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Remittance transfer rule: A personal perspective

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Updated on August 8, 2013: The remittance rule goes into effect October 28, 2013. Visit the remittance rule page for additional information regarding the rule including the most recent updates.

As a child of South Asian immigrants, I recall my parents frequently sending money back to our family and friends in India. Because so much depended on its receipt, my parents were uneasy about the transaction until they knew the money was in the right hands. Their unease was not unwarranted. My parents had no control over how the money got there. When my parents used a service to send money, they never fully understood the process, were charged numerous, unexplained fees, and felt powerless if any errors were made. At times they resorted to sending cash by mail, an option that was not especially secure.

Unfortunately, other immigrant families and other consumers who must send remittance transfers have had similar experiences, which is why advocates have been calling for greater protections around these transfers of money, or remittance transfers. Now, with direction from Congress through the Dodd-Frank Act, the CFPB has changed that. We adopted new rules that will go into effect in February 2013. These rules will generally make the costs of remittances clear and hold remittance transfer providers accountable for certain errors.

Here’s how:

Better Disclosures: Under this rule, remittance transfer providers must generally disclose the exchange rate, any fees related to the remittance, the amount of money that will be delivered abroad, and the date the money will be available. Certain disclosures must be provided both before and after the consumer pays for a remittance transfer. Consumers will generally receive these disclosures in English and sometimes in other languages. The CFPB thinks the clarity provided by these disclosures will help inform consumer decisions and instill confidence.

Option to Cancel: Typically, consumers will have at least 30 minutes after payment to cancel a remittance. If they cancel within the 30 minute window, they will get their money back, whether they make a mistake, change their minds, or feel something isn’t right.

Correction of Errors: With this rule, remittance transfer providers will generally be held accountable for errors. If a remittance sender reports a problem with a transfer within 180 days, the provider must generally investigate and correct errors. Companies that provide remittance transfers may also be responsible for mistakes made by their agents. The CFPB believes this will encourage remittance transfer providers to use reliable agents and partners in the U.S. and abroad, helping to weed out the bad actors.

As a lifelong advocate for immigrant communities, I am very proud that the first final rulemaking adopted by the CFPB addresses this issue and brings new protections to many consumers who, like my family, continue to send money to family members, loved ones, and others abroad.

  • http://twitter.com/nowhere85grad Greg Badovinac

    What this new law/regulation does not realize is that most financial service providers do not have contracts with the foreign money transfer party chosen by the consumer. How does the bank/credit union deal with a foreign bank that says “too bad, so sad, sue me” when it cheats the receiver of the money? It can’t. You will see many current providers of this service stop offering it closer to the Feb 2013 deadline.

  • Paul Murray

    This blog is a bit
    disingenuous. Tell us, by what means were your parents sending these funds
    home, bank wire, Western Union, MoneyGram? If they were sending the funds via
    bank wire, I’ll bet any issues they had were caused by the receiving bank in
    India, not the US sending bank, and I would be surprised to find that they had
    issues caused by Western Union or MoneyGram.

    The new rule is
    not going to give consumers more choice, it will limit their choices, and
    completely abrogates any responsible consumers have for the choices they make.
    The rule makes US international funds transfer providers responsible for the
    actions of foreign banks and for the mistakes of consumers. Anyone who has any
    experience with international bank wires understands that the sending US
    financial institution has no control over the funds once they have been sent,
    and no recourse to get the funds back if the foreign bank will not return them
    - it’s not as if foreign banks will be beholden to Reg E. It’s absurd to say
    that a US financial institution is in a better position to know what fees a
    foreign bank will charge or what their funds availability policy is than the
    actual account holders who requests funds be sent to their own foreign bank
    accounts. Besides, how is any US financial institution supposed to keep track of
    the fee structures and funds availability policies of tens or hundreds of
    thousands of foreign banks? It is even more absurd to hold the sending
    financial institution responsible when the consumer provides an incorrect
    receiving account number and the funds aren’t retrievable. Additionally,
    consumers will not be able to “comparison shop” bank wires – almost
    all banks will only send wires for existing customers, which means that
    consumers will have to be ready to open new accounts and transfer their funds from bank to bank
    (incurring more costs), and by the time they do – if they even can – exchange
    rates will have changed.

    It is my belief
    that this rule will result in an extreme decrease in options for consumers as
    many financial institutions cease to provide international funds transfer
    services in the face of a rule impossible compliance and the extremely elevated
    risk stemming from consumer error. International bank wire services will be
    offered by a few very large financial institutions, with whom the consumers
    most at risk for being taken advantage of will probably not be banking. Person
    to person transfers will continue to be provided by Western Union and Moneygram
    as they are today, but also by the shadowy providers that are the cause of the
    problem in the first place. Consumers, who are taken advantage of today, will
    continue to be taken advantage of because they will have even fewer options -
    which will be more expensive than they are now – and will continue to choose
    these problematic providers won’t heed the new rule because they are already
    operating in the shadows.

  • http://www.smallbusinessgrants.net/simple-business-ideas/ SMALL BUSINESS IDEAS FOR WOMEN

    Revenue from remittance in Ethiopia showed an increase in the second half of the fiscal year out performing earnings from exports according to the National Bank of Ethiopia. Private transfers of remittance totaled 1.74 billion dollars in the last seven months of the financial year which is a 19.6% increase from the same period in the last financial year explained Teklewold Atnafu, Governor of the National bank in a report presented to the House of Peoples Representatives.

  • http://www.householdcharge.org/ joseph Mills

    What if the customer fails to cancel the remittance
    within 30 minutes? Can she still recover them?

  • http://wheatgrassjuicer.co/ wheatgrass tammy

    How come that most of the times the law is tending to be towards the business owner and not towards the cosumer?

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