WASHINGTON — The Consumer Financial Protection Bureau has finalized revisions to its international money transfer rule that will provide certain remittances with a longer exemption.
But, despite positives in the revisions, NAFCU is concerned that the final rule still places a heavy burden on some credit unions and could push a number out of the remittance market.
The CFPB's remittance rule requires money transfer providers to disclose certain estimates to consumers about the costs of a remittance. But the revisions, finalized Friday, are primarily meant to extend an exemption for remittances offered by banks and credit unions in cases where a cost estimate cannot be determined because of reasons outside an institution's control. Such reasons could include fluctuating prices set by third parties.
In such circumstances, the Dodd-Frank Act had allowed for an exemption, but it was set to expire July 21, 2015. The CFPB extended it for five more years, but cautioned that it would not add any more time beyond that.
"If the temporary exception expired in July 2015, current market conditions would make it impossible for insured institutions to know the exact fees and exchange rates associated with a minority of their remittance transfers," the CFPB said in its press release. "Without the exemption, these insured institutions reported that they would have been unable to send some transfers to certain parts of the world that they currently serve. The bureau believes that this exception is limited and is not used for most remittances by insured institutions."
The agency proposed the revisions in April after its remittance rule went into effect in October. The rule requires money transfer providers to disclose certain cost estimates, including from third parties, to the consumer. The rule also requires better resolution of remittance errors and strengthens a consumer's rights to cancel a transfer.
But NAFCU's concern remains more for how the rule, collectively, impacts remittance issuing CUs, which serve an important need for members who send money to their families outside the U.S.
"NAFCU and our members ... remain concerned about the overall rule and the incredible burden it places on any credit union facilitating more than 100 remittances yearly for its members," said NAFCU Director of Regulatory Affairs Michael Coleman. "As it stands, this rule is pushing credit unions out of the market."
Late last year the $1.3 billion Birmingham, Ala.-based America's First FCU said it would
"When we get remotely close to the 100-transaction threshold, we will stop the program," Alan Stabler, SVP and general counsel told Credit Union Journal. "We do not want to even try to comply with the new rules—there is more compliance burden and just a lot more details you face when you top 100 transactions."
At the same time, several CUs reported that they are expecting to raise remittance fees.
Coleman added that NAFCU welcomed the extension and that the trade association's members are happy to see the CFPB explicitly specify that U.S. military installations located abroad are states for the purposes of the remittance rule.
"It is critical that consumers can send money abroad safely," said CFPB Director Richard Cordray in a press release. "Today's final rule will help ensure these changes are implemented smoothly and that consumers will be well-protected during that process."
The CFPB had proposed prolonging the exemption following concerns from some financial companies about determining the exact costs from certain third parties. Remittance cost estimates are harder to determine when the money is being sent in an "open-network" transfer, like a wire transfer, because there can be multiple parties involved.
"By contrast, closed-network providers send cash to recipients through agents, so they are typically able to control or know the transfer terms in advance," the CFPB said. "This allows them to disclose exact amounts to their customers."
The CFPB explained that an extension of the exception is currently needed because in an open network, under which insured providers like depository institutions operate, the provider typically does not have control over, or a relationship with, all of the participants in the remittance transfer.
That lack of control, CUNA stated in a report on its website, "can make it difficult to learn all of the potential fees and, in some cases, the exchange rate. During the proposal comment period CUNA and other entities warned that without an extension financial institutions would have been unable to send some transfers to certain parts of the world that they currently serve."
The CFPB said it will not extend the temporary exemption past July 21, 2020, in part because it believes insured institutions will "develop reasonable ways to provide consumers with exact fees and exchange rates for all remittance disclosures" by then.
