NAFCU Compliance Blog

Return to Sender: Time to Comment on Remittance Transfer Disclosures

Written by Stephanie Lyon, Regulatory Compliance Counsel

My parents and younger sister live in the south of Spain, so this past Christmas Devon and I learned the hard way that sending gifts abroad is not only difficult but incredibly expensive. To sum it up, we had to pay hefty shipping and insurance costs at the U.S. Postal Office and once the package arrived in Spain we were surprised with an additional imposition of import duties and taxes as well as a local delivery fee. Needless to say, when the package made its way to a sorting hub in Barcelona and triggered a bill that was sent to my parents for about half the cost of the presents, pragmatic me told them to just let the package return to the United States. In the end we received the package back about 4 months later, soaked in water, and mangled (picture below). After this experience we no longer send gifts abroad; rather we now use our local credit union to send international remittance transfers and kindly request that my parents take my little sister shopping.

The reason sending money abroad can be better than mailing items internationally is because of the disclosure requirements of the remittance transfer rule which helps the sender avoid unpleasant surprises similar to the one the Spanish government handed me.

Basically, the remittance transfer rule requires that credit unions provide the sender with a written prepayment disclosure full of helpful information such as the exchange rate, fees and taxes that may be imposed, and the amount of money expected to be delivered prior to the payment of the transfer. See, 12 C.F.R. § 1005.31(b)(1), (e)(1). The rule also requires that the credit union give the sender a receipt once the transfer is made. See, 12 C.F.R. § 1005.31(b)(2). As an alternative to providing two separate disclosures, the rule permits credit unions to provide a combined written disclosure prior to payment, so long as the provider also provides proof of payment once the remittance transfer is made. See, 12 CFR § 1005.31(b)(3). Examples of these three disclosures can be found in Appendix A to Regulation E and the CFPB's website.

Understanding the timing and content of these disclosures is key to comply with the rule. To help with that, here is a nifty chart from the CFPB's small entity compliance guide:

NAFCU's compliance team has been contacted before regarding how to practicably provide the required written disclosures, especially as more members bank remotely. I wanted to highlight that in cases when the member requests a remittance transfer through online-baking, the rule does permit the credit union to provide the pre-payment disclosure electronically without regard to E-SIGN consent; however the receipt must comply with E-SIGN requirements. See, 12 C.F.R. § 1005.31, Supp. I, comment (a)(2) – 1. This leaves credit unions in a bit of a compliance dilemma.

For example, remote members that have not yet consented and cannot properly consent to E-SIGN delivery at the moment but need to make a funds transfer can be highly inconvenienced. For those instances, the rule has a narrow exception for remittance transfers completed by phone. The exception allows a credit union to treat an impractical written or electronic request as an inquiry as long as the credit union then calls the member to facilitate the remittance transfer entirely by phone. See, 12 C.F.R. § 1005.31, Supp. I, comment (a)(3) – 2. By completing the remittance transfer entirely by phone, the credit union may provide the required disclosures orally instead of going through the impracticality of sending written disclosures to a member who may not be near a computer.

There are other variations of the same issue for providing required disclosures and other parts of the international remittance transfers rule. So the CFPB is requesting comments on its plan to assess the effectiveness of this rule. If your credit union struggles with the requirements of the remittance transfer rule or can otherwise think of a better system for providing these required disclosures, feel free to contact NAFCU's Regulatory Affairs team or let the CFPB know directly. The important thing is to have a channel to further improve this system for your members and to lift some of the operational burden off credit unions.

Consumer Compliance Outlook – Overview of Regulation E Requirements for Foreign Remittance Transfers + Compliance Trivia!

Written by Shereefat Balogun, Regulatory Compliance Counsel

The Second Issue 2016 of the Federal Reserve’s Consumer Compliance Outlook is now available.  This issue provides an overview of the Regulation E requirements for foreign remittance transfers. The publication also contains revised interagency questions and answers regarding community reinvestment, regulatory updates, and federal court opinions.  This post will focus on the article’s overview of the Regulation E requirements for Foreign Remittance Transfers, as we receive a lot of compliance questions relating to these transactions. 

As way of background, the CFPB published a final rule regarding remittance transfers in February 2012, which became effective on February 7, 2013.  Since the rule’s enactment in 2012 however, it has been amended several times.  The article provides an excellent summary of the rule’s requirements, incorporating the changes that have been made.  Some of the most material changes noted in the article include:

Coverage

• Clarification that U.S. military installations in foreign countries are located in a U.S. state for purposes of the rule. The general definition of a remittance transfer is the electronic transfer of funds requested by a sender in the United Stated to a designated recipient in a foreign country by a remittance transfer provider. See, 12 C.F.R. §1005.30. The rule and commentary provide guidance as to when a recipient is located in a foreign county so as to trigger the rule’s coverage.  In 2014, the CFPB clarified that a designated recipient does not include a transfer to persons at U.S. military installations in foreign countries because they are treated by the rule as being on U.S. soil.  What this means is that if the credit union receives a request from a member specifying that the funds will be received at a location on a U.S. military installation that is located in a foreign country, the transfer will be received on U.S. soil, i.e. in a state, and would not be considered a remittance transfer under the rule.  However, a transfer from a U.S. military installation abroad to a recipient in a foreign county is covered by the rule.  See, 12 C.F.R. 1005, Supp. I, comments 1005.30(c) – 2.

• Providing Guidance on how a provider can determine if a sender is making a remittance transfer primarily for personal, family, or household purposes. A remittance transfer covered by the rule is one requested by a consumer primarily for personal, family, or household purposes.  See, 12 C.F.R. §1005.30 (e), (g).  A credit union can determine if a transfer is for personal, family, or household purposes by examining the type of account from which the transfer is being made.  If the account is used for personal, family, or household purposes, the credit union can assume the transfer is for that purpose, unless the credit union has specific information that suggest otherwise.  See, 12 C.F.R. 1005, Supp. I, comments 1005.30(g) – 2.  Similarly, a credit union can assume a transfer requested from a business account is not primarily for personal, family, or household purposes.  See, 12 C.F.R. 1005, Supp. I, comments 1005.30(g) – 3.

Disclosures

• New disclosures to the prepayment form, when third-party fees and taxes may apply, stating that third-party fees or taxes may apply to the remittance transfer, which could result in the designated recipient receiving less than the amount disclosed. When a sender requests a remittance transfer, the credit union must deliver prepayment disclosures listing critical terms of the transactions. These disclosures can be found in 12 C.F.R. §1005. 31.  As part of the mandatory disclosures, a credit union must disclose any covered third-party fees imposed on the remittance transfer by a person other than the credit union.  Moreover, the credit union must also provide a statement that noncovered third-party fees or taxes may apply to the remittance transfer and result in the designated recipient receiving less than the amount disclosed.  This statement is only required to the extent that these fees or taxes do or may apply to the transaction.  For compliance purposes, credit unions may use Model Forms A-30(a)-(c), contained in Appendix A to the rule.  

Use of Estimates

• Extension of the sunset date for temporary provision allowing credit unions to rely on estimates until July 21, 2020. Generally, disclosures must be accurate when the sender makes a payment.  However, because there are circumstances where credit unions may not always be able to determine all of the transaction terms with full accuracy, the rule provides some exceptions.  One exception allows credit unions to rely on estimates that are “reasonably accurate” when the exact amounts cannot be determined for reasons beyond their control.   See, 12 C.F.R. §1005.32(a).  This exception applies only to the exchange rate fees and taxes imposed by other persons.  Note that this exception is temporary and was scheduled to sunset on July 21, 2015 pursuant to the statute; however, the CFPB extended the temporary exception until July 21, 2020.
  

• Publishing a safe-harbor list of recipient countries qualifying for the permanent exception for the use of estimates. In addition to the temporary exception, credit unions may take advantage of two other exceptions.  These exceptions are permanent and permit estimates if: (1) a credit union cannot determine the exact amounts because of a recipient nation’s laws, or (2) the methods by which transfers are made to a recipient nation do not permit the credit union to know the amount of currency to be received.  See, 12 C.F.R. §1005.32(b)(1).  For compliance purposes, the CFPB established a safe-harbor list of countries that qualify for the second exception.  Currently, five countries are on the list- Aruba, Brazil, China, Ethiopia, and Libya.  While a credit union can still use estimates for a country not on the list if the exception applies, the credit union would not obtain a safe harbor.  See, 12 C.F.R. §1005.32(b)(1)(ii).

The rule’s commentary provides helpful guidance for determining if either of the two exceptions apply.  

Error Resolution

• Explaining that when a transfer is delayed because the provider or third party was investigating suspicious, blocked, or prohibited activity that could not have been reasonably foreseen, the delay is not an error. The error resolution procedures for remittance transfers are distinct from the regular error resolution procedures for electronic funds transfers, and are contained in 12 C.F.R. §1005.33. Section 1005.33 specifies what errors are subject to the error resolution procedures, and also provides certain exceptions.  For instance, delays resulting from the credit union’s screening procedures or in accordance with the BSA, OFAC, or similar laws are not considered errors.  See, 12 C.F.R. §1005.33(a)(1)(iv)(B).  The CFPB clarified in a later amendment that this includes a credit union’s investigation of potentially suspicious, blocked, or prohibited activity that could not have been reasonably foreseen.  See, 12 C.F.R. 1005, Supp. I, comments 1005.33(a) – 7.

• Clarifying that when a credit union makes a refund because a sender provided incorrect or insufficient information that prevented the transfer from being completed as requested, any taxes collected and fees imposed by an intermediary may be deducted from the refund, except for the fees the intermediary will refund to the credit union. See, 12 C.F.R. 1005, Supp. I, comments 1005.33(c) – 12.

