Prepared Remarks by Richard Cordray in a Live Session on Requirements for Remittance Transfer Providers
Director of the Consumer Financial Protection Bureau
Live Session on Requirements for Remittance Transfer Providers
October 16, 2012
Thank you so much for joining us today to discuss the remittance transfer rule. Thousands of institutions have responded to our webinar invitation, including large and small institutions from across the country. We also have people watching overseas today, from countries such as Taiwan, Italy, the United Kingdom, and Colombia, among others. This event is part of a broader effort on our part to help you comply with our rules. At the Consumer Bureau, after we publish new rules, we will not simply move on and leave the burden of compliance for others to bear. Instead, we intend to work with you by offering guidance and assistance to help you implement our rules.
In addition to this event, we recently published a small business compliance guide for the remittance rule. This guide seeks to present the rule and its requirements in an easy-to-read document to assist banks and non-banks alike. This guide is a first draft, and we are currently taking feedback. Please let us know what you think. We want to make it as user-friendly as we can and we will use your suggestions to improve it.
Members of our team will present to you in just a few moments. They are traveling the country speaking to many remittance transfer providers. Our team has also offered guidance in response to questions received from providers and trade groups. We recently released a safe harbor list of countries that providers can rely on to apply one of the rule’s exceptions. We welcome your suggestions for countries to be added to that list. Details about the small business guide and the countries list are on our website at www.consumerfinance.gov.
It is important to remember why we are here in the first place. Congress passed a law that requires basic consumer protections and transparency in the marketplace for sending money abroad. This is only fair. Americans already expect and receive basic consumer protections every time they write a check or use a credit card. The same should be true when people send money outside the country.
In the past, consumers in this situation typically received limited information. Unknown fees and taxes and undisclosed exchange rates meant that consumers often did not know the price of the transaction and did not know much money would be received on the other end. The new law and our new rule will increase the information available to consumers, who will now know all of the fees, taxes, and exchange rates ahead of payment. People can know how much is to be received, and they can shop around for the best deal.
These consumer protections are needed, and like all consumer protections, they will benefit the financial industry if the result is greater trust in the marketplace. If we can succeed in making these transactions more transparent, that will attract more customers who can compare options and achieve lower costs and reduced risk. Trust, confidence, and clear rules of the road are necessary for the efficient functioning of any market, and the same is true here.
The rule aims to reduce risk to consumers by holding remittance providers accountable for errors. Under the rule, as outlined in the statute, if a consumer reports a problem with a transaction within 180 days, the provider must investigate and correct any errors. Note that under the rule, providers may be held responsible for some mistakes made by their agents.
We know this aspect of the rule has raised concerns and we agree with some of the concerns that have been expressed; particularly, where a consumer provides incorrect account or routing information. In those circumstances, though we think the provider should be responsible for trying to remedy the situation, if the money was properly transmitted in accordance with the sender’s instructions and cannot be recovered, we share concerns about liability resting on the provider. We expect to take action shortly to address this issue.
The law generally requires providers to disclose the actual amount to be received by the recipient. To do so, providers have to disclose the exchange rate, third party fees, and foreign taxes that apply to the transaction. For banks and other depository institutions, if they cannot know the exchange rate at the time the transfer is requested, they are permitted to estimate it. Congress, however, did not provide for broad estimates of unknown taxes or fees. We realize disclosures of fees and taxes are proving to be a difficult requirement, and we are considering whether we can facilitate industry efforts to figure out the correct tax information. We welcome your input on this issue. We also appreciate those foreign banks that are working to assist remittance providers in making accurate disclosures about fees.
Our remittance rule becomes effective on February 7, 2013 – about four months from now. The rule only applies to remittances made by individuals, not those by businesses. It will apply to most electronic transfers of funds over $15. Note that the rule does not apply to you if you provide 100 or fewer remittances each year.
We understand that adjusting to the law Congress has passed and the rule we have written to implement that law is not an easy task. We want to help you understand how to comply with the remittance rule. If you have questions, please submit them at CFPB_RemittanceRule@CFPB.gov. The team that is going to present more detail to you about the rule is working diligently to respond to your questions and I know they will continue to do so.
Now I am going to turn it over to our experts who will walk you through the remittance rule and answer many of the questions we have received. It is our pleasure to be with all of you today.