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WASHINGTON-While CUNA had a representative testifying before the House Financial Services Committee hearing on Remittances: Reducing Costs, Increasing Competition, and Broadening Access to the Market, NAFCU also sent a letter in support of expanding low-cost wire transfer opportunities. Self-Help Credit Union Vice President John Herrera, also chairman of Latino Community Credit Union, in Durham, N.C. testified on behalf of CUNA during the congressional hearing on wire transfers. His testimony touched on the need to serve immigrants to gain their trust and keep them from predatory financial service providers. He pointed out that foreign-born people in the U.S. send more than $50 billion a year, $12 billion of that to Mexico, and they need to be provided lower-cost services to help spur the economy of the U.S., as well as the countries where they are sending money. Herrera noted the efforts of the World Council of Credit Unions in setting up the International Remittance Network, which involves nearly 200 credit unions with 850 points of service in 37 states offering money wires. This service also presents a relationship building opportunity for the credit union. “Much like how checking accounts are offered at or below costs to build relationships for financial institutions, credit unions are able to offer remittance services as a relationship product with the expectation that income will be generated from such members on newly formed relationships that encompass savings, credit and/or insurance products,” Herrera explained. “This positioning of the product and the non-profit status of credit unions, enable us to out-compete money transfer companies and generate revenue on the relationships that can be built. Our non-profit mission requires us to focus on the benefits our prices provide for our members, the consumer. In contrast, the major money transfer companies are publicly traded firms that must maximize their profits solely from the fees. The only way to maximize profits in the wire remittance business is to charge the consumer, usually hard-working immigrants living on limited budgets.” He also pointed out that 60% of Latino workers wire money home to their families. To wire $300, between check cashing, wire service, phone call to ensure receipt and money transmitter’s cut on exchange rate, the average cost is $33.50, or $41.50 with a major remittance company, or 5%-6% lost in fees. Going through the same sequence but using IRnet would cost just $14, he said. “However, the most significant impact that the provision of remittance services by credit unions can have is the opening of depository transaction accounts for unbanked senders and receivers,” Herrera said. He added that credit unions are trying to gain immigrants’ trust by disclosing the actual exchange rates at the point of sale and refund money and the fee if a problem occurs. To date, approximately 28% of remittance receivers in El Salvador have opened their first financial accounts. Credit unions’ involvement in money wiring services have driven fees down, Herrera said. Prices for wiring funds to Mexico are down 37%, he said. Additionally, Caja Popular Mexicana, Mexico’s largest credit union, recently announced that it is now able to distributed remittance from its 330 offices as a result of a $500,000 grant from the U.S. Agency for International Development (see related story page 27). Herrera noted that he was pleased to see that the Federal Reserve and Mexico are working to make the two nations’ Automated Clearing House systems compatible. He also commended the Treasury Department for allowing credit unions and other financial institutions to continue to verify accountholders identification with the matricula consular cards. On the eve of the hearing, NAFCU President and CEO Fred Becker sent the House Financial Services Committee leaders a letter on the subject. “Oftentimes, the cost associated with sending such remittances are unnecessarily excessive due to undisclosed fees and poor exchange rates. Historically, the main reason foreign remittance customers use money transfer companies rather than traditional financial institutions is because they are most likely unbanked and do not have access to a financial institution,” he wrote. NAFCU applauded the committee’s recognition of this issue in the Financial Services Regulatory Relief Act (H.R. 1375) by permitting credit unions to offer check cashing and wire transfer services to anyone within their field of membership. “We believe that this provision is an important step to aiding those who could be victims of predatory practices in the remittance industry. Credit unions have always been at the forefront of combating these predatory lending practices through the emphasis of financial education. Currently, numerous NAFCU member credit unions are already offering these services to their members at a low cost,” the letter read. -

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