CFPB seeks to refine money transfer rules

The Consumer Financial Protection Bureau is refining the rules that govern the business practices of money transfer providers. The CFPB proposed in a Nov. 27, 2012, bulletin that refinements be made to the rules requiring remittance transfer providers (RTPs) disclose exchange rates, fees and taxes to consumers; the bureau also wants to change the rule that covers RTPs' liability for customer errors.

The CFPB bulletin explained that the proposed adjustments will help RTPs implement and comply with the rules without impacting consumer protections. The bureau said it will "proceed on a fast track" and issue a formal notice of proposed rulemaking in December 2012 to detail the changes and receive public comment.

The bulletin said the bureau will issue a final rule "as quickly as possible" after considering public comments. The final rule will be in effect 90 days after the proposal is finalized "to ensure the new consumer protections afforded by the rule can be effectively implemented and delivered to consumers as soon as possible."

Remittance implementation

The Dodd-Frank Wall Street Act of 2010 added a new section to the Electronic Fund Transfer Act (EFTA) that requires the CFPB, an agency created by Dodd-Frank, to develop disclosure and error resolution requirements for overseas RTPs.

CFPB's proposed Remittance Rule Implementation would add a new section to Regulation E of the EFTA requiring RTPs disclose all costs of remittance transfers to consumers prior to transactions being consummated. It also makes RTPs liable for remittance transfer errors even if customers provide inaccurate account numbers or routing information.

Public objections

Following publication of its proposed rule changes, the CFPB received public comment that pointed out it would be difficult for RTPs to comply with the rules requiring them keep accurate databases of national and local taxes, as well as other fees charged by financial institutions in various countries around the world. The proposed rule refinements would require RTPs to track and disclose only published bank fee schedules. It also would require RTPs report and disclose only national taxes that apply to money transfers.

Other comments received by the CFPB objected to holding RTPs liable for nondelivery or late delivery of remittance transfers when customers provide incorrect account numbers. The CFPB now proposes to release RTPs from liability if they can show consumers provided wrong information. However, RTPs would still be required to make good faith efforts to recover the funds.

A sigh of relief

On Dec. 3, 2012, retail risk expert David Lott wrote on the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, "While these modifications are termed 'limited' by the CFPB, remittance providers must be breathing a measured sigh of relief, especially regarding the shift in liability from consumer-created errors. It will be interesting to monitor the impact of these regulations to determine if there has been any constriction in the number of countries served due to the additional requirements."

The final rule governing foreign remittance transfers is set to take effect Feb. 7, 2013, but the CFPB said it now expects its proposed refinements to Reg E will push that date back to "sometime during the spring of 2013."

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

Notice to readers: These are archived articles. Contact information, links and other details may be out of date. We regret any inconvenience.