CFPB Issues New Remittance Transfer Rule

Understand the basics before the February 2013 compliance date.

May 14, 2012

Is your credit union a remittance transfer provider?

Until late January 2012, most credit unions would have answered “no” to that question. Now many aren’t sure how to answer it as a result of the Consumer Financial Protection Bureau’s (CFPB) new “remittance transfer” rule.

And, to add to the confusion, the CFPB not only issued a final rule, but also issued a proposed rule with information on whether a credit union will be considered a remittance transfer provider. So, if your credit union is or may be a remittance transfer provider, let’s see what the rule might mean to your operations.

Scope of the rule

The rule is an amendment to Regulation E, adding sections 1005.30 to 1005.36. The purpose of the rule, according to the CFPB, is “the protection of individual consumers engaging in electronic fund transfers and remittance transfers.” The effective date of the rule is Feb. 7, 2013.

The definitions section of this rule is critical to understanding compliance, specifically the definitions for business day, remittance transfer, remittance transfer provider, sender, and designated recipient.

Remittance transfer is defined by the CFPB as “the electronic transfer of funds requested by a sender to a des-ignated recipient that is sent by a remittance transfer provider.” The definition of remittance transfer includes traditional remittance transfers, as well as outgoing international wire transfers and international automated clearinghouse (ACH) transactions. It can even apply to online bill pay if a credit union’s system uses electronic means to pay an international biller.

Prepaid cards, as well, may be included in the rules if the credit union is sending a loaded prepaid card to a designated recipient in a foreign country. 

Domestic wire transfers are, so far, not a part of the regulation. Neither are remittance transfers that are less than $15. Also important to note is that international wire transfers initiated by a business aren’t subject to the final rules governing remittance transfers, meaning that only transfers initiated by a consumer are included.

But the rule also includes remittance transfers sent from the member’s account in the state to the member’s account in a foreign country.

All credit unions that provide remittance transfers for consumers “in the normal course of business” would be subject to the rule. And nonfinancial institutions that provide remittance transfers also may be subject to the rule.

As part of the CFPB’s concurrent proposed rule, it’s proposing the safe harbor for determining “in the normal course of business” is 25 remittance transfers in the previous calendar year and no more than 25 in the current year.

What to do

If you’re unsure whether the rule applies to your credit union, first determine whether your credit union offers traditional remittance transfers, international wire transfers, or international ACH transactions. Also determine whether your bill pay service allows your members to issue bill payments to payees outside the U.S. (even if your bill payment agreement prohibits them), and how you issue prepaid or reloadable cards.

Then decide how many remittance transfers the credit union sent in the current calendar year and the previous year. Another question to ask is whether you currently use or may want to engage a third-party vendor to provide international money transfers.

If you’re not using a third-party vendor and your credit union is a remittance transfer provider, then you have some work to do, especially in the following areas: 

Disclosures. The new rule requires two types of disclosures that must be given to remittance transfer senders: Prepayment and receipt.

The two disclosures may be combined into one; but you must still provide proof of payment after receipt of the transfer fee. Model forms for these disclosures are available from the CFPB’s website (

The rule is very specific about methods and timing for delivery. The CFPB recognizes that not all remittance transfer requests may be made in person. Some providers might allow such requests via mobile app or text message.

The CFPB also recognizes disclosures may need to be provided in a foreign language to meet the objective of protecting consumers. You must provide disclosures in English. But if you advertise remittance transfer services in another language, you must provide the disclosures in the same language as the marketing collateral.

You have various options to receive requests for remittance transfers and to deliver disclosures. To simplify the process, you may want to limit the ways in which you receive requests for outgoing international wires or ACH transactions. This will streamline the procedures you must develop for delivery of disclosures.

Policies and procedures. The CFPB’s final rule provides that a sender has 30 minutes to cancel the remittance transfer after the provider receives the fee. So, include in your procedures at least a 30-minute waiting period before sending the remittance transfer. Your policy and procedures also should acknowledge whether you provide remittance transfers for nonmembers in your field of membership.

The CFPB also mandates financial institutions develop policies and procedures for error resolution. These procedures will differ from your credit union’s regular Reg E error resolution procedures, so review the CFPB’s time frames and resolutions to be sure you’re in compliance.


Training. You must train staff to follow the procedures. The key to training is to have thorough, easy-to-follow procedures that minimize the potential for mistakes. Again, limiting how you receive requests for wire transfers will help make training and implementation easier for credit union staff.

Third-party vendors. Many credit unions offer international and domestic remittance services as agents of popular third-party providers, such as Western Union, MoneyGram, the World Council of Credit Union’s (WOCCU) IRnet program, and the Credit Union Association of New Mexico’s Worldwide Remit program.

Work closely with these vendors to ensure they’re on track to meet the February 2013 compliance date. Although only one party must provide the disclosures the final rules mandate, both parties are responsible, says the CFPB.

The Family Credit Union, Davenport, Iowa, already is investigating its vendors’ readiness. “We use the Vigo service through WOCCU’s IRnet Program, which already has implemented a lot of the compliance guidelines,” says Kris Lundquist, vice president of marketing. “While waiting-time requirements of the rule may be an issue at first, I don’t think it will be anything our members won’t get used to.”

Service to members

Don’t let this rule discourage your service to members. Many of them rely heavily on remittance transfer services.

Remittance services fill an immediate financial need for many first-generation immigrants, particularly Hispanic immigrants, according to Coopera, which helps credit unions implement Hispanic growth strategies. Coopera is affiliated with PolicyWorks and is also a CUNA strategic partner.

A Pew Hispanic Center study found that 42% of foreign-born Hispanics regularly sent remittances to family members in their country of origin, with an average of between $100 and $300 being sent at least once a month.

“Remittance transfer services are a great way to attract the Hispanic market,” says Miriam De Dios, Coopera vice president. “While the new remittance guidelines may create some adjustment in procedures, credit unions will be able to continue offering this much-needed service for the Hispanic community and other markets, as well.”

ANDREA STRITZKE is vice president, regulatory compliance, for PolicyWorks.