When the final remittance transfer rule amending Regulation E was released by the Consumer Financial Protection Bureau in February, many credit unions assumed it did not apply to their institutions. In fact, the rule may apply to most credit unions, as it governs all outgoing international wire transfers and international ACH transactions.
It’s not unusual for a reader to want to skip over the definitions portion of a newly published rule. For this regulation, however, it’s incredibly important that credit unions not pass over the definitions. They hold the answer to whether or not a particular credit union is subject to enforcement of the rule, which governs the type and the timing of the disclosures a credit union must provide to members using its remittance transfer services.
Domestic wire transfers are, so far, not a part of the regulation. Neither are international transfers under $15. Also important to note is that international wire transfers initiated by a business are not subject to the final rules governing remittance transfers.
Remittance transfer is defined by the CFPB as “the electronic transfer of funds requested by a sender to a designated recipient that is sent by a remittance transfer provider.” The definition of remittance transfer includes outgoing international wire transfers and international ACH transactions and can even apply to online bill pay if a credit union’s system uses electronic means to pay an international biller.
Prepaid cards, as well, may be included in the rules if the credit union is sending a loaded prepaid card to a designated recipient in a foreign country.
The remittance transfer final rules apply to all credit unions that issue remittance transfers “in the normal course of business.” Unfortunately, we will have to wait for another final rule until we can definitively know what constitutes “in the normal course of business.”
The CFPB issued a concurrent proposed rule with the final rule to request comment on what constitutes “in the normal course of business.” The CFPB is proposing that the safe harbor for determining “in the normal course of business” is 25 remittance transfers in the previous calendar year and no more than 25 in the current year.
So, what are the rules and what steps must credit unions take to comply with them?
Work Closely with Remittance Transfer Vendors
Some credit unions rely on third-party vendors to perform international money transfers. Recognizable vendors include Western Union, MoneyGram, WOCCU's IRnet and Worldwide Remit.
Coopera, a sister company of PolicyWorks that helps credit unions implement remittance services specifically for Hispanic members, has advised credit unions to work closely with these vendors to ensure they are on track to comply with the new rules as of Feb. 7, 2013.
Although only one party must provide the disclosures mandated by the final rules, both are ultimately responsible according to the CFPB.
The new rules call for two types of disclosures that must be supplied to remittance transfer senders: 1) Pre-payment and 2) Receipt. The two disclosures may be combined into one; however, you must still provide proof of payment after receipt of the fee for the transfer.
Model forms for these disclosures are available from the CFPB’s website. Anytime a regulatory agency provides model forms, it’s a very good idea to use them rather than craft your own from scratch. The remittance transfer hard-copy disclosures can be provided on any size of paper, but the print must be in at least 8-point font.
Disclosures must be provided in English. However, if a credit union advertises its remittance transfer services in another language, it must also be prepared to provide the disclosures in the same language as its marketing collateral.
Because the CFPB understands that exchange rates may be unknown to a provider, estimates are allowable for certain components of the remittance transfer disclosures.
Pre-payment disclosures must be provided in a retainable format so the consumer can keep them among their records. Therefore, if the disclosure is provided electronically, the member must be able to print it. The only exception is the oral disclosure, which can be provided only if the sender has initiated the transfer with a phone call or via a mobile application or text message.
Receipts must include the latest date in the foreign country on which the funds will be available. This date can not be presented as an estimate or a range, but credit unions are allowed to add “May be available sooner” to the receipt.
Another important component to the receipt is the inclusion of the sender’s rights regarding error resolution and cancellation policies, as well as a statement that the sender can contact the CFPB with questions or complaints.
The rule provides various options on how you may receive requests for remittance transfers and deliver the disclosures. To simply the process for your credit union, you may want to consider limiting the ways in which you receive requests for outgoing international wires or ACH transactions. This will help streamline the procedures that you need to develop for delivery of the proper disclosures in the manner required by the rule.
Draft Policies and Procedures
As is true with any regulation imposed on a credit union, proper policies and procedures must be developed to ensure all staff adheres to the rules.
In the case of remittance transfers, the CFPB has mandated that financial institutions develop policies and procedures for error resolution, and they must adhere to the timelines outlined by the CFPB.
Your credit union should also have policies and procedures covering the methods to receive remittance transfer requests as well as deliver disclosures. Sample policies and procedures are available to credit union staff from tools like PolicyAid, PolicyWorks’ online library of customizable templates.
Give the CFPB Your Thoughts
The final rules on remittance transfers are the first final rules issued by the CFPB with a director in 2012. That said, they aren’t quite “final” just yet. The CFPB issued a proposed rule with the final rule seeking comment on what constitutes “in the normal course of business” and how to handle preauthorized transfers under the new rules.
It will be important to stay on top of the rules as they are published. If you want to do more than observe, you can participate in the shaping of the final rules by providing comment to the CFPB by April 9.