Written by Bernadette Clair, Regulatory Compliance Counsel
On January 20, 2012, the CFPB adopted a final rule amending Regulation E (Electronic Fund Transfers) to include consumer protections for various types of remittance transfers. The rule was originally proposed by the Federal Reserve Board last May; however, authority to finalize the rulemaking transferred to the CFPB on July 21, 2011.
Effective Date. The rule will be effective February 7, 2013. The rule is slated to be published in the Federal Register on February 7, 2012. The final rule and a proposed rule are both available at the Federal Register Public Inspection Desk (click the links that say "pre-publication PDF version" to find the full language).
Location in Regulation E. The new rules will be located in a new Subpart B to Regulation E. The rule creates new sections 12 CFR 1005.30-36 along with new model forms (A-30 through A-41). After the rule is published in the Federal Register, the new requirements will be added to the CFPB's Reg E in the Electronic Code of Federal Regulations.
Coverage. The rule was issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which creates comprehensive consumer protections for remittance transfers. Remittance transfer is defined broadly and includes most electronic transfers of funds sent by consumers in the United States to recipients in other countries – including international wire and ACH transactions. Remittance transfer provider is also broadly defined as any person that provides remittance transfers for a consumer in the normal course of its business, regardless of whether the consumer holds an account with such person. This definition includes credit unions.
Key provisions of the final rule include:
- A requirement that the remittance transfer provider provide certain pre-payment disclosures to a sender containing information about the specific transfer – such as the exchange rate, applicable fees and taxes, and the amount to be received by the recipient. The remittance transfer provider is also generally required to provide disclosures when payment is made, including the same information provided on the pre-payment disclosure, plus additional disclosures. Alternatively, the final rule permits remittance transfer providers to give senders a single written disclosure prior to payment containing all of the information required on the receipt, so long as the provider also provides proof of payment.
- The establishment of sender cancellation and refund rights. The rule contains error resolution standards that are similar to those that currently exist under Regulation E for electronic fund transfers. Note that the proposed rule originally provided for a one business day cancellation period – that has been reduced in the final rule to 30 minutes.
- Adoption of liability standards under which a remittance transfer provider will be liable for violations by an agent, when such agent acts for the provider.
Model Forms. You can find model forms on the CFPB’s website here.
Exceptions. The rule does contain a temporary exception permitting certain estimated disclosures where an insured depository institution or credit union is unable to determine the exact amount for reasons beyond its control. The exception sunsets five years from the date of enactment of Dodd-Frank (i.e., July 21, 2015), unless extended by the CFPB.
A second exception applies when the remittance transfer provider cannot determine certain amounts because of the laws of the recipient country, or the method by which transactions are made in the recipient country. The CFPB expects to issue a safe harbor list of countries to which this second exception applies.
Regulatory Final. NAFCU's Regulatory Affairs team is working on a Final Regulation summary of this rule for NAFCU members.
******
Proposed Rule. Concurrent with the final rule, the CFPB also issued a proposed rule detailing further amendments to the remittance transfer rule. Under the proposal, a person making no more than 25 remittance transfers per year would generally not be deemed to be providing remittance transfers in the normal course of business. The CFPB is seeking comments on whether this threshold should be higher or lower.
Changes to disclosure and cancellation requirements for certain transfers are also proposed. The CFPB intends to complete any further rulemaking on matters raised in this proposed rule before the end of the one-year implementation period.
Comments