On August 7, 2012, the CFPB released the final version of the new remittance transfer rule. The remittance rule is designed to implement protections under the Dodd-Frank Act for consumer money transfers. The remittance rules requires financial institutions providing money transfer services to disclose fees, the exchange rate, and the amount of funds the recipient will receive. Disclosures must be provided when a consumer first requests the transfer and then again when the payment is made. Consumers are also entitled to error resolution and cancellation rights.
The final version of the remittance rule slightly relaxes the scope of covered financial institutions. Initially, any financial institution that engaged in 25 or more annual remittance transfers was required to comply with the disclosure rules. The final version, however, increases the number from 25 to 100 annual transfers, thereby exempting institutions that do not offer remittance transfers in the ordinary course of business. The final version also provides for a transition period to meet remittance requirements for financial institutions that provided less than 100 remittance transfers in the previous year and more than 100 in the current year.
The CFPB relaxed the remittance requirements to lessen the burden on financial institutions that do not regularly engage in the practice of remittance transfers. CFPB Director Richard Cordray explained that “[w]e recognize that in regulation, one size does not necessarily fit all. The final remittance rule will protect the overwhelming majority of consumers, while making the process easier for community banks, credit unions and other small providers that do not send many remittance transfers.”
Despite the relaxed standards, many believe that the 100 transfer threshold is still too low. Robert Rowe, vice president and senior counsel for the American Bankers Association has cautioned that the new remittance rule will have a negative effect on consumers. Mr. Rowe predicts that depository institutions will likely restrict the number of transfers they offer and implement steps to make sure that they do not go over the 100 transfer threshold—thereby reducing the availability of remittance transfers to consumers. The Independent Community Bankers of America (ICBA) likewise believes the new remittance standards will do more harm than good. In a released statement, the ICBA noted that “[w]hile the 100-transfer threshold is better than the originally proposed limit of 25, it will nevertheless force many community banks to no longer offer remittance services to consumers. Once the threshold is exceeded, too many community banks will have no choice but to discontinue offering international transfers to consumers, rather than comply with the impractical disclosure requirements and assume the additional liability by the error-resolution requirements.” The ICBA further contends that the effective date is impossible for community banks to meet because community banks need time to “establish agreements with upstream providers to offer compliant solutions.” The ICBA is therefore urging the CFPB to extend the effective date by two years. The current effective date is February 7, 2013.