CFPB Sets Remittance Transfer Safe Harbor

When the CFPB published international money transfer rules in February, the agency also published a Notice of Proposed Rulemaking.

October 24, 2012

When the Consumer Financial Protection Bureau (CFPB) published the Regulation E remittance transfer (i.e., international money transfer) final rule in February 2012, the agency also published a Notice of Proposed Rulemaking (NPR).

The NPR sought comment on whether to provide a safe harbor to exempt institutions from the rule if they transmit 25 or fewer remittance transfers per year.

The comment period closed in April and the CFPB issued a supplemental final rule in August, increasing the proposed 25 transfers to 100 transfers per year.

The remittance transfer requirements go into effect on Feb. 7, 2013.

The amended Reg E will apply to remittance transfers that are:

  • More than $15;
  • Made by a consumer in the U.S.; and
  • Sent to a designated recipient in a foreign country.

Remittance transfer providers generally will be required to disclose the exchange rate and all fees associated with remittance transfers (the rule provides model disclosures), to investigate disputes, and to remedy errors.

The rule will cover most entities that offer these transfers, including credit unions, banks, and money transmitters. But an institution won’t be considered to be a remittance transfer provider unless it provides remittance transfers in the “normal course of business.”

The CFPB’s August final rule provides a safe harbor clarifying when an institution provides remittance transfers in the normal course of business to determine whether it falls under the definition of “remittance transfer provider.” The final rule states that:

  • If an institution provided 100 or fewer remittance transfers in the previous calendar year, and provides 100 or fewer remittance transfers in the current calendar year, then the institution is deemed not to be providing remittance transfers for a consumer in the “normal course of its business” and is exempt from the rule; and
     
  • If an institution crosses the 100-transfer threshold, and is then providing remittance transfers for a consumer in the normal course of its business, the final rule permits a “reasonable time period,” not to exceed six months, to begin complying with the remittance transfer rule (located in subpart B of Reg E).

 The final rule also clarified the regulation regarding remittance transfers scheduled before the date of transfer, including preauthorized remittance transfers.