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Remittance rule should protect consumers CUNA trades
WASHINGTON (6/22/12) —The Consumer Financial Protection Bureau's (CFPB) pending remittance rule, as currently constructed, "will significantly diminish the availability of international transfer services and increase the cost of such services for consumers," the Credit Union National Association (CUNA) and other financial services trade groups said in a letter to members of the U.S. Congress.

The letter was submitted for the record of a Thursday House Financial Services financial institutions and consumer credit subcommittee hearing on money service business supervision. The Clearing House Association L.L.C., the Consumer Bankers Association, the Financial Information Forum, the American Bankers Association, The Financial Services Roundtable, the Independent Community Bankers of America, NACHA – The Electronic Payments Association, and the National Association of Federal Credit Unions all co-signed the letter.

Under a new remittance rule adopted by the CFPB earlier this year, remittance transfer providers would be required to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes. The rule is scheduled to become effective on Feb. 7, 2013.

The remittance regulation broadly defines the term "remittances" to include virtually all cross-border electronic funds transfers initiated by consumers in the U.S., other than most transfers involving credit, debit, and prepaid cards. The joint letter said this definition "is inconsistent with the traditional understanding of what constitutes a remittance transfer and is so broad that it will capture all consumer-initiated international electronic fund transfers regardless of their value or purpose."

The letter added that the CFPB's proposed 25-transaction-per-year safe harbor to exempt providers from being considered a "remittance transfer provider" is too low to provide meaningful relief to institutions that truly do not offer remittance transfer services "in the normal course of business." The exemption will not prevent hundreds of financial institutions from exiting the market, the letter warned.

Moreover, the Final Rule places providers at risk for amounts beyond what they received to perform the transfer service: namely fees and taxes charged by other entities, as well as the principal amount of a remittance transfer. This framework creates considerable risk of financial loss that providers will be largely unable to mitigate or manage, encourages active fraud, and threatens the business case for consumer international transfer services.

Many financial institutions may be forced to severely limit their international transfer product offerings or exit the market altogether, the letter said, warning that small institutions may lack the resources to monitor foreign tax laws or changes in fees charged by unrelated financial institutions. Increased compliance costs created by the new regulation could also be passed on to consumers, the letter added.

Consumer access to international funds transfers through their banks, credit unions, and broker-dealers is now in serious jeopardy due to the "nearly impossible compliance challenge" presented by the pending CFPB regulation, the letter added. The letter said more time is needed to appropriately assess and navigate the issues presented by the CFPB remittance regulation.

For the full letter, use the resource link.


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