Prepare for New Remittance Rules

April 1, 2012

In January 2012, the Consumer Financial Protection Bureau (CFPB) amended Regulation E and its official interpretation to provide new protections to consumers who send remittance transfers to other consumers or businesses in foreign countries. The amendments implement statutory requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The new rules will take effect on Feb. 7, 2013.

The rules cover most entities that offer remittance transfers, including credit unions, banks, and money transmitters. Remittance transfer providers will generally be required 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 (the rule provides model disclosures). The rule also requires remittance transfer providers to investigate disputes and remedy errors.

The rules apply to remittance transfers if they:

  • Are more than $15;
  • Made by a consumer in the U.S.; and
  • Sent via electronic fund transfer to a person or company in a foreign country.

This includes many types of transfers, including international wire transfers and automated clearinghouse (ACH) transactions. Providers must offer the disclosures in English and in each of the foreign languages they principally use to advertise, solicit, or market these services. Consumers will have up to 30 minutes to cancel a remittance transfer request.

The rule contains a partial exemption from some of the disclosure requirements for federally-insured institutions until 2015.

This temporary exemption would allow federally-insured credit unions initiating international wire and ACH transactions for consumers to provide estimates of applicable exchange rates, fees, and taxes correspondent foreign banks and governments impose instead of providing consumers with the exact amounts in local currency. Even with the partial exemption, credit unions still will have to comply with the rule’s other requirements such as error resolution 

and liability for acts of “agents” provisions. Credit unions must still provide consumers with disclosures that estimate likely exchange rates, fees, and taxes.

The CFPB also is seeking comment on whether to make changes to the new rules, including an exemption for companies that don’t provide remittance transfers in the normal course of their business (e.g., 25 or fewer international consumer-initiated electronic fund transfers per year).

The proposal also addressed how to apply the rules when a consumer schedules a remittance transfer many days in advance. Comments are due by April 9, 2012.

Next: More Savings Bond Program Changes

More Savings Bond Program Changes

On April 11, 2012, the Treasury Department will discontinue paying fees to U.S. Savings Bond agents for redeeming savings bonds. Bonds submitted for processing through “EZ Clear” must be received by the Treasury Retail Securities site by 12:30 p.m. CDT on April 10, 2012, to receive fees (30 cents per redeemed savings bond).

Savings bond paying agents will be prohibited from charging any fees for redeeming savings bonds once Treasury’s fee payments end. The Treasury eliminated over-the-counter sales of paper savings bonds in December 2011. Consumers can now only purchase savings bonds through Treasury

Why should credit unions continue to redeem bonds? Redeeming savings bonds is a valuable service for consumers, Treasury says. And, consumers who redeem bonds have cash in hand to direct to other products and services.

Each credit union must determine whether it still makes business sense to maintain this federal


CFPB Looking Into Overdraft Practices

In late February, the Consumer Financial Protection Bureau (CFPB) launched an inquiry into checking account overdraft programs to determine how these practices impact consumers. The bureau also launched a “What’s your overdraft status?” campaign to encourage consumers to understand if they’ve opted-in to overdraft fees on ATM and point-of-sale transactions, and to understand their options for avoiding penalty fees.

The inquiry is focused on four main areas:

  • Transaction re-ordering that increases consumer costs. The CFPB will examine the practice of co-mingling all checks, bill payments, debit card transactions, and ATM withdrawals each day and processing the largest transactions first to maximize the number of transactions that will trigger an overdraft fee.
  • Missing or confusing information. The CFPB will examine how clearly overdraft terms are disclosed and the extent to which consumers are made aware of, qualify for, and take advantage of, alternative means of covering overdraft transactions.
  • Misleading marketing materials. The CFPB is looking into reports that consumers are receiving misleading marketing materials about overdrafts. Initial data suggest that opt-in rates differ widely among institutions. The CFPB seeks to understand how differences in the way institutions explain and promote overdraft programs may affect opt-in rates.
  • Disproportionate impact on low-income and young consumers. The CFPB is revisiting a 2008 Federal Deposit Insurance Corp. (FDIC) study that found 9% of checking account customers bear about 84% of overdraft fees. Evidence suggests overdraft programs disproportionately impact low-income and young consumers.

The CFPB’s inquiry builds on best practices for overdraft programs NCUA and federal banking regulators suggested in 2005. FDIC issued additional guidance for FDIC-regulated institutions and the Office of Comptroller of the Currency and Office of Thrift Supervision issued proposed guidance in 2011 and 2010, respectively.

The agency also is seeking public input on a prototype “penalty fee box”—a disclosure on a consumer’s checking account statement that would highlight the amount overdrawn and total overdraft fees charged. The comment deadline ends on April 30. Find the notice—along with information on how to submit comments electronically—at

Next: Q&A


Q Can a credit union require its employees to use direct deposit for payroll checks as a condition of employment?

A No. According to Section 1005.10(e)(2) of Regulation E, “no financial institution or other person may require a consumer to establish an account for receipt of electronic fund transfers with a particular institution as a condition of employment or receipt of a government benefit.” But the credit union may require employees to use direct deposit of salary if employees are allowed to choose the institution to receive the direct deposit.

Q Does Regulation B require the credit union to send an adverse action notice if a member requests a reduction in a line of credit?

A No. The member’s request wouldn’t trigger an adverse action notice under Reg B. The member made the decision to lower the credit limit, not the credit union. And, a change in terms expressly agreed upon by the member doesn’t qualify as adverse action under the Equal Credit Opportunity Act (ECOA) and
Reg B.

Q Does the Real Estate Settlement Procedures Act require credit unions to provide borrowers with a written list of settlement service providers?

A A mortgage loan originator is only required to provide the borrower with a written list of settlement services providers if it permits a borrower to shop for third-party settlement services. The list must be provided on a separate sheet of paper at the time of the Good Faith Estimate. When “shopping” is permitted, the borrower may also choose a qualified provider not on the list.

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