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  • Senators urge CFPB to increase transparency on “Remittance Rule”

    Federal Issues

    On October 19, a group of five Democratic senators sent a letter to CFPB Director Rohit Chopra requesting that the Bureau strengthen its rule regarding remittances transfers. According to the letter, though remittance providers are required to display the exchange rate and fees associated with a transaction, as required by a May 2020 final rule (covered by InfoBytes here), some providers collect additional revenue by increasing exchange rates. The senators explained that because of various “loopholes in the rules, remittance providers may technically comply with the CFPB’s remittance rule requirements while providing insufficient price transparency to allow consumers to make informed comparisons and choose the lowest-cost provider.” The senators requested that the Bureau “strengthen the remittance rule to ensure greater transparency” so that remittance providers are not able to “advertise ‘no-fee remittances’ while simultaneously inflating exchange rates without limit or without providing accurate third-party costs.” Additionally, the senators stressed that the Bureau “should require remittance providers to display mid-market exchange rates, while only collecting revenue through added costs, including fixed third-party fees, openly displayed as ‘total cost,’ as recommended by the Remittance Community Task Force.” The senators also recommended that the Bureau “rescind the permanent exemption for non-covered third-party fees and encourage the adoption of new technology that would provide transparent, pre-transfer cost information.”

    Federal Issues CFPB U.S. Senate Remittance Transfer Rule Remittance Consumer Finance

  • CFPB updates remittance transfer examination procedures

    Agency Rule-Making & Guidance

    Recently, the CFPB updated its remittance transfer examination procedures to reflect the latest amendments to Regulation E (EFTA’s implementing regulation), Subpart B, as of May 2020. The updates are reflected within the Bureau’s Supervision and Examinations Manual. The updated procedures outline practices for examiners when evaluating institutions that provide remittances in the normal course of business to individuals and businesses in foreign countries. “Examiners should complete a risk assessment, conduct necessary scoping, and use these procedures, in conjunction with the compliance management system review procedures, to conduct a remittance transfer examination,” the Bureau stated. The procedures specify four objectives for remittance transfer examinations: (i) to assess the quality of a regulated entity’s compliance risk management systems in its remittance transfer business; (ii) to identify acts or practices that materially increase the risk of federal consumer financial law violations, as well as associated harm to consumers in connection with remittance transfers; (iii) to gather facts to help determine whether a supervised entity engages in acts or practices in connection with remittance transfers that are likely to violate federal consumer financial law; and (iv) to determine, in accordance with CFPB internal consultation requirements, whether a federal consumer financial law has been violated and whether it is appropriate to take further supervisory or enforcement action.

    Agency Rule-Making & Guidance CFPB Remittance Transfer Rule Examination Regulation E EFTA

  • CFPB supervisory highlights cover wide range of violations

    Federal Issues

    On December 8, the CFPB released its fall 2021 Supervisory Highlights, which details its supervisory and enforcement actions in the areas of credit card account management, debt collection, deposits, fair lending, mortgage servicing, payday lending, prepaid accounts, and remittance transfers. The report’s findings cover examinations that were completed between January and June of 2021 in addition to prior supervisory findings that led to public enforcement actions in the first half of 2021. Highlights of the examination findings include:

