Biden administration should end hidden remittance fees

In 2022, an estimated $77.6 billion was sent by Americans to friends and family abroad. These payments — often used for food and basic needs — are a crucial financial lifeline for millions of people around the world.

As we manage an already fragile global economy, there are billions being spent sending money overseas — an important financial transaction that should be affordable and convenient. In fact, Americans will pay an estimated $4.15 billion in fees alone. This estimate doesn't even take into account the amount of money lost in hidden fees, or additional charges consumers take on that payment providers hide in the exchange rate.

Adrienne Surprenant/Bloomberg

That hidden fee is actually a "junk" fee. And while it doesn't receive as much attention as overdraft, credit card or event processing fees, these added costs are impacting consumers across the U.S. in the same harmful way. As remittance volumes continue to increase, having grown 5% this year alone, eliminating hidden fees will have a significant impact on millions.

The U.S. is the largest source of remittances globally, and with so many providers available, sending money internationally shouldn't be the expensive and challenging endeavor it currently is. Regulators, policymakers and the Biden administration must treat hidden fees in remittances with the same vigor with which it is approaching purported junk fees and act to bring transparency to remittances and international transfers.

Why are international transfer prices still so high?

The World Bank has stated that a lack of transparency in the market is one of the most important reasons the price of international transfers remains high. And the problem isn't just that the fees are high — it's that consumers don't even realize they're paying them.

When you send money abroad, many providers advertise $0 fees while giving you an inferior exchange rate. In fact, more than half of all cross-border payment fees are hidden in exchange rate markups. Plus, when asked, 55% of consumers said they believed they understood the cost of an international transaction, but only 18% could correctly identify exchange rate markups as part of that cost. This means consumers lose money unwittingly, while also not being able to easily identify where the cheapest service is being provided.

Even though Congress included protections for remittance transfers in the Dodd-Frank Act of 2010, banks and payment providers still inflate the cost of remittances through these hidden fees. It's about time this practice ended.

In September the Biden administration launched its initiative on so-called junk fees with a goal of putting more money back into Americans' pockets. The aim is to reduce or eliminate hidden fees, charges and add-ons for everything from banking services to cable and internet bills to airline and concert tickets.

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Unfortunately, the initiative doesn't call out hidden remittance fees, even though the Consumer Financial Protection Bureau identified remittance fees as an area of concern in its initiative to curb "exploitative junk fees." With hidden exchange rate markups exceeding even overdraft fees among the most common hidden fees in the U.S., it's hard to ignore these misleading practices.

Now is an opportune time for the White House to take action, especially with CFPB Director Rohit Chopra's recent indication that the bureau is looking further into price transparency in remittances.

By focusing on bringing transparency to remittances and international transfers, policymakers will help consumers understand the total cost of their payment. This will then allow them to better compare and contrast providers and their offerings, bolstering competition in the market while driving down prices overall.

With millions of people around the world reliant on remittance payments, it's critical the U.S. doesn't allow providers to continue to mislead consumers with hidden exchange rate margins. And with so many Americans now transacting across borders, ending hidden fees in international payments will have a real impact in saving people money.

By including remittance fees in its fight against junk fees, the Biden administration can fulfill its promise by ultimately putting more money back into the pockets of those who need it most.