Regs Could Force Credit Unions Out of the Remittance Business
The Consumer Financial Protection Bureau’s proposed remittance regulations could force credit unions to stop providing the service to members, CUNA and NAFCU said in comment letters submitted this week to the CFPB.
The central issue is credit unions’ use of so-called “open networks” like international wires and ACH, compared to organizations that specialize in remittances and use their own networks. Credit unions don’t have easy access through open networks to all the information required to meet the regulations, wrote NAFCU President/CEO Fred Becker.
Proposed disclosures include an estimate of exchange rates and fees when a pre-scheduled transaction is originally authorized, a second receipt 10 days before the transaction will take place, and a third and final receipt when the transfer is received.
The goal is to allow consumers to comparison shop; however, Becker said consumers who set up reoccurring remittance transactions are more interested in simplicity and are less concerned with comparison shopping.
The rule would require “massive reconfiguration” of the way remittances are offered, which would be an inefficient use of resources for non-profit credit unions. And, Becker said, credit unions would have a difficult time managing exchange rate risk for 10 days.
The CFPB would further mandate the ability for consumers to cancel a transaction up to three days before it is scheduled, after receiving cost and exchange rate estimates.
CUNA Senior Vice President and Deputy General Counsel Mary Dunn said the rule would impose “unsustainably high compliance costs and legal liabilities” for credit unions. Furthermore, if credit unions are forced to discontinue the service due to regulatory burdens, it would result in increased fees for consumers and fewer choices.
Both organizations also agree that multiple disclosures for pre-authorized remittances would be overkill for consumers while increasing compliance costs.
To provide relief to credit unions, both trades propose raising the CFPB’s current threshold of 25 transactions per year. NAFCU suggests raising the number to 600, while CUNA suggested providing safe harbor to organizations that receive less than 30% of their total net income from remittance transactions.