The Consumer Financial Protection Bureau released its final remittance rule April 28 and gave providers six months to comply, setting an Oct. 28 effective date. The bureau had originally proposed a 90-day compliance window following its release of the final rule.
That’s good news for credit unions that have to create required disclosure forms and train staff, said CUNA Mutual Compliance Manager Lauren Capitini. However, she said, credit unions should have already researched their remittance services and have developed a game plan, as the original proposed rule was introduced more than a year ago.
As expected, the CFPB didn’t increase the exemption above 100 transactions per year, because it wasn’t included in its amended proposed rule released last December. In a February webinar hosted by the NCUA, CFPB Director Richard Cordray said the agency determined 100 transactions per yet to be a “normal course of business,” a term mandated by Congress in the Dodd-Frank Act. To increase that threshold because credit unions don’t like the rule, not because they do less business than a normal course of business, would violate the Dodd-Frank mandate, he said.
Capitini said the CFPB can tinker with the 100-transaction rule, raising the exemption threshold if it determines the number to be too low. Additionally, she said Congress could rewrite the CFPB’s legislative mandate by setting a numerical threshold, rather than the normal course of business requirement currently in the Dodd-Frank Act.
Changes to the final rule covered two areas, disclosures and error resolution.
First, the CFPB eliminated all requirements to disclose foreign taxes as well as fees charges by the receiving financial institution. Those back-end charges were burdensome to credit unions, Capitini said, because obtaining that information would be difficult and time consuming. The elimination of all foreign taxes provided even more regulatory relief than the amended proposed rule, Capitini said, because it only proposed eliminating the disclosure of local taxes.
However, she said, remittance providers must still include a disclaimer in their disclosure forms that informs the sender that the receiver could receive a smaller amount than expected because of foreign taxes and fees charges by the receiving institution.
And fees charged by intermediary entities must also be included in the transaction’s disclosures, she said. However, Capitini said that requirement should be easier to comply with, because intermediary institutions are typically located in the United States, making it easier to obtain fee information.
The final rule also addressed error liability, rewriting the rule to eliminate the requirement that the provider bear the cost of recovering funds deposited into the wrong account or institution due to sender error. However, providers are still required to attempt to recover the funds. The CFPB also provided model disclosures for remittance providers to use as a guide in releasing the final rule.
Angel Hernandez, president/CEO of the $28 million California Agribusiness Credit Union in Buena Park, Calif., said his institution will continue to provide in-house remittance services, despite the additional regulatory burden.
“We have a good segment of our membership that send money internationally,” he said. “We understand the rule and where our risks are, but it’s a service we can’t discontinue.”
However, Hernandez won’t have to worry about complying with the new regulation this year because he said his remittance transactions have dropped from pre-recession levels, and he didn’t exceed the 100 transactions per year threshold in 2012.
The CFPB will use 2012’s remittance transaction counts to determine if a provider must meet the Oct. 28 compliance deadline, Capitini said. The final rule can be found on the CFPB’s website.