    • Credit Card Account Management. Bureau examiners identified violations of Regulation Z related to billing error resolution, including instances where creditors failed to (i) resolve disputes within two complete billing cycles after receiving a billing error notice; (ii) reimburse late fees after determining a missed payment was not credited to a consumer’s account; and (iii) conduct reasonable investigations into billing error notices concerning missed payments and unauthorized transactions. Examiners also identified deceptive acts or practices related to credit card issuers’ advertising practices.
    • Debt Collection. The Bureau found instances of FDCPA violations where debt collectors represented to consumers that their creditworthiness would improve upon final payment under a repayment plan and the deletion of the tradeline. Because credit worthiness is impacted by numerous factors, examiners found “that such representations could lead the least sophisticated consumer to conclude that deleting derogatory information would result in improved creditworthiness, thereby creating the risk of a false representation or deceptive means to collect or attempt to collect a debt in violation of Section 807(10).”
    • Deposits. The Bureau discussed violations related to Regulation E, including error resolution violations related to misdirected payment transfers and failure to investigate error notices where consumers alleged funds were sent via a person-to-person payment network but the intended recipient did not receive the funds.
    • Fair Lending. The report noted instances where examiners cited violations of ECOA and Regulation B by lenders "discriminating against African American and female borrowers in the granting of pricing exceptions based upon competitive offers from other institutions,” which led to observed pricing disparities, specifically as compared to similarly situated non-Hispanic white and male borrowers. Among other things, examiners also observed that lenders’ policies and procedures contributed to pricing discrimination, and that lenders improperly inquired about small business applicants’ religion and considered religion in the credit decision process.
    • Mortgage Servicing. The Bureau noted that it is prioritizing mortgage servicing supervision attributed to the increase in borrowers needing loss mitigation assistance due to the Covid-19 pandemic. Examiners found violations of Regulations Z and X, as well as unfair and deceptive acts and practices. Unfair acts or practices included those related to (i) charging delinquency-related fees to borrowers in CARES Act forbearances; (ii) failing to terminate preauthorized EFTs; and (iii) assessing fees for services exceeding the actual cost of the performed services. Deceptive acts or practices found by examiners related to mortgage servicers included incorrectly disclosed transaction and payment information in a borrower’s online mortgage loan account. Mortgage servicers also allegedly failed to evaluate complete loss mitigation applications within 30 days, incorrectly handled partial payments, and failed to automatically terminate PMI in a timely manner. The Bureau noted in its press release that it is “actively working to support an inclusive and equitable economic recovery, which means ensuring all mortgage servicers meet their homeowner protection obligations under applicable consumer protection laws,” and will continue to work with the Federal Reserve Board, FDIC, NCUA, OCC, and state financial regulators to address any compliance failures (covered by InfoBytes here). 
    • Payday Lending. The report identified unfair and deceptive acts or practices related to payday lenders erroneously debiting consumers’ loan balances after a consumer applied and received confirmation for a loan extension, misrepresenting that consumers would only pay extension fees on the original due dates of their loans, and failing to honor loan extensions. Examiners also found instances where lenders debited or attempted one or more duplicate unauthorized debits from a consumer’s bank account. Lenders also violated Regulation E by failing “to retain, for a period of not less than two years, evidence of compliance with the requirements imposed by EFTA.”
    • Prepaid Accounts. Bureau examiners found violations of Regulation E and EFTA related to stop-payment waivers at financial institutions, which, among other things, failed to honor stop-payment requests received at least three business days before the scheduled date of the transfer. Examiners also observed instances where service providers improperly required consumers to contact the merchant before processing a stop-payment request or failed to process stop-payment requests due to system limitations even if a consumer had contacted the merchant. The report cited additional findings where financial institutions failed to properly conduct error investigations.
    • Remittance Transfers. Bureau examiners identified violations of Regulation E related to the Remittance Rule, in which providers “received notices of errors alleging that remitted funds had not been made available to the designated recipient by the disclosed date of availability” and then failed to “investigate whether a deduction imposed by a foreign recipient bank constituted a fee that the institutions were required to refund to the sender, and subsequently did not refund that fee to the sender.”

    The report also highlights recent supervisory program developments and enforcement actions.

    Federal Issues CFPB Supervision Enforcement Consumer Finance Examination Credit Cards Debt Collection Regulation Z FDCPA Deposits Regulation E Fair Lending ECOA Regulation B Mortgages Mortgage Servicing Regulation X Covid-19 CARES Act Electronic Fund Transfer Payday Lending EFTA Prepaid Accounts Remittance Transfer Rule

  • OCC outlines EFTA remittance transfer examination procedures

    Agency Rule-Making & Guidance

    On August 2, the OCC issued Bulletin 2021-33, which outlines supplemental examination procedures on remittance transfers used by OCC examiners and rescinds certain related booklets and bulletins. The examination procedures supplement EFTA procedures issued by the Federal Financial Institutions Examination Council that were adopted by the OCC in 2019 and address several provisions for implementing Regulation E’s requirement to disclose the exact cost of remittance transfers. These include: (i) a safe harbor threshold increase, which “excludes certain banks from the requirements for a bank that provides remittance transfers for consumers in the normal course of the bank’s business,” and (ii) certain allowable exchange rate and third-party fee disclosure exceptions. The bulletin also provides a summary of the CFPB’s Regulation E amendments concerning remittance transfers that took effect July 2020 (covered by InfoBytes here).

