CFPB remittance rule led to drop in prices for money transfers: Report
Prices for international money transfers have declined since the Consumer Financial Protection Bureau's remittance rule took effect in 2014, the agency said in a report.
The CFPB said the trend in overall prices is evidence that the remittance rule “did not lead to a large increase in prices," but the report added that the bureau "cannot rule out that prices would have fallen even faster in the absence of the Rule.”
Before the rule was issued, banks and money transfer companies acknowledged that better disclosures and other steps were necessary in light of higher costs for international money transfers. The CFPB rule required the upfront disclosure of fees and taxes, among other things.
The CFPB's report included percentage-point comparisons of remittance prices before and after the rule took effect for six global regions, although it did compare the average cost overall.
Mexico, the country receiving the most remittances from the U.S., experienced a .933% price drop, or $1.86, for a $200 remittance, and a 1.05% drop, or $5.25, for a $500 remittance. The Middle East and North Africa experienced the largest drop at 2.72%, or $5.44, for a $200 remittance, the report said.
In 2017, consumers in the U.S. sent over 325 million remittances worth more than $175 billion.
Money services businesses conducted 95.6% of all remittance transfers and accounted for 68.4% of the dollar volume.
Banks conducted just 4.2% of money transfers but 28.8% of the dollar volume because the average size of a remittance sent through a bank is much larger than that sent through a money transfer business. Credit unions accounted for 0.2% of remittance transfers and 2.8% of the dollar volume.
The CFPB said its examinations have uncovered “mixed levels” of remittance rule compliance across the industry, including “both individual violations and wholesale failures to comply at others.”
The agency said it has not filed any enforcement actions against remittance transfer providers.
The remittance rule includes three areas: disclosures, which must include the price of a remittance transfer, the amount to be delivered and the date of availability; cancellation and refund rights; and error resolution provisions requiring providers to investigate disputes and remedy certain errors.
The bureau released the report as part of a five-year look-back review of the remittance rule which it said will include whether to begin a new rulemaking to make the rule “more effective in protecting consumers, less burdensome to industry, or both.”