The Consumer Financial Protection Bureau’s proposed remittance regulations could force credit unions to stop providing the service, said CUNA and NAFCU in letters submitted to CFPB Executive Secretary Monica Jackson.
The central issue is credit unions’ use of so-called “open networks” like international wires and ACH, because the cooperatives don’t have easy access to all the information required to meet new disclosure requirements, wrote NAFCU President/CEO Fred Becker.
As users of open networks, credit unions lack control over all of the participants that may collect funds as the remittance makes it way from the U.S. to its recipient. A number of principal providers may access the system, and national laws, individual contracts, and the rules of various messaging, settlement, or payment systems may constrain certain parts of transfers sent through an open network.
In contrast, companies like Western Union that use closed networks, provide remittance services through a network of business partners that help collect funds in the United States and disburse funds abroad. Through the provider’s own contracts with those partners, or through the contractual relationships owned by the provider’s business partner, companies that specialize in money transfers can exercise some control over the transfer from beginning to end, including the elements required in CFPB’s proposed disclosures.
Those requirements 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, such as wires or ACH transfers via online banking, “are presumably more interested in the simplicity the product provides and are less concerned with comparison shopping.”
The CFPB would also allow consumers to cancel the remittance transaction up to three days before it is scheduled, after receiving cost and exchange rate estimates.
“For credit unions, providing estimates and guaranteeing the exchange rate ten days in advance would be extremely burdensome and costly, and the disclosure regime is confusing,” Becker said. “Regarding the final rule, NAFCU believes it is not technically feasible to give disclosures in the way the CFPB has mandated without dramatic changes to the payment system.
CUNA Senior Vice President and Deputy General Counsel Mary Dunn also opposes the new disclosure requirements, adding that the rule would impose “unsustainably high compliance costs and legal liabilities” for credit unions. Furthermore, if credit unions are forced to discontinue the service, it would result in increased fees for consumers and fewer choices, she said.
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.