WASHINGTON (2/16/12)--Recently approved remittance transfer changes "are long overdue," and will "benefit the financial industry if the result is greater trust in the marketplace," Consumer Financial Protection Bureau (CFPB) Director Richard Cordray said on Wednesday.
Cordray spoke before the League of United Latin American Citizens annual legislative conference in Washington. "Up to this point, few protections existed for those sending international money transfers. Hidden fees and fluctuating exchange rates meant that consumers did not know how much money would be received on the other end," he said.
"If we can succeed in making these transactions more transparent, we will attract more customers who can compare options and achieve lower costs and reduced risk... our remittance rule should facilitate confidence in international money transfers by making them work better and with more certainty," Cordray added.
New remittance rules issued by the CFPB earlier this year require remittance transfer providers to disclose the exchange rate and all fees associated with a transfer so consumers know exactly how much money will be received on the other end. Remittance transfer providers will also be required to investigate disputes and fix mistakes.
The rule will become effective in February 2013.
The remittances regulation would affect most U.S. credit unions that provide consumers with international electronic funds transfer services because it broadly defines the term "remittances" to include virtually all cross-border electronic funds transfers initiated by consumers in the U.S., other than most transfers involving credit, debit, and prepaid cards.
Under an accompanying rule, credit unions that provide 25 or fewer international consumer-initiated electronic funds transfers per year are exempted from all aspects of the rule. However, credit unions performing more than 25 of these transactions a year would be subject to the rule if they provide international funds transfer services "in the ordinary course of business" under a facts and circumstances test.
The Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU) are concerned that a number of credit unions that provide 'remittances' as defined by the rule will face challenges in complying with the new regulation, and CUNA has asked the CFPB to provide as much regulatory relief as possible through the accompanying 'safe harbor' standards.
In a meeting last week with CUNA President/CEO Bill Cheney, Cordray said the agency will certainly consider ways to address concerns of smaller institutions that provide remittances and encouraged CUNA to provide its recommendations to the agency, both in its comment letter on the proposal and in discussions with agency staff.
About 109 U.S. credit unions participate in WOCCU's IRNet, a remittance service operated by WOCCU Services Group. The service, which works primarily with Hispanic clients, transmits remittances to eight countries and has taken part in over $2.9 billion in total transactions since its inception.