CFPB Fine Tunes Remittance Transfer Rule

May 1, 2013 at 7:51 am Leave a comment

imagesYesterday, the Bureau that never sleeps, the CFPB, headed by the man of whom the Republicans will not speak, came out with regulations further fine tuning the remittance transfer rule.  The already delayed regulation now officially takes effect on October 28, 2013.

Those of you who expected the CFPB to raise the number of international money transfers that financial institutions could execute without having to comply with this Dodd-Frank mandate weren’t paying attention to what the man of whom Republicans do not speak was saying.  Nevertheless, the changes will help those poor credit unions that have to comply with this new mandate, at least a little.

Most importantly, the Bureau listened to a howl of outrage from across the financial industry and decided that it is unreasonable to require the institution executing an international remittance transfer to disclose or estimate fees and taxes imposed by recipient institutions where the institution receiving the remittance is not an agent of the provider.  Instead, providers will simply have to put their member on notice that additional fees and taxes may be imposed.  Most, if not all, credit unions rely on so-called open networks, so this exception will apply to them.

The change might not sound like a big deal, but without it, institutions would have been required to try and figure out the taxes and fees that might be imposed by a locality in a receiving country.  I am going to go out on a limb here and say that this is not the kind of information your average credit union keeps on file.  Of course, for those credit unions that do have this information, they can disclose it if they choose.

In many ways, this proposal reflects the best and the worst of the CFPB.  First, the best part.  I would defy anyone to show me a regulator that has been more open to making adjustments to proposed regulations based on industry concerns.  At least when it comes to operational obstacles, they really do pay attention to our comment letters.  In addition, let’s remember that it was Congress that mandated increased disclosure requirements and error resolution procedures for international transfers and that it is the CFPB that is given the thankless task of actually implementing the legislative wish list called Dodd-Frank.

Now for the bad.  According to an article in last Sunday’s New York Times, the cost of remittance transfers from the United States has actually tumbled in recent years, resulting in huge savings for the hard-working immigrants sending  their earnings back to their homeland and providing a much-needed source of funds for these countries.  Almost everything the CFPB does is predicated on a gamble that its regulations enhance the operation of the free market by providing enhanced disclosures and giving consumers more leverage when interacting with businesses and financial institutions.  If they are right, we will all be marginally better off.  If they are wrong, then crucial activities like sending money home to a family overseas will not be as efficient or as cheap as it would be if we just let the free market reign.

Entry filed under: Compliance, Regulatory. Tags: , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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