In light of all the changes made since 2012, the article concludes by reminding credit unions the importance of having procedures in place to monitor and implement regulatory changes, to test internal controls to ensure the changes are implemented properly, and to provide adequate training to staff.

Fun Fact: The article notes that the World Bank estimates that the global market for foreign remittance transfers was $581.6 billion in 2015.  The U.S. ranked as the top transmitter, sending $56.3 billion in transfers to recipients in foreign countries in 2014.

Compliance Resources: There are a number of resources available to assist credit unions in compliance with the remittance transfer requirements. The National Credit Union Administration’s Regulatory Alert 13-RA-06 provides a useful overview of the requirements.

Here are some other resources that can help a credit union evaluate the remittance transfer requirements:

• The CFPB’s Main Remittance Regulation page;
• Subpart B of Regulation E – containing the regulatory text for the Requirements for Remittance Transfers (12 C.F.R. § 1005.30 – 1005.36).
• Small Entity Compliance Guide (updated in August 2014 to reflect recent technical amendments to the remittances rule);
• Safe Harbor Countries List;
• The CFPB’s August 2013 Webinar on the remittances requirements and the slides from that presentation;
• The CFPB’s (unofficial) consolidated regulatory text and commentary for the various final rules;
• The remittance transfer examination procedures that will be used by the CFPB to examine entities that provide remittance transfers; and
• The CFPB’s eRegulations tool for the remittance transfer rule on eRegulations;

Compliance Trivia: What are the safe harbor requirements for the remittance transfer rule?

CFPB Revises The Remittance Rule

By Eliott C. Ponte, Law Clerk

The Dodd-Frank Act added new requirements for remittance transfers under the Electronic Fund Transfer Act by directing the CFPB to issue regulations amending Regulation E.  Under this mandate, the CFPB released a series of regulations (the Remittance Rules) corresponding with Congress’ intent.  These regulations became effective on October 28, 2013.  NAFCU issued a summary of the final regulation on July 21, 2012, which can be found by clicking this link (you must be a NAFCU Member to access this summary).

Of the many Remittance Rules promulgated by the CFPB, the Dodd-Frank Act required that consumers be provided with exact pricing disclosures before paying for a remittance transfer.  Foreseeing problems with such requirements, Congress included a provision that allowed insured financial institutions to provide estimated disclosures where exact information could not be determined for reasons beyond a financial institution’s control.  Congress sought this exemption to be temporary, and thus included a sunset provision that retired this exemption on July 21, 2015.  Hedging against their own expectations, Congress also empowered the CFPB to extend the exemption for an additional five years if the CFPB determined that the expiration of the exemption would negatively affect the ability of insured financial institutions to send remittances to locations in foreign countries. 

In April of this year, the CFPB announced that it sought to amend the Remittance Rules by, among other things, extending the exemption for an additional five years (ten years in total, which is the maximum length as allowed by the Dodd-Frank Act).  Last week, the CFPB announced that it finalized its proposed regulations, thereby extending the exemption period until July 21, 2020.  In prepared remarks, CFPB Director Richard Cordray said, “today’s final rule will help ensure these changes are implemented smoothly and that consumers will be well-protected during that process.”

In addition to extending the exemption, the CFPB also adopted several clarifications and technical corrections to the Remittance Rule.  First, the CFPB clarified that U.S. military installations abroad are considered to be located in a “State” for purposes of the Remittance Rule.  Prior to this clarification, the Remittance Rule was unclear as whether a United States military base in a foreign nation was considered a “State” for the purposes of the regulation.  Under the final rule, transfers that will be received at a location on a United States military base that is physically located abroad are considered to be received in a “State.”  Similarly, transfers that are sent to a recipient’s account that is also located on a United States military base abroad is considered to be located in a “State.” 

Second, the CFPB clarified that whether a remittance transfer from an account is for personal, family, or household purposes (and thus, whether the transfer could be a remittance transfer) may be determined by ascertaining the primary purpose of the account.  Next, the CFPB clarified that faxes are considered writings for purposes of satisfying certain provisions of the Remittance Rule that require remittance transfer providers to provide written disclosures. 

Fourth, the clarified regulation permits providers to include the CFPB’s new remittance-specific consumer website (the Spanish speaking version of the website can be found here, although it is not currently functioning) as the website that providers must disclose on remittance transfer receipts.  Finally, the CFPB released a revised version of its compliance guide to reflect the changes finalized in the updated regulation.  The Final Regulation is available here.

CFPB Proposed Rule Round-up; Spoiled Pup

Written by Brandy Bruyere, Regulatory Compliance Counsel

Happy Friday everyone! There’s reason to feel a bit optimistic today, a rare treat for those who spend their time navigating complex regulations. Today we’ll review some of the key provisions of three recent CFPB proposed rules in the areas of privacy, mortgages, and remittances.

Proposed Rule on Privacy Disclosures

On May 6^th, the CFPB proposed a rule that would bring some relief for the requirement to provide annual privacy notices. Currently, credit unions must mail or electronically deliver a privacy notice to each member every year. Under the proposed rule, a credit union could generally post this notice on their website instead, provided that five conditions are met:

(1) the credit union does not share the member’s nonpublic personal information with nonaffiliated third parties in a way that triggers a member’s opt-out rights;

(2) the credit union does not include on its annual privacy notice a FCRA opt-out notice;

(3) the credit union’s annual privacy notice is not the only notice provided regarding sharing consumer reports with affiliates for marketing purposes under the FCRA;

(4) the information included in the privacy notice has not changed since the member received the previous notice; and

(5) the credit union uses the model form provided in Regulation P.

The proposed rule would require credit unions that use this alternative delivery method to provide a “clear and conspicuous statement” annually on a notice or disclosure that is sent to the member announcing that the privacy disclosure is available online. Credit unions would also have to mail the notice to members who request it. Comments are due to the CFPB thirty days after the proposed rule is published in the Federal Register.

Proposed Changes to the Ability-to-Repay/Qualified Mortgage Rule

On April 30^th, the CFPB proposed some “minor” changes to the mortgage rules. Two of these changes relate to certain 501(c)(3) nonprofits and do not impact credit unions, but the third may help some credit unions meet the points and fees requirements of a Qualified Mortgage (QM).  The points and fees calculation under the Ability to Repay (ATR) rule is very complex, and the CFPB acknowledged that this can lead to “inadvertent errors” in making the QM determination. Under the proposed rule, under certain limited circumstances, if a loan inadvertently exceeds the points and fees limit, the credit union could “cure” this problem after consummation.  To be eligible for this relief, the credit union would have to meet three requirements:

• The credit union originated the loan in good faith as a QM and the loan otherwise meets the requirements of the ATR rules;
• The credit union refunds the member any points and fees over the 3% threshold within 120 days of consummating the loan; and
• The credit union maintains policies and procedures for reviewing loans post-consummation  and making refunds as needed.

In addition to these provisions, the CFPB is also seeking comment on whether a similar post-consummation cure could be provided for loans exceeding the ATR rule’s 43% debt-to-income ratio requirement. The Bureau is also seeking feedback from smaller creditors regarding how their lending operations have changed due to the new mortgage rules. Comments are due to the CFPB  by July 7, 2014.

Proposed Changes to Remittance Rule

Finally in case you missed it, on April 15^th, the CFPB is considering some revisions to the remittance rule. First, the proposed rule would extend the temporary exception that allows credit unions to estimate fees and exchange rates in some cases. If finalized, the exception would apply until July 21^st, 2020, the latest date permitted under Dodd-Frank. Second, the Bureau is seeking comment on how to treat US military bases abroad under the rule. The CFPB proposal would consider these military bases to be within a “State” for the purposes of the rule. This would mean that transfers to “designated recipients” located on US military bases from the US or another such base would not be considered a remittance for the purposes of the rule. Other minor proposed revisions include:

• Determine the purpose of the transfer based on the purpose of the sender’s account (i.e. personal, family, or household purposes);
• Revise the CFPB staff commentary to clarify that disclosures may be provided by fax; and
• Change sections of the rule’s error resolution process.

Comments are due to the CFPB by May 27, 2014.

Spoiled Pup

We finally got rid of one of our last “college kid” pieces of furniture and replaced our couch. Of course, it did not take long for Lemmy to decide that he belonged on the chaise lounge. He even prefers to make use of a decorative throw pillow to further cushion his head. I keep telling myself I’ll be firmer with him, but saying no to that face is hard!

CFPB Accepting Payday Loan Complaints; Free NCUA Webinars to Address Remittances and Mortgage Lending Rules; Programming Note

Written by JiJi Bahhur, Director of Regulatory Compliance

Payday Loan Complaints.  As we’ve mentioned on other occasions, payday lending is definitely on the CFPB’s radar.  Yesterday, this was further confirmed through the CFPB’s blog where it announced that consumer complaints regarding payday loans are now being accepted.  From the blog:

“Starting today you can submit a complaint if you have a problem with your payday loan. You can submit a complaint about:

• Unexpected fees or interest
• Unauthorized or incorrect charges to your bank account
• Payments not being credited to your loan
• Problems contacting the lender
• Receiving a loan you did not apply for
• Not receiving money after you applied for a loan."

The CFPB uses this complaint data to identify business practices that may pose risks to consumers, which in turn will pave the way for new payday lending rules and regulations. 

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NCUA Webinars on Remittances and Mortgage Lending Rules.  In a press release yesterday, the NCUA announced that it will host a free, two-part webinar, “New Dodd-Frank Remittances and Mortgage Lending Rules.”  The first part, which will cover remittance transfers, higher-priced mortgage loan appraisals, mortgage servicing, and higher-priced mortgage loan escrows, will take place at 2:00pm Eastern on November 18, 2013.  The second part, which will cover ability-to-repay and qualified mortgages, high-cost mortgage and home ownership counseling, loan originator compensation, and Equal Credit Opportunity Act appraisals and valuations, will take place at 2:00pm Eastern on December 18, 2013. 

