The Bureau of Consumer Financial Protection (CFPB) has proposed several amendments to the Remittance Transfer Rule:
- Increasing safe harbor threshold.
- The Electronic Funds Transfer Act and Remittance Transfer Rule provides that a “remittance transfer provider” (any person that provides remittance transfers for a consumer in the normal course of its business, regardless of whether the consumer holds an account with such person) is required to make certain disclosures. However, a safe harbor is carved out in which case a person is not deemed a remittance transfer provider if they do not provide remittance transfers in the normal course of business of 100 or fewer transfers in the current calendar year. The amendment to this Rule would increase the threshold from 100 transfers to 500 transfers annually in efforts to reduce compliance costs for entities that make limited number of annual remittance transfers.
- Adoption of permanent exceptions for exchange rate and covered third-party fees estimates.
- The Electronic Funds Transfer Act outlines a temporary exception for qualified remittance transfer providers that permits certain financial institutions to disclose estimates of the exchange rate and covered third-party fees instead of exact amounts to consumers. This temporary exception expires on July 21, 2020 with no current proposal to extend the exception or make it permanent. The CFPB is proposing to adopt a permanent exception that would permit insured institutions to estimate the exchange rate as required in the disclosures for remittance transfers to a particular country if the designated recipient will receive funds in the country’s local currency and the insured institution made 1,000 or fewer remittance transfers in the prior calendar year to that country when the designated recipients received funds in the country’s local currency. Another permanent exception is proposed that would permit insured institutions to estimate covered third-party fees that must be included in certain circumstances in the disclosures. The adoption of these permanent exceptions is in an effort to mitigate the impact of the expiration of the temporary exception.
- Seeking comment on expanding safe harbor countries list.
- Currently, the Electronic Funds Transfer Act requires a remittance transfer provider to disclose the exact exchange rate to be applied to a remittance transfer; however, an exception allows the CFPB to write regulations specific to transfers to certain countries if it has determined that the recipient country does not legally allow, or the method by which transactions are made in the recipient country do not allow, a remittance transfer provider to know the amount of currency the designated recipient will receive. Under these scenarios, a safe harbor is available in which case the provider may use an estimate of the foreign currency to be received based on the exchange rate the provider conveyed to the sender at the time the transaction was initiated. The existing countries that qualify for use of the safe harbor include Aruba, Brazil, China, Ethiopia, and Libya. The CFPB is seeking comment on what other countries, if any, should be added to the list because their laws do not permit the determination of exact amounts at the time the pre-payment disclosure must be provided.
The CFPB is proposing that any final rule take effect on July 21, 2020 and anticipates that at least 30 days prior to July 21, 2020 it will publish any final rule in the Federal Register. The CFPB also seeks comment on whether a mid-year change in the safe harbor threshold would pose any complications for providers or cause confusion, and if so, whether the CFPB should make the change to the safe harbor threshold.
The proposed rule can be found here.