed on any subsequent receipts provided with respect to that transfer. The transfer date will enable a sender to identify the transfer to which the receipt pertains, and, when received prior to the date of the transfer, generally calculate the date on which the right to cancel will expire.
Second, for subsequent preauthorized remittance transfers, the final rule requires the remittance transfer provider to disclose the date or dates on which the provider will make those subsequent transfers in the series, with certain other information. The final rule provides providers some flexibility in how they may make these disclosures to senders. However, for subsequent preauthorized remittance transfers for which the date of transfer is four or fewer business days after payment is made for the transfer, the final rule requires disclosure of future dates of transfer in the receipt provided for the first transfer in the series.
Finally, the final rule also permits providers to describe on a receipt both the three-business-day and 30-minute cancellation periods and either describe the transfers to which each deadline applies, or alternatively, use a checkbox or other method to designate which cancellation period is applicable to the transfer. The final rule does not change the three-business-day cancellation period for these transfers.
The rule has been met with significant opposition. Thirty-two members of Congress wrote a letter to Director Cordray urging the agency to delay implementation of the new rule until further study is conducted on the potential impacts to providers and consumers. The letter said the final rule imposes “unworkable” requirements on remittance transfer providers, which could result in higher fees and fewer available services for consumers. The Independent Community Bankers Association (ICBA) also asked the CFPB to push back the rule’s effective date. In an August 8 letter, the ICBA said the current deadline is impossible for community banks to meet because they must establish new agreements with upstream providers to be in compliance.
The Bureau has indicated that it will continue working with consumers, industry, and other regulators in the coming months regarding implementation issues. The Bureau expects to release a small business compliance guide and a list of countries that providers may rely on for purposes of determining whether estimates may be provided under certain circumstances. The Bureau also expects to conduct a public awareness campaign to educate consumers about the new disclosures and their other rights with respect to remittance transfers.