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CFPB expands relief for banks and credit unions from remittance rules

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More banks will be able to estimate costs to consumers of remittance transfers rather than quote exact third-party fees and exchange rates under a final rule issued by the Consumer Financial Protection Bureau.

The rule released Monday expanded and made permanent temporary protections established in an earlier 2013 regulation. The new rule establishes a safe harbor for banks providing 500 or fewer transfers a year from complying with a requirement that they disclose the price of a remittance transfer, the exact exchange rate, the amount to be delivered and the date funds are available.

The final rule permanently raised the exemption threshold from 100 transfers. The previous safe harbor was set to expire in July 2020.

“We are pleased with the increased threshold and that they made the temporary exemption permanent,” said Rhonda Thomas, vice president at the Independent Community Bankers of America.

“The final rule allows certain banks and credit unions to continue to provide estimates of the exchange rate and certain fees under certain conditions,” the CFPB said in a press release.
“The final rule allows certain banks and credit unions to continue to provide estimates of the exchange rate and certain fees under certain conditions,” the CFPB said in a press release.

Consumer groups opposed changes and had urged the CFPB to instead lower the threshold, while banks and credit unions had lobbied for an even higher threshold of 1,000 or 1,200 transfers. Banks argued that they exert little control over their foreign counterparts on which they rely for information about third-party fees.

Ann Kossachev, director of regulatory affairs at the National Association of Federally-Insured Credit Unions, said a number of credit unions have effectively been prevented from offering remittance transfer services "because of the high compliance costs and associated burdens," she said. "The rule failed to expand the exemption on fee estimates at a time when credit unions are in need of regulatory relief."

The rule will allow a wider array of banks to estimate just the exchange rate in certain circumstances. insured institutions can estimate exchange rates if they meet two requirements: the funds are received in the local currency and the bank remits 1,000 or fewer transfers to that specific country the prior year.

Because of the coronavirus pandemic, the CFPB also gave financial institutions a further reprieve from issuing enforcement actions on remittances until January.

In April, the bureau said it will not initiate an enforcement action or cite an institution in an exam for estimating third-party fees and exchange rates to consumers rather than giving specific amounts. That change applies to remittances sent from July 21, 2020 to January 1, 2021.

The bureau said in a press release that the rule would preserve the ability of consumers to send remittances.

“The final rule allows certain banks and credit unions to continue to provide estimates of the exchange rate and certain fees under certain conditions,” the CFPB said in a press release. “This could preserve consumers’ ability to send remittances from their bank accounts to certain countries or recipient institutions.”

The CFPB said the rule "will reduce the burden" on over 400 banks and almost 250 credit unions that send a relatively small number of remittances.

Banks collectively sent roughly 43% of the dollar volume of all remittance transfers while credit unions sent 2%, the CFPB said. Remittance transfers by banks averaged $6,500, compared with an average of $381 by money transmitters.

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