PLANO, Texas (5/31/13)--Since the Consumer Financial Protection Bureau (CFPB) first announced the details of its proposed international remittance regulations, credit unions and others have talked about exiting the business, reported Catalyst Corporate FCU. However, the corporate advises its member credit unions to stay in the business.
The regulations would implement section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
"At first, compliance with the rule as proposed appeared to be nearly impossible," said Brad Ganey, senior vice president and chief operating officer of Catalyst Corporate. "And, to the extent that it was feasible to comply, new procedures would have been very cumbersome operationally."
However, things changed over recent months, with the rule's implementation delayed from February to October, giving Catalyst Corporate and its partners time to develop the functionality to facilitate credit union compliance, Ganey said. "The delay...helped us to refine our solution even further, reducing the operational impact on member credit unions," he said.
"While it is far from ideal, the final rule published last month does provide some meaningful relief," Ganey said.
The Credit Union National Association, in meetings and other communications with the CFPB, urged the agency to make such changes to the rule.
CUNA agrees that the changes are positive but wants to hear more from credit unions regarding their actions. CUNA is surveying credit unions about CFPB's final remittance transfer rule, which is explained in the May 23 News Now story, CUNA Seeks CU Remittance Comments In New Survey. Surveys are due June 10. For more information about the survey and the final recommendations, use the link.
In disclosures, "the CFPB has significantly reduced the burden on remittance providers of including hard-to-obtain information about fees charged by other entities. Remittance providers now will have the ability to distinguish certain 'non-covered third-party fees' from those charged by the remittance provider," Ganey said.
Financial institutions won't have to disclose taxes collected by any party other than the remittance provider. "Instead, the disclosure should state generally that the recipient may receive less than the disclosed total value of the transfer due to fees and taxes that may be deducted later," Ganey explained.
Other relief provided by the final regulation includes a "very significant improvement" that limits the sending institution's liability for error, said Ganey. He noted that "credit unions won't be liable for errors caused by wrong or insufficient information provided by the 'consumer sender' under certain fairly reasonable conditions when the outcome is that the funds are deposited into the wrong recipient account."
To eliminate liability in these instances, the credit union would be required to demonstrate that the sender provided incorrect or incomplete information and that the sender was notified that the information could cause the transfer amount to be lost. To avoid liability, credit unions also must employ reasonable verification measures to help ensure the accuracy of a recipient institution identifier, and engage in investigation and reasonable efforts to retrieve the mis-deposited funds, said Catalyst Corporate.
"The combination of a well-formulated solution, such as what Catalyst Corporate is offering for international funds transfers, and regulatory relief found in the final rule, should influence credit unions that were considering exiting the international remittance space," Ganey said.
"International remittances are an important service for credit unions to offer to a growing demographic in the membership base. Fortunately, some of the unintended consequences of legislative efforts to protect these individuals have been addressed."
Catalyst Corporate will provide a summary of its modifications in upcoming webinars in June and July. For more information, use the link.