CFPB Revises Remittance Transfer Small Entity Compliance Guide
- Sources: consumerfinance.gov and federalregister.gov
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On June 18, 2020, the Consumer Financial Protection Bureau (CFPB) issued an updated Remittance Transfers Small Entity Compliance Guide. The revised guide incorporates recent changes in Regulation E that will take effect on July 21, 2020. The changes in both the regulation and the guide focus on the following:
- An increase in the normal course of business safe harbor threshold used to classify an entity as a remittance transfer provider. When this change takes effect, the safe harbor threshold will be increased from 100 transfers annually to 500 transfers annually.
- The expiration of the temporary exception for insured depository institutions and insured credit unions codified in 12 CFR 1005.32(a). This exception permits institutions that met certain criteria to provide estimates instead of exact amounts in disclosures.
- The creation of two new permanent exceptions that permit banks and credit unions to use estimates in disclosures of certain third-party fees and exchange rates under certain conditions described in 12 CFR 1005.32(b)(4). These exceptions would permit estimates in disclosures if the institution is unable to determine exchange rates or third-party fees associated with the remittance transfer.
To be eligible for the new exceptions, the entity must be an insured depository institution under Section 3 of the Federal Deposit Insurance Act or an insured credit union under Section 101 of the Federal Credit Union Act. The remittance transfer must be sent from the sender’s account (excluding prepaid cards other than payroll card accounts or government benefit accounts) with the institution, and the transfer must be provided on or after July 21, 2020.
For the exchange rate exception, the insured institution must be unable to determine the exact exchange rate for the remittance transfer at the time it must provide the required disclosures. An insured institution cannot determine the exact exchange rate if the rate is set by an entity other than (a) the insured institution; (b) an institution that has a correspondent relationship with the insured institution; (c) an insured institution’s service provider; or (d) an insured institution’s agent. The insured institution cannot apply this exception if the institution sent more than 1,000 remittance transfers to a particular country that were received in the particular country’s local currency.
For the third-party fee exception, the insured institution must be unable to determine the exact covered third-party fees for the remittance transfer at the time it must provide the applicable disclosures. An insured institution cannot determine the exact third-party fees if (a) the insured institution does not have a correspondent relationship with the designated recipient’s institution; (b) the designated recipient’s institution does not act as the insured institution’s agent; (c) the insured institution does not have an agreement with the designated recipient’s institution with respect to the imposition of covered third-party fees on the remittance transfer; and (d) the insured institution does not know at the time the disclosures are given that the only intermediary financial institutions that will impose covered third-party fees on the transfer are those institutions that have a correspondent relationship with or act as an agent for the insured institution, or have otherwise agreed upon the covered third-party fees with the insured institution. In addition, the insured institution must have made 500 or fewer remittance transfers to the recipient’s institution in the prior calendar year of be subject to a U.S. federal statute or regulation that prohibits the insured institution from being able to determine exact covered third-party fees for the remittance transfer. The guide notes that the 500 remittance transfer limit applies regardless of whether covered third-party fees were estimated for those transfers and whether the transfers were provided to the designated recipient’s institution in local currency or another currency. The CFPB also notes that it is unaware of any U.S. federal statute or regulation that would prohibit insured institutions from determining covered third-party fees to be disclosed.