    Agency Rule-Making & Guidance OCC EFTA Examination Remittance Transfer Rule FFIEC Regulation E Bank Regulatory

  • CFPB reaches settlement with remittance transfer provider

    Federal Issues

    On December 21, the CFPB announced a settlement with a large non-bank remittance transfer provider resolving allegations that the company violated the Electronic Fund Transfer Act (EFTA) and the Remittance Transfer Rule by failing to adequately comply with the rules’ requirements. According to the Bureau, the company sent $2.2 billion in remittance transfers from the United States to several countries in Central America, South America, the Caribbean, and Africa. In sending the remittance transfers, the Bureau claims the company failed to (i) honor cancellation requests or provide cancellation rights; (ii) develop and maintain appropriate error resolution policies and procedures; (iii) promptly investigate whether errors have occurred and make error determinations; (iv) provide consumers with written reports of investigation findings; (v) refund certain fees and taxes when funds were not available on time; (vi) treat international bill pay services as remittances covered by the Remittance Rule; and (vii) make proper disclosures in numerous instances. The consent order requires the company to pay a $750,000 civil money penalty, and prohibits the company from offering or providing remittance transfers without complying with EFTA and Remittance Rule requirements. The company is also required to adopt a compliance plan to ensure that its remittance transfer acts and practices are in compliance with all applicable federal consumer financial laws and the consent order.

    Federal Issues CFPB Enforcement Remittance Transfer Rule Remittance EFTA

  • CFPB updates Remittance Transfer Small Entity Compliance Guide

    Agency Rule-Making & Guidance

    On June 18, the CFPB updated its Remittance Transfer Small Entity Compliance Guide to reflect the final amendments to the Remittance Transfer Rule (Final Rule) issued by the Bureau in May (covered by InfoBytes here). Among other things, the Final Rule grants a permanent safe harbor from exact remittance cost disclosures to insured institutions that do fewer than 500 remittances annually in the current and prior calendar years. Additionally, the Final Rule adopts a new, permanent exception that permits insured institutions to estimate the exchange rate for a remittance transfer to a particular country if, among other things, the remittance payment is made in the local currency of the designated recipient’s country and the insured institution processing the transaction made 1,000 or fewer remittance payments to that country in the previous calendar year. 

    As previously covered by InfoBytes, the CFPB issued FAQs covering Covid-19 and the Final Rule, and the Bureau issued a policy statement, which established a temporary exception allowing institutions providing remittance transfers to estimate fees to consumers in light of the Covid-19 pandemic. For the period between July 1 to January 21, 2021, the Bureau will not cite supervisory violations or initiate enforcement actions against certain institutions for disclosing estimated fees and exchange rates.

    Agency Rule-Making & Guidance Remittance Transfer Rule CFPB

  • CFPB issues Covid-19 remittance rule FAQs

    Federal Issues

    On June 2, the CFPB released Regulation E Remittance Rule FAQs related to the Covid-19 pandemic. The FAQs state that a provider’s failure to deliver remittance transfer funds to a designated recipient by the disclosed date of availability due to a government-mandated closure of commercial activity in response to Covid-19 would not be considered an error under the rule if the provider could not have reasonably anticipated the closure. The FAQs note that a provider would not be able to reasonably anticipate a closure, for example, if the closure of remittance transfer services was announced in the foreign country after the provider initiated the transfer, but before the guaranteed availability date.

    The Bureau previously issued a policy statement (covered by InfoBytes here), which established a temporary exception allowing institutions providing remittance transfers to estimate fees to consumers in light of the Covid-19 pandemic. From July 1 until January 21, 2021, the Bureau will not cite supervisory violations or initiate enforcement actions against certain institutions for disclosing estimated fees and exchange rates.

    Federal Issues CFPB Agency Rule-Making & Guidance Remittance Transfer Rule Covid-19

  • CFPB issues final remittance rule extending safe harbor and providing compliance exceptions

    Agency Rule-Making & Guidance

    On May 11, the CFPB issued final amendments to the Remittance Transfer Rule (Final Rule), which implements the Electronic Fund Transfer Act and imposes requirements on insured institutions that handle international money transfers—also known as remittance transfers—on behalf of consumers. The Final Rule follows a notice of proposed rulemaking issued last December (covered by InfoBytes here). Among other things, the Final Rule grants a permanent safe harbor from exact remittance cost disclosures to insured institutions that do fewer than 500 remittances annually in the current and prior calendar years.