Credit unions should take advantage of these free high-level overviews.  Click here to register for the November 18 session and here to register for the December 18 session.

If you are looking for additional compliance assistance on these new rules and regulations, the NCUA also issued regulatory alerts and YouTube videos summarizing the rules and highlighting issues of particular importance for credit unions. 

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Programming Note.  NAFCU’s offices will close today at noon and remain closed until Tuesday for the long holiday weekend.  We’ll be back to blogging next Wednesday!  Have a great weekend!

Remittance Rule Safe Harbor List; November Compliance Monitor Available; Meet the NAFCU Family (Fun Video Alert)!

Written by JiJi Bahhur, Director of Regulatory Compliance

Remittance Rule Safe Harbor List.  Yesterday, the CFPB published a notice of the current safe harbor list of countries that qualify for an exception in the remittance rule.  The list, effective concurrently with the final remittance rule on October 28, 2013, remains unchanged from the initial release on September 26, 2012.

To provide some background, the final remittance rule generally requires remittance transfer providers to give consumers sending remittance transfers certain specified disclosures, including the applicable exchange rate, any fees imposed and taxes collected by the provider, and covered third-party fees.  The safe harbor list provides an exception: it permits estimates of certain disclosures when a remittance transfer provider cannot determine the exact amounts it must disclose at the time the disclosures are required because the laws of the recipient country do not permit such determinations. 

The list currently contains the following countries: Aruba, Brazil, China, Ethiopia, and Libya.  The CFPB intends to revise the list periodically; however, none of the countries currently listed will be removed from the list prior to July 1, 2014. 

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November Compliance Monitor.  The November 2013 NAFCU Compliance Monitor is now available for download by NAFCU members. This month's articles are on Mortgage Servicing: Error Resolution & Information Request Procedures and the NCUA Common Bond Advertising Requirements.  And, of course,
the latest Compliance Calendar is also available.

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NAFCU Video.  Ever wonder who you’re speaking with when you call in to NAFCU?  Or even who is behind these crazy blog postings?  Well wonder no more!  Meet the folks that provide you with Extreme Member Services every day.  This video will definitely make your Wednesday!

Leadership; QRM; Interchange Update; September Compliance Monitor

Written by Steve Van Beek

Last week, I wrote an article for CUinsight.com that asked How Can Credit Unions Create a Culture of Compliance? Here is a snippet:

"So, how can we change our culture into a culture of compliance – an environment where we can stop compliance snafus before they begin, by building risk management into product development from the start?

In the past, a compliance officer would be brought into a discussion at the tail end of a project’s development, to give approval or disapproval. In today’s world, a compliance officer needs a seat at the table to help evaluate the various risks of a new product or service. The Consumer Financial Protection Bureau is not just rule- and requirement-focused – it is principle-focused. Their offices want to know not only if a credit union’s product or service is compliant with rules and guidance, but if that product or service provides a real benefit to members." (Emphasis added).

As compliance plays a larger and larger role at credit unions, compliance officers need to expand their skill sets. Rather than sitting back, they need to take charge and demonstrate how an effective compliance program at the credit union can reduce compliance, strategic and reputation risks. 

While compliance professionals usually attend NAFCU's two compliance conferences (School & Seminar), I'd recommend taking a look at NAFCU's Management & Leadership Institute - October 7-11 in Philadelphia, PA. To successfully create a culture of compliance, compliance officers need to expand their leadership skills and this conference provides those tools - including:

• Tools to effectively build relationships with board members;

• Successful communication techniques to help move projects forward;

• Tactics for leading a successful credit union— from operations to marketing; and

• Clarity on board vs. management roles.

More information on the "institute experience" can be found here and the overall conference details are here.

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Qualified Residential Mortgage Proposal. Last week, the FDIC, OCC, FHFA, SEC and the Federal Reserve released a joint proposed rule (replacing the prior proposal) that would define a "qualified residential mortgage." Importantly, this proposed rule would not directly impact credit unions; however, it will impact the secondary mortgage market. 

One important improvement is that the proposed definition of "qualified residential mortgage" would be aligned with the CFPB's definition of "qualified mortgage." However, the devil is always in the details and the proposed definition of "qualified residential mortgage" would only be aligned with the CFPB's "general definition of qualified mortgage." According to the proposal, the definition of "qualified residential mortgage" would not include a mortgage that attains “qualified  mortgage” status on the basis of being eligible for purchase by Fannie Mae or Freddie Mac, issued by a “small creditor” (as defined in the CFPB’s rule), or is a “qualified mortgage" balloon loan.

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Latest Interchange Video. Looking for the latest on interchange? Check out NAFCU's Interchange Fee issue page - including the latest video update from NAFCU's Carrie Hunt.

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September Compliance Monitor. The September 2013 NAFCU Compliance Monitor is now available for download by NAFCU members. This month's articles are on NCUA's Loan Participation Rule and the CFPB's Remittance Transfer Rule. And, of course, the latest Compliance Calendar is also available.

Remittance Transfer Resources from the CFPB

Written by Michael Coleman, Regulatory Compliance Counsel

The Consumer Financial Protection Bureau (CFPB) recently released some additional resources for the remittance transfer final rule. If you are like me and have been deep diving into these final rules trying to figure out all the various intricacies and nuances, you might have employed Steve’s stress reduction kit (I know I have), so any compliance resource is most welcome.

Last week the CFPB released, via this blog post, a few resources that should help you in your efforts to get your compliance solution in place before the October 28^th effective date of the final rule, including:

• an updated small entity compliance guide;
• an updated video/webinar on the final rule(s); and
• a consolidated (unofficial) copy of the regulatory text and official commentary from the various final rules.

The rulemaking process for the remittance transfer final rule has been complicated and confusing to keep up with (which we have mentioned several times) as the CFPB has issued several final rules amending the text of the regulations and the commentary. Note that the updated small entity compliance guide and the updated video are replacing previously released versions, which the CFPB has stated are outdated and should not be relied upon.

The consolidated regulatory text should be a great benefit for compliance officers when they are researching the remittance rule, and I am glad that the CFPB took a page out of NAFCU’s handbook (we created our own consolidated version of the regulatory text and the commentary back in June). Fingers crossed for consolidated versions of the mortgage final rules! 

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NAFCU On-Demand Webcasts. NAFCU has hosted two webcasts this year on the remittance transfer final rules, both of which were presented by Mary Lou Heighes. In case you missed them live, they are both available on-demand for purchase:

• The CFPB's International Remittance Transfer Disclosure Rules  (originally aired January 24, 2013; available on-demand until January 24, 2014)
• Comply with the CFPB's International Remittance Rules (originally aired July 16, 2013; available on-demand until July 16, 2014)

As always, NAFCU's On-Demand webcasts are open to everyone. And, remember that you (or your colleagues) can watch the archived version for up to one year after the original air date.

NCUA Regulatory Alerts

Written by Bernadette Clair, Regulatory Compliance Counsel

NCUA recently released the following Regulatory Alerts:

• Regulatory Alert 13-RA-04, Garnishment of Accounts Containing Federal Benefit Payments

• Regulatory Alert 13-RA-05, New Escrow Requirements under the Truth in Lending Act

• Regulatory Alert 13-RA-06, CFPB’s Amended Remittance Transfer Rule

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Today, I want to highlight guidance contained in Regulatory Alert 13-RA-06 regarding the CFPB’s Amended Remittance Transfer Rule.  The alert addresses recent changes to the CFPB’s remittance transfer rule and reminds credit unions of the October 28, 2013 compliance deadline.  The guidance also provides an overview of the types of remittances covered by the rule, eligibility for the safe harbor exemption, and general disclosure requirements under the final rule.

In particular, the following guidance may be helpful for credit unions determining whether they are eligible for the safe harbor exemption:

 “Which Credit Unions Are Exempt?

Credit unions that do not provide international wire/ACH transfers in the normal course of business are exempt from the remittance transfer rule. For purposes of the rule, “normal course of business” is defined as providing more than 100 remittance transfers in the previous calendar year and in the current calendar year. Credit unions that facilitate lower volumes (100 or fewer remittance transfers per year) are eligible for the safe harbor exemption.

The safe harbor exemption is not related to your credit union’s asset size or complexity, number of members, or number of accounts engaged in money transfer services. Instead, you must count the actual number of international transactions you provide to determine whether the safe harbor exemption applies. For example, if one member routinely sends money outside the United States twice a month beginning in January, you will have provided 24 remittance transfers by the end of December for that calendar year.

You are expected to track the number of remittance transfers conducted annually to confirm eligibility for the safe harbor exemption. When your credit union is no longer eligible for the exemption, you will have up to six months to begin complying with the regulatory requirements. 

If you currently exceed the safe harbor threshold, you must begin complying with the regulatory requirements on October 28, 2013.”

 For complete details, the alert is available in its entirety here.

CFPB Releases Exam Procedures for Mortgage Rules; Remittance Transfer Resources

Written by Michael Coleman, Regulatory Compliance Counsel

Yesterday, the Consumer Financial Protection Bureau (CFPB) released updated exam procedures for some of the recent mortgage rules issued by the CFPB. Specifically, the CFPB updated the exam procedures for the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA). The updated TILA exam procedures incorporate the requirements of the recent mortgage rules on escrow accounts and loan originator compensation and qualification. The updated ECOA exam procedures incorporate the requirements of the Regulation B final rule on appraisals. 

