It might have been a mild winter for those of us in Wisconsin, but credit unions everywhere have been weathering a storm (née flurry) of regulatory activity.
And if your credit union breathed a sigh of relief in dismissing the Consumer Financial Protection Bureau’s (CFPB) final rule amending Regulation E to regulate remittance transfers…not so fast, friend.
Before deeming these new rules inapplicable, let me tell you why you need to think again and then, well, really think…again.
Is my CU affected?
Earlier this year, CFPB released its final rule amending Reg E to newly regulate remittance transfers conducted by remittance transfer providers. Huh? Let’s break this down.
What is a remittance transfer? Put simply, it’s an electronic transfer of funds to a recipient in a foreign country initiated by a provider (e.g. credit union) on behalf of a consumer in the U.S. The transaction must be in an amount greater than $15 to be considered a remittance transfer.
Your credit union may be affected by the new rule if it engages in any of these activities:
• International wire transfers. A common remittance transfer is a wire transfer initiated by a credit union for a member seeking to send money to his or her relatives living abroad.
Let’s take a hypothetical situation. I live in El Paso, Texas, and my sister lives in Monterrey, Mexico. My sister is a spender and her account quite frequently has a low balance.
I run into my local El Paso credit union to send her $1,000 (I am a very generous sister). My credit union initiates an international wire transfer to my sister’s bank in Monterrey and she picks up the money the following business day.
(Parts of this story are true. I grew up in El Paso, Texas, but currently live in Madison, Wis. My sister does not live in Mexico, but her account is empty quite frequently. I consider myself to be a generous sister.)
My credit union just engaged in a remittance transfer and acted as a remittance transfer provider (more on the latter part in a minute).
• Electronic bill pay. If your credit union allows members to pay bills via your online bill pay service, you may be affected if any of these bills are being paid electronically (not via paper check) to individuals or businesses outside the U.S.
Let’s look at another hypothetical situation. I still live in El Paso, Texas, and my sister (the one with the spending issues) still lives in Monterrey, Mexico. Because I am a generous sister, her electric bill is in my name and I pay it every month.
Each month, I use my El Paso-based credit union’s online bill pay service to pay this bill, which is sent electronically to the electric company in Mexico. This is a remittance transfer and the credit union is acting as a remittance transfer provider every month this payment occurs.
Am I a remittance transfer provider? If your credit union engages in remittance transfers in the “normal course of business,” you are considered a remittance transfer provider and the remittance transfers you conduct will be governed by this new rule.
So, you engage in remittance transfers as described above. But do you engage in these activities in “the normal course of business?” What does that phrase mean? Good question. I don’t know.
To be honest, the CFPB doesn’t even know. That is one reason the agency issued an accompanying proposed rule on remittance transfer provisions in Reg E.
CFPB is seeking comments on, among other things, what it means to conduct remittance transfers in the “normal course of business.” The agency did provide some guidance: If a credit union conducts two or three remittance transfers per year, it would not be a remittance transfer provider.
However, if a credit union is providing these services a couple of times per month, it would most likely be governed under this rule.
How can I comply with the new rule?
Several components to the new rule provide new rights for consumers sending funds abroad. Consumers must receive new disclosures before and after the remittance transfer occurs, and they’re entitled to certain cancelation and error resolution rights.
And finally, the rule imposes additional liability on remittance transfer providers for certain violations by agents acting on behalf of the provider.
This rule is new, complex, and, at first glance, perhaps not relevant to credit unions. So my appeal to you: Think again.
Think about whether you’re governed by this new rule. Do you actually conduct remittance transfers as described above, and how frequently do you provide these services?
And one more, yet similar, request: Think…again. This time, really think about the compliance pieces from a procedural perspective—not whether you have to comply, but rather, how can you comply?