By Jeff Williams
A congressionally mandated report by the Consumer Financial Protection Bureau regarding the Remittance Rule showed "mixed" compliance with disclosure requirements, but at least some consumers are receiving more information about remittance transfers.
A CFPB blog post accompanying the Bureau’s report assessing the Remittance Rule notes that the Dodd-Frank Act requires the Bureau to formally review some of its rules within five years after they take effect. Its 2013 Remittance Rule was intended to bring new consumer protections to international money transfers. The Remittance Rule requires remittance transfer providers to give consumers disclosures showing costs, fees and other information before they pay for a remittance transfer and to provide cancellation and refund rights. The Remittance Rule also requires remittance transfer providers to investigate disputes and remedy certain errors.
"The Bureau expects that the report will help inform the Bureau’s future policy decisions concerning remittance transfers, including whether to commence a Rulemaking proceeding to make the Remittance Rule more effective in protecting consumers, less burdensome to industry, or both," the agency said.
Among other things, the report noted that the CFPB had not filed any enforcement actions against remittance transfer providers for violating the rules. In 2017, the CFPB said, U.S. consumers transferred more than 325 million remittances worth more than $175 billion, with money service businesses (MSBs) conducting 95.6 percent of all remittance transfers and 68.4 percent of the dollar volume.
Among the key findings in the report, the CFPB said, was that "new and repurposed technologies and new entrants have had a substantial effect on the remittance transfer market." In particular, the report said, the use of mobile phones to access the Internet and the ability to transfer remittances online have altered the way many consumers send remittances. "These trends started before the rule came into effect and are expected to continue." The Bureau said, "Against this rapidly changing marketplace, discerning the effect of the Remittance Rule is difficult."
The CFPB report also found the volume of remittance transfers by MSBs was increasing before the effective date of the rule and has continued to rise. "However, many factors other than the Rule may affect consumer demand for remittance transfers, and the evidence does not eliminate the possibility that remittance transfers would have increased more rapidly in the absence of the Rule," the CFPB said.
There was a slight increase in the number of MSBs conducting more than 100 transfers, which generally makes them subject to the Rule. There was also an increase in the number of credit unions that reported offering remittance transfers in the two years after the Rule took effect, the CFPB said, though it noted that the increase could be due in part because of changes in the question used to collect data about that number.
The report also showed the average price of remittance was declining before the Rule took effect and has continued to do so, CFPB said. "The available evidence cannot rule out the possibility that prices would have fallen even faster in the absence of the Rule," the report said. "Comparing trends in the U.S. with those in other industrialized countries, the evidence does not seem to support the Rule causing either substantial price declines or substantial price increases."
The report also found there were "mixed levels" of compliance with the Remittance Rule across the industry, "including general compliance at certain institutions as well both individual violations and wholesale failures to comply at others. The evidence from many of the Bureau examinations, however, is consistent with consumers generally receiving disclosures, albeit in many instances with inaccuracies and errors."
There were also "mixed" findings for error resolution "because systems to correctly track and investigate error claims were identified as weak at some providers." The agency estimated in the report the one-time costs for the industry to establish compliance procedures with the rule amounted to between $86 million and $92 million.
The CFPB also examined whether particular provisions of the rule were accomplishing the stated goals in the law and found that, "at least in some cases," consumers receive more information than they had before the Rule went effect.
The report cited data showing consumers cancel between 0.3 percent and 4.5 percent of remittance transfers, the CFPB said, noting that the Remittance Rule gives consumers 30 minutes after payment to cancel a transfer. "There is evidence that some banks or credit unions delay initiating at least some transfers to make it easier for them to provide a refund if a consumer requests a cancellation within the 30-minute period, but the evidence does not indicate how prevalent this practice is," the report said.
Available data also indicated consumers assert errors for between 0.5 percent and 1.9 percent of remittance transfers, CFPB said. Consumers have 180 days after a remittance transfer to claim an error, though nearly all error claims are made within 30 days of remittance transfers, the agency said.
CFPB also said the approximately 80 percent of banks and 75 percent of credit unions fall under a safe harbor provision for entities that provide 100 or fewer remittance transfers in the prior and current year. "Data analysis suggests that few credit unions that offer remittance transfers constrain the number of transfers that they are willing to provide to stay under the 100-transfer threshold," CFPB said. "Data on banks that provide 100 or fewer remittance transfers is not as robust but also suggests that they rarely limit the transfers that they are willing to provide to stay below the 100-transfer threshold."
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