What about the ability-to-repay and mortgage servicing final rules? The CFPB issued a press release on the updated exam procedures, indicating that "within the next several months, the CFPB will publish its first round of exam procedures for the Ability-to-Repay and mortgage servicing rules."

The updated exam procedures will eventually be incorporated into the CFPB's Supervision and Examination Manual, but for the time being you can find the TILA and ECOA exam procedures on the CFPB's website here. 

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Remittance Transfer Rule - Putting it All Together. The remittances rulemaking process has had numerous ups and downs and it can be very hard to just find and analyze the complete final rule. Well, the good folks at BankersOnline have compiled the regulatory text and commentary from the various final rules as they will eventually appear in the CFR on their "alphabet soup" page for Regulation E (scroll down to Subpart B for the remittance transfer sections). Here are the links to the individual sections of the remittance transfer rule as listed by BankersOnline:

12 CFR 1005.30 Remittance transfer definitions.

12 CFR 1005.31 Disclosures.

12 CFR 1005.32 Estimates.

12 CFR 1005.33 Procedures for resolving errors.

12 CFR 1005.34 Procedures for cancellation and refund of remittance transfers.

12 CFR 1005.35 Acts of agents.

12 CFR 1005.36 Transfers scheduled before the date of transfer.

Note that the official commentary associated with each individual section is listed directly below the regulatory text. Pretty neat. Keep in mind that these links are not to the Electronic Code of Federal Regulations, but still, hopefully this will help you avoid a couple compliance related headaches! 

NACHA Launches 1073 Solutions Center to Assist with Remittances Compliance; Baby Compliance Solutions 101

Written by JiJi Bahhur, Regulatory Compliance Counsel

Yesterday, NACHA – The Electronic Payments Association – announced the launch of its 1073 Solutions Center with the objective of providing greater clarity and understanding of the requirements from the international remittances regulation.  The 1073 Solutions Center makes this possible by providing information, tools and resources, and available solutions to help financial institutions meet compliance and business needs with the regulation. 

If you’re wondering what the “1073” refers to, it’s because section 1073 of the Dodd-Frank Act establishes the regulatory framework for governing international remittance transfers originated by U.S. Consumers.  The 1073 Solutions Center is NACHA’s resource center intended to assist with compliance of such section; and in doing so, NACHA has provided the four steps to 1073 compliance on the 1073 Solutions Center main page:

 “Step 1 - Read and understand the regulation.

Step 2 - Determine how many consumer international remittance transfers you have annually.

Step 3 - Evaluate your procedures to determine how they will adapt to be in compliance.

Step 4 - Identify solutions to meet your business needs.”

Under each step, there is a wealth of information, resources, and solutions available.  If you are a credit union that generates more than 100 consumer international remittance transfers per year, take some time to go to the 1073 Solutions Center and poke around.  This is a great way to get any questions you may have had on the remittances regulation answered.

As a reminder, the final remittances rule takes effect October 28, 2013.

***

Speaking of solutions, a couple nights ago, I was looking at two pictures I snapped of my kids. Unfortunately, and to my disappointment, neither picture was perfect: in the first picture, Kyse was looking up, but Ava was looking down; and in the second picture, vice versa.  Baby Compliance Solutions 101: associate yourself with talented friends who can take the good parts of each picture and turn it into one perfect picture!   Now, I'd say that is a solution!

Remittance Transfer Final Rule; NAFCU Final Regulation

Written by Michael Coleman, Regulatory Compliance Counsel

On April 30th, the CFPB issued its latest final rule on remittance transfers. Most importantly, this final rule set the effective date of the remittance transfer final rule(s) as October 28th, 2013. Meaning, the entirety of the remittance transfer rule, including all of the previous final rules, are effective October 28th, 2013. 

This latest final rule also amended several other disclosure requirements and error resolution requirements from the previous remittance transfer final rule(s), here is an excerpt from the preamble: 

"The amendments address three specific issues. First, the 2013 Final Rule 
modifies the 2012 Final Rule to make optional, in certain circumstances, the requirement to 
disclose fees imposed by a designated recipient’s institution. Second and relatedly, the 2013 
Final Rule also makes optional the requirement to disclose taxes collected by a person other than 
the remittance transfer provider. In place of these two former requirements, the 2013 Final Rule 
requires disclaimers to be added to the rule’s disclosures indicating that the recipient may receive 
less than the disclosed total due to the fees and taxes for which disclosure is now optional. 
Finally, the 2013 Final Rule revises the error resolution provisions that apply when a remittance 
transfer is not delivered to a designated recipient because the sender provided incorrect or 
insufficient information, and, in particular, when a sender provides an incorrect account number
or recipient institution identifier that results in the transferred funds being deposited in the wrong 
account." 

As always, the best place to look for the nitty gritty details of these amendments is going to be the regulation itself, you can find the amended regulatory text here, and the amended official commentary here. This final rule has not been posted in the Federal Register yet, but when it has you should be able to find it as published in the Federal Register on the CFPB's webpage for the remittance transfer rule. Also, don't forget the categories listed on the right side of the blog, you can click "Remittances" to see all our recent posts on the topic, including this post which provides a nice list of resources on the remittance transfer final rules.  

NAFCU's Final Regulation on 2013 Remittances Final Rule. Confused yet? Don't worry, you are not alone, this rule has been an extremely difficult rulemaking process to follow. NAFCU’s Regulatory Affairs Team has prepared a Final Regulation, 13-EF-07, on the 2013 Remittances final rule. It is available for download here (NAFCU login required). Also, the Regulatory Affairs team is working on a comprehensive guide for all the remittance transfer final rules. Stay tuned. 

CFPB Expands Consumer Complaint Database Information; #Reputation Risk?

Written by Michael Coleman, Regulatory Compliance Counsel

We have blogged several times on the CFPB’s Consumer Complaint Database (and we even created a member complaints category for the blog) and its implications for credit unions, most recently, here. Initially, it is important to keep in mind that credit unions under $10 billion are not included in the Consumer Complaint Database.  The CFPB will forward any complaints from these credit unions to NCUA, and credit unions will need to follow NCUA's procedures for responding to member complaints, which we’ve outlined a couple of times on the blog.  Most recently here and here.

Well, the CFPB is at it again. On March 28^th, 2013 the CFPB announced in a press release and on its blog that they have expanded the consumer complaint database. The database now includes more than 90,000 complaints on mortgages, student loans, bank accounts and services, other consumer loans, and credit cards.

We have expressed our concern numerous times over the fact that the consumer complaint database contains unverified complaint information, and the danger that this poses to a credit union’s reputation risk in this age of viral media. Once that information is out there, you can’t un-ring that bell.

The CFPB acknowledges the fact that this data is unverified in a disclosure on the compliant database, but it doesn’t really jump off the page. Nor does their rationale for listing unverified data in their policy statement really resonate (see page 9), or the “significant controls” for verification in this policy statement on the release of credit card compliant data.  

Instead of beating that drum again, I’d like to focus on what I considered a particularly troubling excerpt from the CFPB announcement:

“A Call to Action

The CFPB is encouraging the public, including consumers, analysts, developers, data scientists, civic hackers, and companies that serve consumers, to analyze, augment, and build on the public database to develop ways for consumers to access the complaint data or mash it up with other public data sets.

The CFPB would like the public to highlight innovative uses of the data, from visualizations to new tools, by tweeting @CFPB using the hashtag #CFPBdata.”

Admittedly, I am what you might call technologically challenged (just ask any of my colleagues, if the printer is broken, its most likely my fault), and I have no idea how Twitter actually works. Still, I don’t know about you, but this makes my eyes start twitching and I want to employ Steve’s stress reduction kit. There is a great recap of “the new cycle” of regulation in this blog post, highlighting the fact that the solicitation of complaints can ultimately result in the passage of laws or the issuance of regulations that will apply to all credit unions, not just those over $10 billion in assets.

But the CFPB has taken it a step further. They are now asking the public, including “civic hackers,” to analyze and augment the data, or to “mash it up” with other public data sets. And then tweet it at “#CFPBdata.” To me, this just exacerbates the reputation risk issues associated with the consumer complaint database.

But wait, there’s more. On Thursday April 4^th, the CFPB announced in a blog post that they are now accepting complaints regarding remittance transfers:  

“Every complaint we receive helps us understand the challenges facing consumers, and they inform and shape our priorities.

Reading your complaints about money transfers will complement work we have already started in this area, including issuing a rule on international money transfers, which will include a new set of protections for consumers who send money internationally.”

As if the rulemaking process for the final rule on remittance transfers hasn’t been difficult enough already, the CFPB is now soliciting complaint data on remittances, and who knows where that will lead. To me, this feels like throwing gasoline on a wild fire. But I digress.

***

Iceland Photos, Part 2. On a more cheerful (less rant-filled) note, I thought I’d share a couple more photos from my trip to Iceland. Have a great weekend!

My brother and I at Gullfoss.

 

Skógafoss!

Research Tip: Tracking Rulemakings in the Federal Register

Written by Steve Van Beek

We often get questions about the status of certain rulemakings.  For example:

• Has NCUA finalized their Emergency Liquidity proposal?

• Has the CFPB finalized (for the third time) the Remittance Transfer proposal?

• What about NCUA's CUSO proposal?

• Loan Participations?

You get the picture.  To help with this, we created a Pending Regulations Chart which can be found at the end of our Compliance Calendar.  You do not need to be a NAFCU member to view the Compliance Calendar; however, some of the linked resources are for members-only.  

***

Federal Register.  There is also a great way to track the rulemakings in the Federal Register automatically.  You can subscribe to the topic "credit unions" to be sure you are emailed whenever a credit union-related rulemaking is published in the Federal Register.  This is especially important as - we are all aware - rulemakings impacting credit unions do not come from just NCUA.  Of course, this isn't a perfect science as some rules might not be coded with the "credit union" topic.  But, I've found it works pretty well.

