On April 30, 2013, the Consumer Financial Protection Bureau (“CFPB”) issued its final rule regarding international electronic remittance transfers (i.e., international transfers of money) pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new rule will go into effect on October 28, 2013.
CFPB has stated that the final rule is meant to provide new protections, including disclosure and error resolution and cancellation rights, to consumers who send remittance transfers to foreign persons or businesses. The rule applies to U.S. banks, thrifts, credit unions, and other commercial international wire transfer providers (but excludes any such entity that consistently provides less than 100 wire transfers a year).
Among other requirements, the final rule generally requires remittance transfer providers to do the following:
(i) provide to customers (prior to a customer’s payment for the remittance transfer) with disclosures regarding the applicable current exchange rate, fees and taxes collected by the provider, fees charged by the provider’s agents abroad and remittance intermediaries, and the amount of money expected to be delivered abroad (with certain exceptions, as noted below).
(ii) provide a receipt to customers including proof of payment, date when money will arrive at the foreign destination, and the method by which a customer can report a transfer problem.
(iii) customers get at least thirty minutes (and more time in certain circumstances) to cancel an initiated transfer.
(iv) investigate problems with transfers. In certain circumstances, providers are required to refund wired amounts (and/or refund of the provider’s fee from the customer) if the money does not reach its destination.
While draft versions of the rule required a provider to disclose all fees of receiving foreign institutions and foreign taxes, the final rule made that requirement optional (as long as a provider discloses that foreign taxes and/or fees are not included). This revision was made in response to industry concerns that providers could not accurately predict the fees and taxes of foreign institutions and jurisdictions.
Also, while draft versions of the rule stated that providers were liable for refunds of wired amounts (and/or refund of the provider’s fee from the customer) in most circumstances involving an error, the final rule states that when a customer provides incorrect information (such as an incorrect account number or recipient institution identifier), the provider is not obligated to return or refund mis-deposited funds that could not be recovered if the provider had made reasonable efforts to recover those funds.
Prior to the enactment of this rule, federal consumer protection regulations largely did not apply to international remittance transfers. Remittance transfer providers should carefully consider whether the new rule applies to them, and whether (and to what extent) they should create new policies and procedures (or update current policies and procedures) to address the rule’s requirements.