In February 2012, the Consumer Financial Protection Bureau first published amendments to Regulation E to provide new protections—including disclosures and error resolution and cancellation rights—to consumers who send remittance transfers to other consumers or businesses in a foreign country. The amendments implement statutory requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Now, the CFPB has finalized the rules after making a series of changes and adjustments based in part on recommendations from ICBA to make the rules more workable for community banks. (See this month’s Payments Exchange column on page XX for specifics.)
In its final form, Regulation E has specific rules that govern what your community bank must do to comply with the required disclosures for providing remittance transfers. The CFPB rules take effect Oct. 28, 2013, when full compliance is required. Your community bank should look at what is covered under the rules and what will be needed to adjust systems, operations, procedures and policies for effective, timely compliance.
Here are some important definitions the CFPB is using under the amendments to Regulation E for remittance transfers.
- A “remittance” is defined as the process of sending money to satisfy an obligation.
- A “remittance transfer” is defined as the electronic transfer of funds requested by a consumer sender to a designated recipient that is sent by a remittance-transfer provider. The definition includes outgoing international wire transfers and international ACH transactions and can even apply to online bill pay if an institution’s system uses electronic means to pay an international biller.
- A “remittance-transfer provider” means any person or entity [EN1] that provides remittance transfers for consumers in the normal course of its business, regardless of whether the consumers hold an account with said person or entity.
- “Normal course of business” means the remittance-transfer provider completed more than 100 remittance transfers in the previous calendar year and more than 100 remittance transfers in the current calendar year.
- “Safe Harbor Provision,” a measure ICBA encouraged the CFPB to create to exempt as many community banks as possible from the rules, excludes from the definition of remittance-transfer provider those institutions that do not provide 100 or more remittance transfers during the previous and current calendar year.
Starting in October, a remittance-transfer provider will be required to make certain transaction disclosures to consumer senders, including a notice of the consumer’s right to cancel the remittance transfer under certain circumstances. The disclosures may be provided in writing or electronically, or they may be provided orally in the case of transactions conducted entirely by telephone.
A remittance-transfer provider will have to disclose to a consumer-sender the following information before sending a payment, as applicable:
- the amount that will be transferred to the designated recipient, in the currency in which the remittance transfer is funded, using the term ‘‘transfer amount’’ or a substantially similar term.
- any fees and taxes imposed on the remittance transfer by the provider, an agent of the provider or an intermediary institution, if known, in the currency in which the remittance transfer is funded. (The disclosures must use the terms ‘‘transfer fees’’ for fees and ‘‘transfer taxes’’ for taxes, or substantially similar terms.)
- the total amount of the transaction in the currency in which the remittance transfer is funded, using the term ‘‘total’’ or a substantially similar term;
- the amount of the funds transferred using the term ‘‘transfer amount’’ or a substantially similar term.
- the exchange rate or estimated exchange rate used to calculate the amount of funds transferred.
- any foreign fees and taxes imposed on the remittance transfer by a person other than the provider, in the currency in which the funds will be received by the designated recipient, using the terms ‘‘other fees’’ for fees and ‘‘other taxes’’ for taxes, or substantially similar terms. Disclosing foreign taxes or fees imposed by a recipient institution for receiving transfers into an account, if the institution is not the provider’s agent, will be optional. However, providers must include, where applicable, a disclaimer that other fees and taxes may apply; and
- the amount that will be received by the designated remittance transfer recipient, in the currency in which the funds will be received, using the term ‘‘total to recipient’’ or a substantially similar term.
Under the rules, the remittance-transfer provider must provide the consumer-sender with a disclosure receipt when a payment is made that includes:
- the prepayment disclosures;
- the date in the foreign country on which funds will be available to the designated recipient, using the term ‘‘date available’’ or a substantially similar term;
- the name, telephone number(s) and website of the remittance-transfer provider;
- a statement that the sender can contact the state agency that licenses or charters the remittance-transfer provider and that the sender can contact the CFPB for questions or complaints about the remittance-transfer provider, using language set forth in a prescribed model form or substantially similar language;
- any remittance transfer scheduled by the consumer-sender at least three business days before the date of the transfer—or the first transfer in a series of pre-authorized remittance transfers; and
- the date the remittance transfer provider will make or made the remittance transfer, using the term “transfer date,” or a substantially similar term.
Under certain circumstances, a remittance-transfer provider may provide the disclosures in a combined format.
For purposes of error-resolution requirements, the term “error” includes any of the following under the rules:
- an incorrect amount paid by a sender in connection with a remittance transfer;
- a computational or bookkeeping error made by the remittance-transfer
provider relating to a remittance transfer; and
- a failure to make available to a designated recipient the amount of currency stated in the disclosure provided to the sender.
Under the rule, the term error does not include these circumstances:
- an inquiry about the status of a remittance transfer, except where the funds from the transfer were not made available to a designated recipient by the disclosed date of availability;
- a request for information for tax or other recordkeeping purposes;
- a change requested by the designated recipient; or
- a change in the amount or type of currency received by the designated recipient from the amount or type of currency stated in the disclosure provided to the remittance sender. (For this circumstance, the remittance-transfer provider must have relied on information provided by the sender when making the initial disclosure.)
The remittance-transfer provider must investigate and respond to alleged errors within prescribed time frames. When funds are deposited into the wrong account because the sender provided an incorrect account number or routing number (as long as other conditions are properly met by the provider), the provider will be able to attempt to recover the funds, but it will not have to bear the cost of funds that cannot be recovered.
Under the rules, a remittance-transfer provider will have to comply with any oral or written request from the consumer-sender to cancel a remittance transfer that has been funded. The cancelation must occur within 30 minutes after the consumer-sender makes a payment to fund the transaction if:
- the cancelation request enables the provider to identify the sender’s name, his or her address or telephone number, and the particular transfer to be cancelled; and
- the transferred funds have not been picked up by the designated recipient or deposited into an account of the designated recipient.
In canceling a remittance transfer, the provider must refund, at no additional cost to the sender, the total amount of funds provided by the sender for the remittance transfer. These refunds must include any fees and, to the extent not prohibited by law, taxes imposed to conduct the remittance transfer. These refunds must be provided within three business days of receiving a sender’s request to cancel the remittance transfer.
is vice president of Chartwell Compliance, an ICBA Compliance & Risk Management service provider.