To subscribe, start out be going to the "credit union" topic page.  Click the "Subscribe" button on the right-hand side.

From here, you'll get a pop-up box that you can enter your e-mail address (or subscribe via RSS feed).

You can choose to receive all "credit union" topics or only those labeled as "significant actions."  For me, I'm not one to trust the self-labeling of "significant" by the regulators - so I subscribe to the broader group.

Have a great week!

CFPB's Project Catalyst & Trial Disclosure Programs

Written by Steve Van Beek

Project Catalyst. The CFPB established Project Catalyst in order to foster "consumer-friendly innovation and entrepreneurship in markets for consumer financial products and services."  There is quite a bit of information on Project Catalyst here.

Unfortunately, there is a serious design flaw.  And, that is the existing regulations and the non-stop changes to them.  Credit unions and other providers of financial products and services are spending ever-increasing time and money keeping their existing products compliant that there is little or no time for innovation or entrepreneurship.  While Project Catalyst may end up being an avenue where innovators can work with the CFPB to have their products, services or approaches deemed compliant with the CFPB's interpretation of the regulations, I seriously doubt it will have a large impact for credit unions who are trying to weave through the complex maze of regulations to fill the demands of their members.  

***

Trial Disclosure Program.  As part of Project Catalyst, the CFPB is allowing companies to run trial disclosure programs.  You can find the CFPB's press release of the this program here and their proposed policy here (NAFCU has a Regulatory Alert (13-EA-03) with additional details).     

In short, credit unions could design and test new disclosure documents - provided they receive approval up front from the CFPB.  The CFPB would give credit unions a safe harbor for compliance with the existing regulations as they test their new forms for consumer understanding, cost effectiveness and minimizing consumer harm.

Is your credit union likely to invest in a trial disclosure program?  Probably not.  There would be huge upfront costs to design a new disclosure and then you'd need to receive the CFPB's blessing.  Then, test the disclosures and share the results with the CFPB.  Hopefully, your new disclosures would help improve the existing requirements - but there would be no guarantee the CFPB would listen.

As mentioned above, credit unions are spending huge amounts of time and resources to comply with the existing regulations.  Developing their own disclosures isn't exactly on the top of the list.  

So, why I'm I spilling ink over this?  To demonstrate how backward the CFPB has the process.  The CFPB is the only entity with authority over the consumer regulations.  They also have a mandate to protect consumers and improve consumer understanding of disclosures.  So, they should be the ones creating multiple disclosure options and testing them with actual consumers in real-world situations.  Their Know Before You Owe program was similar but it included a shockingly low number of tests with consumers.  And, even worse, it hasn't been tested on any actual mortgage loans.  

If anyone is going to be creating numerous approaches to disclosures, it should be the CFPB.  And, they should partner with entities offering financial products and services to provide a safe harbor for using the CFPB's testing forms with real customers/members and the CFPB will get real feedback.

Example - Remittances.  If the CFPB had taken this approach with their remittance transfer regulation, they would have realized very early on that their approach to the regulation was going to be a huge headache for institutions who utilized an open network.  And, they would have been able to determine which disclosures were meaningful to consumers and which weren't.  That would have resulted in a better regulation in the end.  Instead, we've been through numerous ups and downs as the CFPB tries to adjust and amend a rule that was not initially designed with the real world in mind.

Resources for the CFPB's International Remittances Regulation

Written by Steve Van Beek

A Wild Ride.  The evolution of the CFPB's international remittances regulation has been confusing to everyone.  First, we had the rule proposed by the Federal Reserve.  Then, the CFPB took over on July 21, 2011.  The CFPB finalized the rule but also proposed amendments to the rule at the same time.  Then, realizing the rule was not workable, the CFPB issued a delay of the effective date while it proposed additional changes.  So, that is where we are - trying to figure out where we are at.  And, how your credit union will be able to comply.  The CFPB has indicated the new effective date will likely be 90 days after they finalize the latest proposed changes (although they are taking comments).  That doesn't leave much time if your CU has made a business decision to continue offering remittance transfers to your members.

Below are a variety of resources that may be helpful to understand the new requirements and what steps your credit union will need to take to comply.

• The CFPB's Main Remittance Regulation Webpage

• Small Entity Compliance Guide

• Safe Harbor Countries List

• The CFPB's October 2012 Webinar on the Remittances Rule (also available here)

• Presentation Slides from October 2012 Webinar

• CFPB Bulletin 2012-08 Announcing Delay of Implementation Date

• Proposal to Amend Certain Provisions of Remittance Rule (but not the 100 transaction safe harbor level)

NAFCU also has these resources available to NAFCU-member credit unions:

• Regulatory Alert on Latest Remittance Proposal (13-EA-01) - Covers the Latest Proposed Changes

• Final Regulation on Remittance Requirements (12-EF-10) - Covers the Rules after the Concurrent Proposal was Finalized

• Final Regulation on Remittance Requirements (12-EF-02) - Covers the First Remittance Regulation Finalized by the CFPB

Throughout the process NAFCU has sent numerous comment letters to the CFPB on the remittance requirements.  Recently, we sent a letter urging the CFPB to further delay the requirements to ensure the rules do not unnecessarily burden credit unions trying to comply:

“First, NAFCU requests that the CFPB further extend the 90-day delay of the effective date to allow credit unions sufficient time to comply with the proposed rule and to make the required disclosures of fees, taxes, and exchange rates. Second, NAFCU continues to believe that the CFPB should exempt federally regulated credit unions, or, alternatively, small entities consistent with the Small Business Regulatory Enforcement Fairness Act, from the purview of the final remittance transfer rule. The regulatory burden that the remittance transfer rule places on credit unions will lead to a significant reduction in consumers’ access to remittance transfer services. Many credit unions already facing an enormous compliance burden have or will be forced to discontinue their remittance programs, and those that continue to offer remittances will be forced to significantly increase their members' fees.  

Further, NAFCU would like to reiterate the necessity for the CFPB to respond to credit union concerns during the rulemaking process, rather than implementing remedial measures after the fact. Although NAFCU appreciates the CFPB’s responsiveness to reconsider the remittance rule, proactive efforts by the CFPB to address potential problems and reduce the future compliance costs and regulatory difficulties faced by credit unions would be far more effective when conducted prior to and during the rulemaking process.”  (Emphasis added).

The last paragraph is especially important.  The process this regulation has taken has left everyone's head spinning.  The CFPB had opportunities to listen to industry feedback and make changes upfront.  Instead, they finalized the rules and only then did they realize they were not workable.  Unfortunately, the lack of operational experience and background at the CFPB was on full display.  They had a rule and were going to finalize it no matter what the consequences.  

***

NAFCU Remittances Webcast Today.  We also have a webcast on the Remittances Webcast today at 2:00 p.m. EST.  Be sure to tune in.  We've extended the early-bird deadline indefinitely, so you can purchase the webcast at any time (including after today) at the early-bird price.  To learn more about the webcast, click here.  

Economic Census Forms; Upcoming Webinars & Webcasts

Written by Steve Van Beek

Economic Census.  Your credit union may have gotten an Economic Census form (the forms were sent between October and December).  The deadline for completion is February 12th.  To help facilitate understanding of this form and the requirement, the Office of Business Liaison at the Department of Commerce has put together information, numerous FAQs and is hosting a webinar on Wednesday, January 24th at 1:00 p.m. EST.  Note: There was a prior webinar on October 11th, 2012.  The slides from that presentation are here (very large PPT file) and a transcript is available here.

There are additional help resources available here.  

The FAQs include specific information for different industries - including credit unions.  The credit union FAQs are here and forms are here.  Remember, the deadline is February 12th, 2013.  

Note:  Not every credit union will receive a form.  But, be sure to check with folks and see if your CU has and make sure it is completed by February 12th. 

***

There are also numerous other webinars and webcasts this week.  

NCUA Webinar on Serving Low-Income Members.  NCUA is hosting a free webinar on Strategic Issues for Servicing Low-Income Members.  This webinar is Wednesday, January 23rd at 2 p.m. EST.  If your credit union recently received your low-income designation, this might be a useful webinar.  Here is from the announcement:

"Staff from [NCUA's] OSCUI and NCUA’s Office of Consumer Protection will discuss ways low-income designated credit unions may improve and increase service to low-income members. In addition, the staff will present sample products and services designed to meet the needs of these members."

You can register here. 

***

NCUA HMDA Webinar.  NCUA will also be offering a free webinar entitled HMDA: Accuracy and Timeliness.

The webinar will be Thursday, January 24th at 2 p.m. EST.  You can register for the webinar here and you can also send any questions to [email protected].  

NCUA also recently issued Regulatory Alert 13-2 which highlights the March 1, 2013 deadline for submitting HMDA data.  Earlier, they had sent Regulatory Alert 13-1 which discusses the $42 million asset threshold for 2013 HMDA reporting.

Does anyone know how these Regulatory Alerts are delivered?  Why don't they go through NCUA Express?  Another one they buried on their website was Regulatory Alert 12-4 on the CFPB's Remittance Rule. 

***

Upcoming NAFCU Webcasts.  NAFCU will be offering a very full slate of webcasts in 2013.  And, you can be assured that quite a few will be focusing on compliance - especially the new mortgage requirements.  Below are our next couple webcasts:

• The CFPB's International Remittance Transfer Disclosure Rules - Thursday, January 24th from 2:00 - 3:30 p.m. EST.  Mary Lou Heighes will walk attendees through the final rule as well as aspects of the proposed rule that you need to know.  Mary-Lou has been very involved in the remittance transfer rule from the start and gave a great presentation at our Compliance Seminar in October.  And, because of the importance of this rule - we are extending the early-bird registration price indefinitely.  You can sign-up for this webcast any time and receive the early-bird price.  

