Summary:  Request for Information Regarding Potential Regulatory Changes to the Remittance Rule

12 CFR Part 1005

Consumer Financial Protection Bureau
Prepared by the NASCUS Legislative & Regulatory Division
May 2019

The Consumer Financial Protection Bureau issued a request for information seeking feedback that may inform possible changes to the remittance rule that would mitigate the effects of the expiration of a statutory exception for certain financial institutions.  The Bureau is also seeking feedback related to the scope of coverage of the rule including whether to change a safe harbor threshold and whether an exception for small financial institutions may be appropriate.

The Request for Information can be found here.  Comments are due to the Bureau no later than June 28, 2019.

Summary

The Electronic Fund Transfers Act (EFTA), as amended by Dodd Frank, provides certain protections for consumers sending international money transfers or “remittance transfers.” The Bureau issued remittance regulations to implement these protections.  Section 919 of the EFTA created a comprehensive system of consumer protections for remittance transfers sent by consumers in the United States to individuals and businesses in foreign countries.

The term “remittance transfer” is defined as an electronic transfer of funds by a sender in any state to designated recipients located in foreign countries that are initiated by remittance transfer provider; only small dollar transactions are excluded from this definition.  “Remittance transfer provider” is defined as a person or financial institution providing remittance transfers in the “normal course of its business” and this is to be determined based on specific facts and circumstances. 

Under the current rule, remittance transfer providers must disclose (both prior to and at the time the consumer pays for the transfer) the actual exchange rate and the amount to be received by the recipient of a remittance transfer.  The EFTA provides for two exceptions to this disclosure requirement—one is a permanent exception and the other is a temporary exception.  This particular RFI addresses the impending expiration of the temporary exception that would apply to a remittance transfer provider that (i) is an insured depository institution that makes a transfer from an account that the sender holds with them and (ii) is unable to know (for reasons beyond their control) the exact amount of currency that will be made available to the designated recipient.  If these conditions are met, the temporary exception provides that these providers are not required to disclose the amount of currency that will be received by the recipient but rather may disclose “a reasonably accurate estimate of the foreign currency to be received.”  This temporary exception will expire on July 21, 2020. 

In addition, the Bureau is reviewing the current safe harbor under the rule, which permits a provider that provides 100 or fewer remittance transfers in the previous and current calendar years would be deemed not to meet the definition of “normal course of business.”  In addition, the Bureau is reviewing whether this safe harbor threshold amount should be raised and whether an exception for small financial institutions would be appropriate. 

The RFI is seeking feedback to a number of questions related to the expiration of the temporary exception and questions related to the coverage of certain remittance transfer providers.  You can access the RFI here.