WASHINGTON – Credit unions are asking the Federal Reserve to exempt them from stiff new disclosure requirements on international remittances, one of the dozens of provisions included in the Dodd-Frank Act the Fed must implement.
The proposed rule would require credit unions and other providers of consumer-initiated, cross-border electronic funds transfers to disclose the prevailing exchange rate being used, disclose all fees to be charged, and would leave the originator liable in circumstances when funds are delivered late or deposited in the wrong account by fault of another institution involved in the transaction.
CUNA asserted in a comment letter that the chief goal of the Dodd-Frank provision is to protect immigrants who send workers’ remittances internationally through closed-loop networks such as Western Union, Vigo and MoneyGram, and not open networks such as Fedwire, ACH, or the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, that operate through unrelated correspondent institutions beyond the control of credit unions that originate the transactions.
CUNA urged the Fed to exempt credit union and bank-originated international wires and ACH transactions from the regulation, “in order to maintain consumer access to these services and prevent significant increases in the fees that consumers are charged.” Instead, the Fed should issue an additional rule tailored for open networks, said CUNA.
Credit union commenters see the proposal as impractical. “As currently written, the practical implications of the Federal Reserve Board’s pending rules pertaining to international remittance transfers under the Dodd-Frank Act threaten UNFCU’s ability to continue to provide international payment services to its members,” Bobi Shields-Farrelly, assistant vice president for payments systems for United Nations FCU, told the Fed in her comment letter.
The $2-billion credit union, which processes more than 120,000 international wire transfers into 200 countries, suggested three possible exemptions from the rule’s provisions that could apply to credit unions: a carve-out for all international ACH transactions; for transactions under $500; or for a consumer’s transfer into his or her own account. This would cover the vast majority of international remittance transactions conducted by credit unions.
Navy FCU, which originated 19,248 international wires in 2010, said many originators, including the credit union, do not know the amount of currency a designated recipient will receive, the exchange rate that will apply, or the fees or taxes that will be deducted when a remittance is sent. “This is because when Originators do not have a correspondent relationship with these intermediary or receiving institutions they do not communicate directly,” said Cutler Dawson, president of the $46-billion credit union.
“There is no way that we know the fees being charged by intermediary institutions of the final institution on wires sent out of the country,” wrote Sally Gorman, president of Class Act FCU. “We do not know the days the wired funds will be available to the recipient nor do we know the exchange rate on the unknown future date at the receiving institution.”
