The Consumer Financial Protection Bureau released the final part of its new remittance rule Aug. 7, increasing the maximum number of annual transactions that qualify for safe harbor exemption to 100.
The CFPB said in a release that it concluded institutions that consistently conduct 100 or fewer remittance transfers per year do not provide transfers in the “normal course of business.”
While the final rule increased the previous exemption of 25 transactions per year, the number was far shy of the 1,000 transactions CUNA had requested from CFPB as an acceptable safe harbor threshold.
“We remain very concerned that the remittance transfers final rule will impose high compliance costs and legal liabilities on credit unions,” said CUNA President/CEO Bill Cheney.
The CUNA chief said the trade association is reviewing its options to respond to the rule, including appealing the decision with the Financial Stability Oversight Council, which can overturn CFPB rules.
NAFCU General Counsel and Vice President of Regulatory Affairs Carrie Hunt said that in general, the increase does help ease regulatory burdens for credit unions. However, the way the CFPB exempts institutions is problematic.
“In effect, if the institution doesn’t have the compliance resources, which most of them don’t, if they hit that 101st remittance, they either have to deny the member, which they don’t want to do, or not offer remittances at all,” she said.
Michael Edwards, World Council of Credit Unions’ chief counsel and vice president for advocacy and governmental affairs, said of the approximately 50 credit unions on WOCCU’s IRNet remittance system, the exemption increase would benefit about 25% of them.
“For credit unions that do just a few remittances, the compliance costs wouldn’t justify them offering the service to members, so the new rule helps them,” he said. “We’re talking about credit unions that may have a member who has a kid attending school overseas, that sort of thing.”
Edwards said the CFPB contacted WOCCU, requesting data regarding their system usage, which WOCCU provided.
“We made it clear this was just a slice of what was being used by credit unions,” he said.
The rule, which will take effect Feb. 7, 2013, also requires remittance transfer providers to disclose fees upfront, as well as the exchange rate and the amount to be received by the recipient. Disclosures must generally be provided when the consumer first requests a transfer and again when payment is made. The rule also provides consumers with error resolution and cancellation rights.
Edwards said the new rule also allows institutions to provide estimates when disclosing fees up front for pre-arranged payments scheduled several days in advance of the transfer, which benefits credit unions.