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ICBA Policy Resolutions for 2013
Track I: Legislation and Regulation
REMITTANCE TRANSFERS
Position
- ICBA strongly urges policymakers to amend the Regulation E provisions that establish new rules governing remittance transfer providers. Specifically, ICBA urges policymakers to:
- Hold the sender—the source of the information and the party best positioned to prevent an error—liable for providing inaccurate or fraudulent information regarding the recipient.
- Eliminate the disclosure requirements for foreign recipient taxes (national, provincial, and municipal) and the disclosure of recipient account fees.
- Adopt a phased-in implementation of the remittance transfer rules that require international cooperation.
- Additionally, ICBA strongly encourages legislation that would:
- Increase the safe harbor threshold to encourage community banks to cultivate greater remittance transfer volumes.
- Exclude from the definition of “remittance transfer” funds transfers not destined to a natural person outside the United States or that are of large dollar amounts.
- Promote open network transactions such as wire and ACH transfers as a fast and cost-effective alternative for remittance transfers and develop requirements that reflect the functionality and capabilities of open network systems.
Background
On January 20, 2012, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule that amended Regulation E, which implements the Electronic Fund Transfer Act, to establish new rules governing remittance transfer providers effective February 7, 2013. However, on December 31, 2012, the CFPB delayed the effective date of the final rule and re-proposed certain provisions. This action was prompted by concerns raised by ICBA and other financial institutions that the January 2012 rule, would have led community banks to either discontinue or drastically limit the availability of this service and thereby limit consumer access. The new rule will become effective 90 days after it is published in final form. The proposed rule addresses three main issues: liability for sender error, disclosure of foreign taxes and the disclosure of recipient banks fees.
Liability for sender error. The liability provisions of the January 2012 rule posed a serious risk to community banks. The re-proposed amendments would provide that providers are not liable for incorrect account numbers provided by the sender, but still hold the bank liable when the consumer provides incorrect bank information or international bank routing codes.
Disclosure of foreign taxes. Under the re-proposed rule, a provider must disclose any nationally assessed foreign taxes to be paid by the recipient. Any sub-national taxes would be exempt from disclosure. ICBA remains concerned that the disclosure of foreign taxes is highly problematic for community banks as this kind of database does not currently exist and would require international cooperation to establish and maintain.
Disclosure of recipient bank fees. The re-proposed rule would require providers to disclose fees a recipient bank charges its customer, though only to the extent that the information that is available on the receiving bank’s website, a limitation not provided for in the prior rule.
Safe harbor. ICBA appreciates the Regulation E exception to the definition of “remittance transfer provider” which provides a safe harbor for providers that process 100 or fewer remittance transfers in the previous year. However, ICBA remains deeply concerned about the 1,500 – 1,800 community banks not covered by this safe harbor as this presents an undue compliance burden to community banks and will result in most community banks discontinuing this service. This aspect of the January 2012 rule was not re-proposed.
Broad definition of remittance transfers. The January 2012 rule broadly defines “remittance transfer” beyond the scope of traditional remittance transfers (sending money to family abroad, usually for amounts below $300) transfers, to include larger value consumer-initiated international transfers for purposes such as property purchases, tuition payments and wealth management. Requiring disclosure and consumer protections for these larger dollar transfers creates compliance challenges and legal uncertainties that far outweigh the benefits of any protections that would be achieved. This overly broad definition of remittance transfer has not been re-proposed.
Compliance in open network systems. ICBA believes that the January 2012 rule is oriented towards closed network, cash-based remittance models and does not adequately reflect the operational realities of open network transactions. Although the Dodd-Frank Act provides certain exceptions intended to make disclosure requirements workable for open network transfers, these exceptions have been implemented too narrowly and largely ignore the operational realities associated with such transfers. This aspect of the January 2012 rule has not been re-proposed.
Staff contacts: Cary Whaley and Viveca Ware
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