Remember: All of NAFCU's webcasts are available on-demand as well.  If you can't make the live webcast (perhaps because you need to watch the HMDA webinar or the Census webinar live), you can always watch the on-demand webcast at a later date.

• Top HR Compliance Issues Affecting Credit Unions in 2013 - Wednesday, February 6th from 2:00 - 3:30 p.m. EST.  Margaret Fiester from the Society of Human Resource Management (SHRM) will discuss how credit unions will be impacted by various future reforms - including tax reform and health care reform.  Register by January 30th to Save $100.  

NCCOs:  Both of the webcasts above will earn credits toward renewing your NAFCU Certified Compliance Officer (NCCO) designation.  If you see this logo -  - you'll be sure the webcast will be offering NCCO credits.

New NCCO Affidavit Process:  We also have a new, streamlined NCCO affidavit.  You can find the fillable-form located here.  If you are an NCCO and attend a NAFCU webcast with this symbol -   - be sure to use this form.   

CFPB Extends Remittances Effective Date - New Proposal Coming Soon

Written by Steve Van Beek

Earlier this afternoon, the CFPB issued Bulletin 2012-08 on the remittance transfer requirements under Regulation E:

"The Consumer Financial Protection Bureau (CFPB or the Bureau) expects to issue a proposal next month to refine three elements of its rule regarding foreign remittance transfers.  The proposal will be narrowly targeted to address the rule’s provisions on: (1) errors resulting from incorrect account numbers provided by senders of remittance transfers; (2) the disclosure of certain foreign taxes and third-party fees; and (3) the disclosure of sub-national, foreign taxes.  The Bureau will proceed on a fast track with a notice of proposed rulemaking, which will propose these changes. This notice will propose to amend the final rule issued earlier this year, currently set to take effect on February 7, 2013.  The notice will also propose a brief extension of the effective date of the rule until 90 days after the Bureau finalizes the proposal. The Bureau anticipates providing this extension in order to permit providers to adjust their systems in response to the proposed requirements.  The Bureau expects that the proposed effective date will be sometime during the spring of 2013." 

In short, the CFPB will be proposing changes to certain parts of the remittances rule (although it doesn't appear to be considering an increase in the 100 safe harbor level) and this proposal will also extend the effective date of the rule.  

The CFPB's Bulletin indicates it will fast-track the proposal and final rule and that the new effective date will be later in the Spring 2013.  For additional information, be sure to review the proposed rule when it is issued.  The CFPB also has a remittances page - including a PDF document with the full regulation and staff commentary - which might be useful. 

CFPB Report on Private Student Loans; CFPB Remittances Webinar; NAFCU's Offices Closed

Written by Steve Van Beek

We'll keep this blog post brief as we’ll have additional information on the CFPB reports in future blog posts.

***

Private Student Loan Report.  On October 16th, the CFPB issued a report on private student loans.  Here is from the press release:

"Today’s report, which was mandated by Congress, analyzed approximately 2,900 private student loan complaints, comments, and other submissions and input from borrowers. The report found that roughly 95 percent of the complaints are about loan servicing – when borrowers try to pay back their debt or are unable to pay."

The report is available here.  A fact sheet is available here.   

***

Student Loans and Servicemembers.  On October 18th, the CFPB issued a report on student loans and servicemembers.  Prominent in the report were discusses of student loans and the SCRA:

"Many servicemembers navigate hurdles that may be unnecessary in order to receive the SCRA interest rate cap. Once a borrower has qualified for this interest-rate cap, the SCRA requires the servicer to continue to provide this benefit for the duration of the servicemember’s time on active duty, as reflected in the servicemember’s orders. We have received complaints from servicemembers, on active duty for multiple years, who reported that they were told that their interest-rate cap would expire annually, and were subsequently required to submit  additional orders in order to retain this benefit."

The report is available here.  The CFPB also released a Guide for Servicemembers with Student Loans.  

***

CFPB Remittances Webinar.  If you missed the CFPB's webinar on remittances, you can view the archive here (slides are here).  The Small Entity Compliance Guide is also available.

***

NAFCU Closed.  NAFCU follows the Federal Government Operating Status and our offices will be closed today due to Hurricane Sandy.  NAFCU Members:  If you have compliance questions, please email us at [email protected].  If you call, please leave a voicemail and we'll get back to you as soon as we can.   

For those in and around the Hurricane area, be safe!

Remittances Webinar; Fair Lending Webinar; Archived Nonaccrual/TDR Webinar

Written by Steve Van Beek

Remittances.  The CFPB recently opened their Remittances Webinar to everyone - without the need to register (the webinar is free).  The webinar will be available on this page beginning at 2:30 p.m. Eastern.  The webinar will last 90 minutes.

That is TODAY at 2:30 p.m. Eastern.  Be sure to tune in.    

NOTE - The CFPB issued their small entity compliance guide yesterday.  

*** 

Fair Lending.  The Philadelphia Federal Reserve's Consumer Compliance Outlook will be hosting a Fair Lending Webinar tomorrow - October 17th from 2:00 - 3:30 p.m. Eastern.  You can register here.   

The presentation slides are already available here.  Topics to be discussed are:

• Recent Fair Lending Enforcement Actions
• Risk Assessments
• Fair Lending Compliance Management
• Data Reporting and Analysis
• FHA LGBT Rule, Disability Discrimination, Maternity Leave Discrimination
• Loss Mitigation and Loan Modification
• Redlining

Remember - TOMORROW at 2:00 p.m. Eastern.  Register here.   

***

Nonaccrual and TDR Webinar.  NCUA's webinar on Workouts, Nonaccrual and TDRs is now archived and available.  The webinar can be watched here.  A transcript is also available inside the webinar (or at this link).       

Upcoming Webinars and Webcasts; NAFCU's October Compliance Monitor

Written by Steve Van Beek

Webinars and Webcasts.  There are quite a few free webinars to keep on your radar:

• October 4 at 3:00 p.m. EDT - Town Hall with Chairman Matz - Registration is Still Open

• October 16 at 2:30 p.m. EDT - New Requirements for Remittance Transfer Providers - Sign-Up by sending an email to [email protected] by October 9.  If you have a question you'd like answered during the webinar - send it to [email protected] by October 5.  

• October 17 at 2:00 p.m. EDT - Fair Lending Hot Topics by the Philadelphia Federal Reserve's Consumer Compliance Outlook

• Archived:  Servicemember Financial Protection (Compliance with the SCRA) - Slides are here.

NAFCU also has a couple of upcoming webcasts that might be of interest:

• October 10 - BSA/OFAC for Directors and Supervisory Committee  - Keep in mind that you can watch the archived webcast for up to one year - making this perfect for a future Board meeting or training event.  Sign up by October 3 and Save $100.  

• October 24 - Social Media and Website Compliance - This webcast will also be viewed live by all Regulatory Compliance Seminar attendees.  Sign up by October 17 and Save $100.  

• November 7 - CFPB's Latest Mortgage Proposals - NAFCU's Compliance team will overview the mortgage loan originator proposal, interagency higher-risk appraisal proposal and the Regulation B appraisal proposal.  Sign up by October 31 and Save $100.    

***

NAFCU's October Compliance Monitor.  NAFCU Members: Our October Compliance Monitor is now available for download.  This issue includes lengthy articles on the "high-cost" mortgage proposal (including a discussion of the potential change to the definition of "finance charge") and the CFPB's mortgage servicing proposals.  We've also attached a six-page chart which helps organize the 20 new notices included in the mortgage servicing proposals.  Happy reading!

Is this What a Level Playing Field Looks Like?; 2996 Pages in Six Weeks

Written by Steve Van Beek

Proponents of Dodd-Frank and the Consumer Financial Protection Bureau tried to tell credit unions that Dodd-Frank and the CFPB would be good for credit unions.  The playing field would be leveled and the regulatory burden would be lowered on small institutions.

Here is a snippet from Elizabeth Warren's testimony before the House on May 24, 2011:

"A significant part of our mission will also be to help level the playing field for smaller lenders, such as community banks and credit unions. We recognize that the regulatory pressures on banks have increased substantially over time. While regulatory costs may be manageable on a per-account basis for the largest financial institutions, for smaller businesses, all the complicated rules, extensive paperwork, and expensive compliance reviews can be daunting. If we continue on our current regulatory trajectory, traditional banks and credit unions will be put at a further disadvantage that could push many out of business.

American consumers are best served by a strong and diversified financial services industry. Many community banks and credit unions embrace relationship lending, and they often work in partnership with the families they serve. Some smaller institutions provide a banking presence in otherwise-underserved communities, both in our cities and in rural areas. If community banks and credit unions continue to face competitive pressures triggered by a complex regulatory system, then those institutions will not be as able to serve American families. In that case, not only do the banks lose, but families lose as well.

The CFPB is committed to working with smaller institutions to reduce regulatory costs. We have already begun that work, and we are pleased to report to Congress that the spirit of openness and cooperation expressed by community banks and credit unions has been extraordinary. The mortgage disclosure integration project is one area in which we are seeking to reduce regulatory burdens, and we expect that it will serve as an excellent test case as we design our ongoing processes for how the consumer bureau and smaller institutions can work together to increase the ability of these institutions to spend less time on regulations and more time serving America’s families."  (Emphasis added).

Now, I want to ask a question to credit unions:  Does what is stated above match what the CFPB has done in the past 6 weeks as indicated below?  

