Proposed Rules to Reg E Remittance Transfers

One of the first “Final Rules” that the CFPB published came with a twist. Click here to go to the rules. It is not a ice cream cone, or a Chubby Checker song, or anything that is remotely fun. It is a proposed rule that could dramatically change the rule that it finalized.  In other words, they are looking for comments on two issues of the finalized rule. I have already wrote about the remittance transfer rules, and mentioned that a “remittance transfer provider” must follow special rules for remittance transfers.  

The proposed rule solicits comment on a possible safe harbor to define when a person is given a safe harbor and does not provide transfers in the “normal course of business”.  To qualify for this safe harbor and in turn not provide remittance transfers as a “normal course of business” currently you must not make more than 25 transfers in the previous calendar year.  During the current year you must keep track of how many you have done, and if you reach the 26th remittance transfer you must review whether you must now comply with the rules.  The CFPB is requesting comments on the proposed safe harbor in general, if the safe harbor is appropriate, and whether the minimum number of transfers per calendar year to qualify for the safe harbor should be higher or lower that 25 transfers.  They specifically mention 10 or 50 transfers.  

Why did they pick 25 transfers you may ask?  Well it keeps consistent with Reg Z.  Under Reg Z, a “creditor” that must comply with Reg Z disclosures is an entity that regularly extends consumer credit under specified circumstances. Generally, under Reg Z, a person regularly extends consumer credit in the current calendar year when it either extended consumer credit more than 25 times in the preceding calendar year or more than 25 times in the current calendar year.  I commend them for staying consistent with something, but these transactions are a different beast and they should think about increasing the threshold.  

The CFPB believes that if they do not have some sort of a threshold, that some small providers will discontinue the service or decline to start up the service because of the burden placed on them by the new provisions.  This of course would be detrimental to the consumer. To that end, I would suggest that they increase the volume above the 25, to 50 or 100.  This would eliminate the small institutions that have this service out of a convenience to their customers, and not because there business relies on it.  Some commenters gave numbers as high as 1,000 and 2,500 but the CFPB stated that they believed that this went against the congresses wishes, and was too high. 

The Bureau requests comment on the proposed safe harbor. As discussed above, theBureau requests comment on whether a threshold safe harbor is appropriate in this context, and whether the maximum number of transfers per calendar year to qualify for the safe harbor should be higher or lower than 25 transfers, and if so, what the maximum number should be and why. The Bureau also specifically seeks information regarding how many persons would likely qualify for any such a safe harbor; whether such a safe harbor would be more or less likely to apply to particular types of businesses, as compared to others; the potential benefits for consumers if a higher or lower number were chosen; and any specific costs that would be implicated by a higher or lower figure.

The other item they are requesting comment on is whether there are ways to better balance consumer benefits and potential industry compliance burdens in light of the potential costs of setting exchange rates and potential difficulty of determining the amount to be received by a designated recipient in the foreign country in a preauthorized remittance transfer, and certain other remittance transfers requested in advance of the transfer date.  In simple language the CFPB is looking at whether the provider must give the same disclosures on preauthorized remittance transfers.  If you accept preauthorized transfers please read the proposal and let the CFPB know how they work in your bank, and how the changes and notifications will affect your pre authorized remittance transfers.  If you would like to talk about these provisions get in touch with me. 

As always, please comment.  I think it is our responsibility as bankers to let the governing bodies know what burden their rules will put on us.  Let your voice be heard. You can to that at www.regulations.gov