On Aug. 7, 2012, the Consumer Financial Protection Bureau updated the international remittance (money transfer) rules, despite urging from the financial services industry that the CFPB delay the rule until further study of how it will ultimately affect consumers. Consumer advocacy groups hailed the updated rules as an important consumer protection measure, while bankers' associations said the rule will harm consumers in the long run by reducing the choices they have in sending international remittances.
Under the new rule, money transfer providers must disclose fees, exchange rates and amounts when consumers first request to make transfers and again when payments are made. The CFPB said consumers will also have 30 minutes after money transfers are made to cancel them.
The CFPB will give certain financial service providers "safe harbor" exemption status from the new rules. Community banks, credit unions and financial institutions (FIs) that provide fewer than 100 international money transfers per year will not have to comply with the rules. The CFPB raised the threshold from the original 25 it had initially proposed.
"The bureau concluded that those institutions that consistently conduct 100 or fewer remittance transfers per year do not provide transfers in the 'normal course of business' and therefore are not subject to the new requirements," the CFPB said.
The agency added that should service providers surpass the 100 international remittance threshold in a given calendar year, the CFPB will provide a maximum transition period of six months for organizations to gain compliance with the new rules.
The Americans for Financial Reform, a coalition of trade unions and consumer advocacy groups, lauded the CFPB for rejecting a call by the financial services industry to have a 6,000 transaction threshold imposed, carve out large exemptions for banks and credit unions, and ultimately delay implementation of the rules. The AFR said the 6,000 transaction threshold would have "significantly reduced the reach of consumer protection," as many banks and credit unions would fall under that threshold and be exempt from the rules.
The rules also make money transfer providers responsible for "abuses committed" by their agents, the AFR noted. "[T]hese provisions will make it far easier for consumers to get satisfaction when things go awry," the association added.
In a July 30, 2012, letter addressed to Congress, the American Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, the National Association of Federal Credit Unions and the National Bankers Association said the international remittance rules "impose arbitrary and unworkable requirements on consumer-initiated international transfers of all sizes and purposes that will drastically curtail the availability of international transfers to consumers."
Pat Keefe, Vice President, Communications & Media Outreach at CUNA, said CUNA advised the CFPB that the threshold should be 1,000 transactions per year. Keefe believes most of CUNA's members would fall under that threshold. He doesn't know how many of CUNA's members will eliminate their international remittance services due to the new rules, but he said the cost to member organizations of complying with the rules could force them to drop the service.
The associations' letter said international remittances offered through banks and credit unions are processed primarily over the "open" automated clearing house. "While these networks enable consumers to send funds account-to-account to almost anywhere in the world, they do not enable a financial institution in the U.S. to access the exact exchange rate, third-party fees and foreign taxes required by the final rule," the letter stated.
FIs will have three options, according to the associations. FIs can develop their own closed networks where they would control both the sending and receiving of the remittances. But the associations said creating closed networks could take years. The second option is for FIs to partner with money transfer specialists, such as The Western Union Co. or MoneyGram Inc. The final option is to stop offering international remittances altogether.
"We estimate that thousands of banks, credit unions and broker-dealers will no longer send consumer-initiated international funds transfer because of the final rules," the associations said, adding the result will be that consumers will have fewer lower-cost money transfer options and will have to pay higher fees through money transfer specialists.
Keefe said CUNA members once offered the money transfer services of third-party providers, but they were too expensive for consumers and were subsequently dropped.
Western Union, which operates its own proprietary, closed money transfer network of approximately 500,000 agent locations around the world, said in a statement that it helped educate the rule makers about the money transfer sector and "how transactions work between our company, our agents and our consumers – across all of our business channels and consumer touch points."
The final remittance rule, which takes effect Feb. 7, 2013, updates Regulation E of the Electronic Fund Transfer Act, as mandated by the Dodd-Frank Wall Street Reform Act of 2010, which went into effect October 2011.
"Consumers transfer tens of billions of dollars from the United States to foreign countries each year," the CFPB said. "Prior to the passage of the Dodd-Frank Act, these international money transfers were generally excluded from existing federal consumer protection regulations. To remedy this, the Dodd-Frank Act expanded the scope of the Electronic Fund Transfer Act to provide protections for senders of remittance transfers." 
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