Banking and Finance Law Daily CFPB proposes changes to Remittance Rule to provide financial relief for smaller institutions
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Tuesday, December 3, 2019

CFPB proposes changes to Remittance Rule to provide financial relief for smaller institutions

By Stephanie K. Mann, J.D.

The proposed rule would extend an exception that allows certain insured institutions to disclose estimates instead of exact amounts and would increase the safe harbor threshold to reduce compliance costs for entities that make few remittance transfers each year.

The Consumer Financial Protection Bureau is proposing new changes to the Remittance Rule to mitigate the effects of the expiration of the statutory exception that allows insured institutions to disclose estimates instead of exact amounts to consumers. The current exception is set to expire on July 21, 2020. Additionally, the Bureau is proposing to increase a safe harbor threshold related to whether a person makes remittance transfers in the normal course of its business. According to the CFPB, this will reduce compliance costs for entities that make a limited number of remittance transfers each year. Comments on the proposed rule must be received within 45 days after publication in the Federal Register.

The rule generally requires companies that provide remittance transfers in the normal course of business to disclose to consumers certain fees and the exchange rates that apply to transfers. Currently, the rule also includes an exception that allows certain banks and credit unions to estimate certain fee and exchange rate information instead of disclosing exact amounts in certain circumstances, but this exception expires by statute in July 2020. The proposed rule would allow certain banks and credit unions to continue to provide estimates under certain conditions where it could be economically infeasible for these institutions to provide exact disclosures. This could preserve consumers’ ability to send remittances from their bank accounts to certain destinations and reduce the compliance burden for banks and credit unions.

In addition, the Bureau is proposing to increase the safe harbor threshold that determines whether a company makes remittance transfers in the normal course of its business and is subject to the Remittance Rule. Under the proposed rule, companies making 500 or fewer transfers annually in the current and prior calendar years would not be subject to the rule. This would reduce the burden on over 400 banks and almost 250 credit unions that send a relatively small number of remittances—less than. 06 percent of all remittances.

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