• TILA/RESPA Proposed Rule (1099 Pages)
• HOEPA/High-Cost Mortgage Proposed Rule (293 Pages)
• August Final Rule on Remittances (168 Pages) which Amends the February Final Rule (417 pages)
• Mortgage Servicing Proposed Rules - TILA (313 Pages) - RESPA (442 Pages)
• Higher-Risk Appraisals Proposed Rule (211 Pages) - New!
• Regulation B Proposed Rule - Free Copies of Appraisals (53 Pages) - New!

So, here is my question to the CFPB:  Is proposing 2996 pages of new regulations - within a six week period - how you envisioned "working with smaller institutions to reduce regulatory costs"?

And now a question for proponents of Dodd-Frank and the CFPB:  Is this what a level playing field looks like? 

CFPB Finalizes Remittance Transfer Safe Harbor at 100 Transactions/Year

Written by Steve Van Beek

How many others had their Tuesday altered by the CFPB's final rule?  Glad I'm not alone - and I'm also still hoping the CFPB sets some sort of regular schedule for their proposed and final rules so that compliance officers - Like Sally - don't have to fear when the next shoe is going to drop.  I don't think that is too much to ask.  

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Remittances Final Rule(s).  The CFPB announced their final rule to the public via a press release.  The latest final rule - including the safe harbor discussion - is available here.  However, it is very important to remember that the prior final rule also needs to be consulted as it contains the details on which remittance transfers are covered by the new requirements (we'll have more on this in a future blog post).

To prevent confusion between the final rules - it may be best to refer to the rules by when they were finalized:

• February Final Rule (417 pages)
• August Final Rule (168 pages)   

The CFPB has also indicated their intent to provide a "small business compliance guide" to help with implementation issues.  From Page 4: 

"As noted in the February Final Rule, the Bureau intends to continue working with consumers, industry, and other regulators in the coming months regarding implementation issues.  In the near future, the Bureau expects to release a small business compliance guide and a list of countries that providers may rely on for purposes of determining whether estimates may be provided under certain circumstances.  The Bureau also expects to conduct a public awareness campaign to educate consumers about the new disclosures and their other rights under the Dodd-Frank Act with respect to remittance transfers."

Hopefully, this small business compliance guide will include a "Fact Sheet for Compliance Officers" which clearly explains which transactions are considered remittances transfers and subject to the new rules and which are not.  Hopefully.

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Safe Harbor.  The August Final Rule provides a safe harbor for credit unions providing 100 or fewer remittance transfers in a calendar year.  Additionally, you would have had to perform 100 or fewer remittance transfers in the prior calendar year as well to obtain the safe harbor.  And, credit unions will need to track the number of remittances transfers during each year as they will need to comply with the requirements within six months - the transition period - of making their 101st remittance transfer.  

Thus, in order for credit unions to fall under the safe harbor - your credit union would need to provide 100 or fewer remittance transfers in the prior year and 100 or fewer in the current year.   This safe harbor language will be located in 12 CFR 1005.30(f) (page 143):

"(f) Remittance transfer provider.  (1) General definition. “Remittance transfer provider” or “provider” means 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.

(2) Normal course of business.  (i) Safe harbor.  For purposes of paragraph (f)(1) of this  section, a person is deemed not to be providing remittance transfers for a consumer in the normal  course of its business if the person:  

(A) Provided 100 or fewer remittance transfers in the previous calendar year; and  

(B) Provides 100 or fewer remittance transfers in the current calendar year.

(ii) Transition period.  If a person that provided 100 or fewer remittance transfers in the previous calendar year provides more than 100 remittance transfers in the current calendar year, and if that person is then providing remittance transfers for a consumer in the normal course of its business pursuant to paragraph (f)(1) of this section, the person has a reasonable period of  time, not to exceed six months, to begin complying with subpart B.  Compliance with subpart B will not be required for any remittance transfers for which payment is made during that reasonable period of time."   

The CFPB determined that credit unions that perform 100 or fewer remittance transfers per year are not providing the transfers in the "normal course of business" and, thus, are not covered by the remittance transfer requirements. 

Transition Period.  As noted in 12 CFR 1005.30(f)(2)(ii), if your credit union qualifies for the safe harbor and subsequently makes more than 100 remittance transfers - you'd be given a six month transition period from the 101st transaction with which to comply with all the requirements.  In other words, that 101st transaction is going to be very costly.  

Compliance Date.  Of course, this transition period applies for future years (where credit unions had the safe harbor but then lose it).  If your credit union conducts more than 100 transactions currently, you'd need to comply with all the requirements of the February Final Rule and the August Final Rule by February 7, 2013.    

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100 Transfers.  You may be thinking the 100 transfers is pretty low.  And, you would be right.  The CFPB knew this would be a low number, but they determined - from their perspective - that it was appropriate.  

Not 100 Members.  Not 100 Accounts.  The rule is transaction based and not related to how many members or how many accounts conduct remittance transfers.  Thus, credit unions will need to count the actual transactions to determine if the safe harbor applies or not.

As few as 9 Members.  I had to pass along this from the CFPB's preamble to the August Final Rule (page 29):

"Similarly, the Bureau believes that because it is not uncommon for consumers who send money abroad to do so 12 or more times per year….....One hundred transfers per year is equivalent to an average of approximately two remittance transfers per week, or the number of remittance transfers needed to satisfy the needs of a handful of customers sending money abroad monthly." (emphasis added).

When we argue that regulators just don't get it - this will have to be part of the discussion.  If you had 9 members sending monthly remittance transfers - you'd be conducting 108 transfers a year - and your safe harbor would go poof!  

Member Complaints; NAFCU's 2012 Regulatory Compliance Seminar

Written by Steve Van Beek

Consumer and member complaints are at the forefront of quite a few conversations right now (including quite a few news articles).  The CFPB's promotion of their complaint process is one reason for this uptick in discussion as is the centralized complaint process for financial products.  

The CFPB issued their 2011 Annual Report on Consumer Complaints and it is full of useful information to review.  Here is a snapshot of the results:

"Between July 21 and December 31, 2011 the CFPB received 13,210 consumer complaints, including 9,307 credit card complaints and 2,326 mortgage complaints.

Forty-four percent of all complaints were submitted through the CFPB's website and 14.7 percent via telephone calls.  Referrals from other regulators accounted for 34.9 percent of all complaints received.  The rest were submitted by mail, email, and fax."

Future reports will include even more details - including complaints in new areas such as private student loans, auto loans and checking accounts.  Be sure to review the full report or pass it along to the appropriate person at your credit union.   

NCUA.  The March 2012 edition of the NCUA Report also included an article on Trends in Member Complaints and Consumer Inquiries.  Of note, the article indicates that of the complaints received in 2011 less than 1 percent involved a consumer compliance violation.  Of that 1 percent, half of those were related to timing issues related to the error resolution process under Regulation E.  

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NAFCU Regulatory Compliance Seminar.  October seems like a long way off but it will be here before you know it.  We are in the process of putting together the content and agenda - so please feel free to send in any comments, ideas or suggestions.  We love your input and this conference is really about you all so let us know what you need.

Here is what we are tentatively looking at so far (topics are subject to change, of course):

• TILA/RESPA Mortgage Disclosures
• Upcoming Mortgage Servicing Requirements
• The Latest on Overdraft Protection
• Remittance Transfers under Regulation E
• CUSOs
• Loan Participations
• Bank Secrecy Act Changes
• Social Media
• NCUA Update
• CFPB Update

I think that is a pretty good start - but let us know what you are looking for and how we can make NAFCU's 2012 Regulatory Compliance Seminar even better than the past.  

Recertification for NCCOs.  Remember, attending Regulatory Compliance Seminar is the best way to recertify your NAFCU Certified Compliance Officer (NCCO) designation.  Seminar offers 24 CEUs which is enough to fully recertify for two years.

Seattle, Washington.  Did I mention Seminar was in Seattle?  Right Downtown?  Well, now I have.  Hope to see you October 23-26, 2012!    

Financial Literacy; NCUA LCU 12-CU-04; Remittance Transfers; NCUA IRR Video

Written by JiJi Bahhur, Regulatory Compliance Counsel

Financial Literacy Month.  April is Financial Literacy Month and NAFCU is conducting a survey of members seeking general information about the different types of financial literacy programs they offer and how the credit union determines the effectiveness of its program. 

For background information on Financial Literacy Month and where to obtain the results of NAFCU’s survey, check out this NAFCU Today story. 

NCUA also announced a twitter campaign for Financial Literacy Month.  The CFPB will also be active this month with information for consumers.

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NCUA Letter to Credit Unions 12-CU-04.  NCUA announced, in its Letter to Credit Unions 12-CU-04, that it’s making $1.3 million in grants available to low-income credit unions.  Any credit union with a low-income designation may apply for up to $25,000 in grants for initiatives covering financial literacy and education in school branches; new product/service development; staff, official and board member training; student and job creation internship; and/or volunteer income tax assistance. 

The LCU has an attached enclosure – 2012 Grant Guidelines for Low-Income Credit Unions – which provides examples of projects that these grants could fund, the grant process, and the application.  The deadline to apply for a grant under this program is June 29, 2012. 

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Remittance Transfers.  The CFPB recently blogged on the consumer benefits of the new remittance transfer rule, which goes in effect in February 2013:

“Better Disclosures: Under this rule, remittance transfer providers must generally disclose the exchange rate, any fees related to the remittance, the amount of money that will be delivered abroad, and the date the money will be available. Certain disclosures must be provided both before and after the consumer pays for a remittance transfer. Consumers will generally receive these disclosures in English and sometimes in other languages. The CFPB thinks the clarity provided by these disclosures will help inform consumer decisions and instill confidence.

