WASHINGTON (4/10/12)--Credit unions need meaningful relief from the Consumer Financial Protection Bureau's recently adopted final regulation on remittances, Credit Union National Assocation (CUNA) Deputy General Counsel Mary Mitchell Dunn wrote in a comment letter filed yesterday with the agency.
The letter was filed in response to the agency's proposed rule designed to provide some limited relief regarding the regulation of remittances.
A new remittance rule was adopted by the CFPB earlier this year and would require remittance transfer providers 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 will become effective on Feb. 7, 2013.
The remittances regulation will likely affect most U.S. credit unions that provide consumers with international electronic funds transfer services because it 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.
Credit unions want to make sure their members are well informed about transactions at the credit unions, including remittances, the letter said. However, many credit unions rely on independent third parties to complete the transfers and do not have control over their activities, making it difficult to provide the disclosure information the CFPB requires, the letter pointed out.
The CFPB has proposed a safe harbor that would exempt credit unions that provide 25 or fewer international consumer-initiated electronic funds transfers per year from all aspects of the rule. However, credit unions performing more than 25 of these transactions a year would be subject to the rule if they provide remittance transfers in the ordinary course of business" under a facts and circumstances test.
The proposed safe harbor threshold of 25 transfers annually is much too low to provide meaningful relief to credit unions, CUNA stated.
Instead, CUNA urged the agency to provide much broader relief for credit unions under the agency's authority to grant exemptions, which it is authorized to do under the Dodd-Frank Act and the Electronic Fund Transfer Act, which includes the remittance provisions.
Alternatively, CUNA recommended that the agency limit its reach to remittance providers that receive at least 30% of their net income income from remittance transfers. If the agency determines a numerical benchmark is the only approach it can support, then CUNA advocated raising the limit from 25 to 1,000.
The proposed rule also applies to any consumer-initiated electronic transfer using open networks, such as international wire and international automated clearing house (ACH) transactions. International transactions using open networks typically involve three or more financial institutions and, once initiated, the transfer is usually beyond the sending-credit union's control, CUNA has noted.
The open-network transfer rules could create high compliance costs for small credit unions, and force these credit unions with relatively small volume international payments programs to stop offering such programs since they will no longer be economically sustainable.
Overall, CUNA in the comment letter said the CFPB's final remittance rule did not address credit union concerns, and added that some credit unions will be forced to stop offering remittances if they are required to comply with the disclosure requirements as stated in the final rule.
"Credit unions provide these transfers to their members as one of many services they offer and are not in business solely to offer remittance transfers. They are not seeking to charge exorbitant fees or to prevent consumers from having reliable information about their transactions," Dunn said.
CUNA also suggested the agency use its statutory discretion to extend the compliance date by an additional year, but also said the extended compliance date may not be needed if the CFPB made certain changes to the rule, as advocated for by CUNA in its comment letter.
Those changes would include compliance relief for "open network" remittance transfers, preauthorized transfers, and other disclosure changes.