    The Final Rule also addresses anticipated compliance challenges following the July 21 expiration of an existing exemption that allows certain insured institutions to disclose estimated exchange rates and third-party money transfer fees. Specifically, the Final Rule adopts a new, permanent exception that permits insured institutions to estimate the exchange rate for a remittance transfer to a particular country if, among other things, the remittance payment is made in the local currency of the designated recipient’s country and the insured institution processing the transaction made 1,000 or fewer remittance payments to that country in the previous calendar year. A second permanent exception will allow insured institutions to estimate covered third-party fees for remittance transfers to a recipient’s institution provided, among other things, the insured institution made 500 or fewer remittance transfers to the recipient’s institution in the prior calendar year. While the adopted final amendments will take effect July 21, the Bureau is adopting a transition period for both exceptions that will allow insured institutions that exceed the 1000-transfer or 500-transfer thresholds to “provide estimates for a reasonable period of time while they come into compliance with the requirement to provide exact amounts.”

    The Bureau also reminded institutions of its April 10 policy statement (covered by InfoBytes here), which established a temporary exception allowing institutions providing remittance transfers to estimate these fees to consumers in light of the Covid-19 pandemic. From July 1 until January 21, 2021, the Bureau will not cite supervisory violations or initiate enforcement actions against certain institutions for disclosing estimated fees and exchange rates.

    Agency Rule-Making & Guidance CFPB Remittance Remittance Transfer Rule EFTA

  • CFPB announces regulatory flexibility after remittance transfer rule exception expires

    Federal Issues

    On April 10, the CFPB announced the release of a policy statement “Supervisory and Enforcement Practices Regarding the Remittance Rule in Light of the COVID-19 Pandemic” addressing the implementation of the Electronic Fund Transfer Act (EFTA), and the Regulation E Remittance Rule (Rule). EFTA’s consumer protections, implemented by the Rule, require financial companies handling international money transfers, or remittance transfers, to disclose the exact exchange rate, fees, and amount delivered to the consumer making the transfer. However, it also provides a temporary exception, which allows institutions that provide remittance transfers to estimate these fees to consumers. (Covered by InfoBytes here.) The temporary exception is set to expire on July 1, and section 919 of the EFTA does not authorize the Bureau to extend it past that date. Accordingly, “[i]n order to minimize the impact of the pandemic on the remittances market…the Bureau will neither cite supervisory violations nor initiate enforcement actions against certain remittance transfer providers” for disclosing estimated fees and exchange rates from July 1 until January 21, 2021.

    Federal Issues CFPB Agency Rule-Making & Guidance EFTA Regulation E Remittance Transfer Rule Enforcement Supervision Covid-19

  • CFPB to amend Remittance Transfer Rule

    Agency Rule-Making & Guidance

    On December 3, the CFPB issued a Notice of Proposed Rulemaking (NPRM) relating to the Remittance Transfer Rule (Rule), which implements the Electronic Fund Transfer Act’s (EFTA) protections for consumers sending international money transfers, or remittance transfers. The NPRM makes three proposals. First, the Bureau proposes to increase the Rule’s safe harbor threshold, mitigating compliance costs for financial institutions. The EFTA and the Rule consider a “remittance transfer provider” to include “any person that provides remittance transfers for a customer in the normal course of business.” However, the Rule currently includes a “safe harbor” provision that excludes persons that process 100 or fewer remittance transfers annually. The NPRM proposes increasing this threshold from 100 to 500 international remittance transfers per year. According to the Bureau’s announcement, the change would “reduce the burden on over 400 banks and almost 250 credit unions that send a relatively small number of remittances—less than .06 percent of all remittances.”

    Second, the NPRM proposes adopting two permanent exceptions. The first is a permanent statutory exception that would allow certain insured institutions to estimate exchange rates and money transfer fees they are required to disclose, rather than provide consumers with exact costs when they send money abroad. Such an exemption would only apply in instances where a remittance payment is made in the local currency of the designated recipient’s country and the insured institution processing the transaction made 1,000 or fewer remittance payments to that country in the previous calendar year. An identical exemption provision is currently set to expire July 21, 2020. (Previous InfoBytes coverage here.) The NPRM proposes adopting a second permanent exception to allow insured institutions to estimate covered third-party fees for remittance transfers to a recipient’s institution provided, among other things, the insured institution made 500 or fewer remittance transfers to the recipient’s institution the prior calendar year.

    Third, the NPRM requests comments on a list of safe harbor countries for which providers may use estimates for remittance transfers.

    Comments must be received 45 days after publication in the Federal Register. In conjunction with the NPRM, the Bureau also released a summary of the NPRM, a table of contents, and an unofficial redline of the proposed amendments to the Rule.

    Agency Rule-Making & Guidance CFPB Remittance Transfer Rule EFTA Regulation E Remittance

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