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Financial Services Law Insights and Observations

CFPB Closes Public Comments on Remittance Transfer Rule; Industry Groups Submit Responses

Consumer Finance CFPB Remittance ABA

Consumer Finance

As previously covered in InfoBytes, the CFPB issued a request for comment on its plan for assessing the effectiveness of its May 2013 final rule governing consumer remittance transfers (Remittance Rule). The request, which closed for public comment on May 23, focused on, among other things: (i) “whether the market for remittances has evolved . . . in ways that promote access, efficiency, and limited market disruption”; and (ii) whether the Remittance Rule (and other CFPB regulatory activity) has “brought more information, transparency, and greater predictability of prices to the market.” The CFPB received over 35 public comments from a vast array of large and small credit unions, as well as some of the leading providers of money transfer by volume. The consensus among these institutions was that implementing and maintaining the Remittance Rule’s new disclosures, cancellation windows, and audits are costly and the benefits to consumers are negligible. Specifically, one commenter noted increased consumer confusion, increased consumer delays in receiving their funds, and some have discontinued offering money transfers altogether.

On May 23, the American Bankers Association (ABA) submitted a comment letter calling upon the Bureau to conduct an evidence-based assessment on whether the rule has preserved consumers’ access to remittance services. According to a survey conducted by the ABA of 75 member banks of varying asset sizes and cited in the comment letter, the rule—intended to “provide additional information to help consumers shop for remittances and establish error resolution procedures and protections”—has “restricted consumers’ access to remittances, increased fees for use of the service, and unnecessarily delayed remittance requests.” As explained in the letter, the ABA expressed concern about the rule, stating that there is “little evidence that the final rule has improved consumer decision-making or facilitated comparison shopping.” Furthermore, the ABA has asked the CFPB to examine the following issues: (i) whether consumers, including those in rural areas, have access to remittance transfer services; (ii) whether consumers are provided information about remittance services that inform rather than confuse; and (iii) whether regulation of remittances is not unnecessarily burdensome to the financial institutions that provide this service.

Separately, on May 23, The Clearing House, the Consumer Bankers Association, the Bankers Association for Finance and Trade, and the ABA (Associations), issued a joint letter urging the CFPB to examine the effects of the rule from the perspective of both consumer-senders of remittance transfers and the providers of those services. The Associations outlined recommendations for the CFPB including: (i) continuing to permit depository institutions to provide estimates of third-party fees and exchange rates rather than actual fees and rates in cases where obtaining exact data is not feasible; (ii) excluding from the rule high-value transfers in excess of a certain dollar amount as well as excluding from coverage transfers effectuated through reloadable prepaid cards; (iii) modifying disclosure requirements and cancellation and resend rights; and (iv) making changes to the rule’s error resolution provisions to hold the sender responsible for transaction costs resulting from sender error.

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