About a year ago, the Consumer Financial Protection Bureau (CFPB) published amendments to Regulation E (12 CFR Part 1005).
The amendments provide new protections to consumers who send remittance transfers to consumers or businesses in foreign countries.
The rule was to go into effect on Feb. 7, 2013. But last November, the CFPB announced plans to amend the rule to:
Meantime, consider these frequently asked questions (and answers) we’ve received from credit unions:
Q: What transactions does the rule cover?
A: A “remittance transfer” is an electronic funds transfer (EFT) a sender (U.S. consumer) requests to a designated recipient (person or business in a foreign country) that’s sent by a remittance transfer provider. The rule excludes small-dollar transfers of $15 or less.
The definition is broad, but generally covers international wire transfers, cross-border automatic clearinghouse (ACH) transactions, and electronic bill payments scheduled in advance (unless the bill-pay agreement states you’ll pay solely by check, draft, or similar instrument).
Q: What’s a “remittance provider” under the rule?
A: A “remittance transfer provider” is a “person” who provides remittance transfers to consumers in the “normal course of business” (regardless of whether the consumer holds an account with such person). The rule provides a safe harbor for institutions that provide 100 or fewer remittance transfers per year.
Q: How does the remittance safe harbor operate?
A: If a credit union provided 100 or fewer remittance transfers in the previous calendar year and provides 100 or fewer remittance transfers in the current calendar year, then CFPB considers it exempt because it’s not providing remittance transfers in the “normal course of its business.”
If the credit union crosses the 100-transfer threshold, CFPB considers it providing remittance transfers for consumers in the normal course of its business. The final rule then permits a “reasonable time period”—not to exceed six months—to comply.
Q: How does the rule treat agents?
A: The CFPB generally defers to state law regarding agents, including what creates or constitutes an agency relationship. But under the rule, remittance transfer providers are responsible for the acts of their agents, and will be liable for any rule violations when the agent is acting for the provider.
Q: Is a credit union a remittance transfer provider when it uses a U.S. intermediary bank to send remittances?
A: The rule covers the credit union if it meets the definition of remittance transfer provider (e.g., initiates international wires for consumers), even if a credit union routes transactions through another financial institution. More than one remittance transfer provider can be involved. Institutions also may create agency relationships via contract.
Q: What are disclosure requirements for remittance transfers?
A: Providers must generally give senders a prepayment disclosure and receipt in writing (or electronically). Alternatively, they may provide a single written disclosure prior to payment containing all of the information required on the receipt, along with proof of payment. The rule provides model disclosures.
Q: Do these requirements have any exceptions?
A: The rule contains a temporary exception until 2015 allowing a federally insured credit union initiating remittance transfers from a consumer’s account (e.g., international wire/ ACH transaction) to provide estimates of applicable exchange rates, fees, and taxes when it can’t determine exact amounts “for reasons beyond its control” (e.g., foreign correspondent bank sets exchange rate or imposes a fee).
Providers also may estimate these costs under a permanent exception when they can’t determine certain amounts because of a recipient country’s laws, or how transactions are made in a recipient country.
For more information, visit CUNA’s e-Guide at cuna.org (select “regulations & compliance”).
VALERIE Y. MOSS is CUNA’s director of compliance information.