Option to Cancel: Typically, consumers will have at least 30 minutes after payment to cancel a remittance. If they cancel within the 30 minute window, they will get their money back, whether they make a mistake, change their minds, or feel something isn’t right.

Correction of Errors: With this rule, remittance transfer providers will generally be held accountable for errors. If a remittance sender reports a problem with a transfer within 180 days, the provider must generally investigate and correct errors. Companies that provide remittance transfers may also be responsible for mistakes made by their agents. The CFPB believes this will encourage remittance transfer providers to use reliable agents and partners in the U.S. and abroad, helping to weed out the bad actors.” 

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NCUA IRR Video.  NCUA released its third economic update series, which features an in-depth discussion on NCUA’s Interest Rate Risk (IRR) rule.  The rule essentially requires a written policy to address IRR management and an effective IRR program for successful asset liability management.  To see the free video, go here (Youtube.com). 

Also, NAFCU Members, the April Compliance Monitor features an article on Interest Rate Risk with additional information and resources on the new requirement (Effective September 30, 2012).  

Playing Catch-Up: SAFE Act Procedures; Compliance Monitor; Final Regulations

Written by Steve Van Beek

Initially, I want to say Thank You to all the attendees at last week's Regulatory Compliance School.  It was a great week, made even better by the great questions and interaction among attendees.  Thank You - and hope to see you at Regulatory Compliance Seminar in the future (no tests - I promise!)  

And - good luck to everyone who took the NCCO Exams!  

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Strange as it sounds, it feels good to be back in the office after a long week at School.  I'm sure there are more than a few items to get up to speed on, but first a few older items that might be useful.

CFPB's SAFE Act Examination Procedures.  On March 7, the CFPB announced their SAFE Act examination procedures.  While the CFPB's primary examination authority extends only to credit unions above $10 billion in assets, all credit unions offering mortgage loans need to follow Regulation G - 12 CFR 1007.  I'd pass these examinations procedures along to the appropriate folks at your credit union as NCUA might take a similar approach in its future examinations.  If nothing else, the examination procedures could serve as a useful internal audit tool.      

NAFCU's March Compliance Monitor.  The March 2012 NAFCU Compliance Monitor is available.  The Worth Noting section highlights issues over the past month or so that might impact your credit union and there are articles on the CFPB and small blurbs on Health Care Reform and Periodic Statements for Mortgages.  

The Compliance Monitor is a NAFCU member-only publication.  If your credit union is interested in learning more about NAFCU membership, take a peek at our trial membership program.

NAFCU Final Regulation - Reg E:  International Remittances.  NAFCU-members, our Final Regulation on the Remittances rule is available (12-EF-02).  Compliance is required by February 7, 2013. 

NAFCU Final Regulation - NCUA:  Interest Rate Risk Policy.  Our Final Regulation on NCUA's Interest Rate Risk Policy and Management is also available (12-EF-01).  Remember, compliance is required by September 30, 2012.

The CFPB's Ability to Finalize Existing Proposed Regulations

Written by Steve Van Beek

One of the areas of the CFPB's regulatory authority that hasn't received very much attention is the CFPB's ability to finalize a regulation that was proposed by another regulator.  We saw the CFPB take this action with the Remittances final rule - which was originally proposed by the Federal Reserve.

Section 1063(j).  Dodd-Frank specifically indicated that proposed rules - to amend a consumer regulation - would transfer to the CFPB as well.  This allows the CFPB to finalize a proposed rule without having to "repropose" the regulation in the Federal Register.  Section 1063(j) of Dodd-Frank:

"(j) STATUS OF RULES PROPOSED OR NOT YET EFFECTIVE.— (1) PROPOSED RULES.—Any proposed rule of a transferor agency which that agency, in performing consumer financial protection functions transferred by this title, has proposed before the designated transfer date, but has not been published as a final rule before that date, shall be deemed to be a proposed rule of the Bureau."

Remittances.  As we saw with remittances, the CFPB decided to finalize the remittances rule (by their statutory deadline of January 21, 2012) and issue a proposed rule at the same time.  NAFCU members:  Our Regulatory Alert (12-EA-05) on the remittances proposal is now available.    

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Existing Proposed Rules.  There are quite a few other proposed rules that are "hanging out there" and which could be finalized by the CFPB without further warning (i.e., without a new proposed rule).  Of course, the CFPB could reissue a new proposed rule if it wanted to take a different approach than was taken by the Federal Reserve.    

Below is a listing of a few proposed rules that the CFPB inherited on July 21, 2011 when it obtained its regulatory authority.

Regulation Z:  Ability-to-Repay for Mortgages.  Originally proposed by the Federal Reserve in April 2011, the CFPB has indicated it will finalize this rule in Spring 2012.  

Regulation Z:  Escrow Accounts.  Originally proposed by the Federal Reserve in February 2011.  I wouldn't be surprised if we saw this rule finalized sometime in 2012.     

Regulation Z:  Credit Insurance; Right of Rescission; HELOCs.  The Federal Reserve had proposed changes in August 2010.  In February 2011, the Federal Reserve announced it would not finalize these proposals as the CFPB would gain authority over Regulation Z on July 21, 2011.  

Regulation Z:  Closed-End Mortgages; HELOCs.  The Federal Reserve also had proposed changes to Closed-End Mortgage disclosures and HELOC disclosures.  The Fed issued these proposals in July 2009.  These proposals were also tabled by the Federal Reserve in February 2011 - passing authority on to the CFPB.    

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Credit Insurance.  We've blogged on the credit insurance issue a couple of times in the past.  

• A September 2010 blog post highlights the proposed model form and how it will definitely lead to fewer policies.
• A March 2011 blog post highlights a GAO study focused on credit insurance products.    

If your credit union offers these products, this is definitely an area to keep an eye on.  

When It Rains, It Pours............Regulations

Written by Steve Van Beek

The DC area has had some unseasonably warm weather the past couple of weeks - but the flood of regulations coming from the regulators make it seem like we need to have our galoshes with us at all times.  The past couple of weeks have been a good example of regulatory onslaught from multiple angles - making the lives of compliance officers everywhere very difficult.

Given the fast-paced nature of the recent proposals and finalized regulations, I thought a quick blog post highlighting where to find the new rules was a good start up this mountain I like to call "regulatory change."  As an aside, I'm very interested to see Chairman Matz discuss NCUA's efforts to ease the regulatory burden on credit unions during NCUA's February 8th webinar (which also features CFPB Director Richard Cordray).

Interest Rate Risk Policy - Final Rule.  Recently NCUA issued a final rule on interest rate risk policies.  That rule will be published in the Federal Register this morning.  This final rule becomes effective September 30, 2012.    

Loan Workouts, Nonaccrual Policy & TDRs - Proposed Rule.  At its January Board meeting, NCUA also proposed a new rule that would require all federally-insured credit unions to have a written loan workout/modification policy.  The proposal also contains an Interpretive Ruling & Policy Statement discussing nonaccrual status and troubled debt restructuring reporting.  This proposal was published in the Federal Register yesterday and includes a short, 30-day comment period.

Derivatives - Advanced Notice of Proposed Rulemaking (ANPR).  NCUA also issued a ANPR on derivatives that would provide opportunities for credit unions to use derivatives to manage interest rate risk.  This proposal has not been published yet, but it will have a 60-day comment period (from the date it is published in the Federal Register).

Regulation E (Remittances) - Final Rule.  We discussed this final rule yesterday and I'm fairly certain we'll all become good friends with this rule over the next year.  The final rule will become effective February 7, 2013.

Regulation E (Remittances) - Proposed Rule.  Quite possibly a new record - proposing a rule to amend a final rule that was published on the same day.  Bravo!  The CFPB issue a proposed rule that would tweak the recent final rule.  Rest assured (warning - you may need to adjust your snark meter), the CFPB has indicated they will finalize this proposed rule before the finalized rule that it amends becomes effective.

Junior Lien Loan Loss Allowances - Guidance.  On Tuesday, NCUA along with the other regulators who make up the Federal Financial Institutions Examination Council (FFIEC) announced new guidance for junior lien loan loss allowances.  The Interagency Guidance is here and NCUA also issued Accounting Bulletin 12-1.

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On a happier note, all this talk about raining, pouring and galoshes got me thinking about a wonderful trip with my (now) wife in Seattle.  Good times!  

CFPB Issues Final Rule on Remittance Transfers; Proposes Changes As Well

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. 

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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.

NAFCU's CFPB Page; CFPB Studies; FTC Mortgage Rule

Written by Steve Van Beek

Keeping track of the issues surrounding the CFPB can be quite difficult.  NAFCU's Regulatory Affairs team has created a webpage to help track and monitor the CFPB's actions.  Click here to see the new page.  The page includes links to the CFPB's guidance documents and reports as well as NAFCU comment letters to the CFPB and recent NAFCU Today stories.  

Also, don't forget that the blog itself has categories which allow you to view prior blog posts related to a certain area - such as the CFPB.   

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The CFPB has released two reports that were required by Dodd-Frank.  

• Credit Scores (differences between the score consumers receive and the score lenders use).  Full report is here.

• Remittances (relating to transparency of pricing and their potential use in credit scores).  Full report is here.  

These reports have the potential to be the groudwork for future rulemakings and guidance - so just keep these issues on your radar.  

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With only a few days to spare before the CFPB took over rulemaking authority, the FTC finalized a rule on deceptive mortgage advertisements.  The FTC, CFPB and individual states will have the ability to enforce the new rule - which becomes effective August 19, 2011.  The rule applies to state-chartered credit unions as they fall under the FTC's jurisdiction.  Federally-chartered credit unions are not covered by the new rule but are covered by NCUA's requirements regarding accuracy of advertisements.