United States: Remittance Transfer Rule Enforcement Heats Up

Last Updated: September 10 2019
Article by Dustin N. Nofziger

Via a consent order issued last week, the Bureau of Consumer Financial Protection (CFPB) settled its first enforcement action based on violations of the Remittance Transfer Rule (“Rule”) with Maxitransfers Corp. (“Maxi”), a company serving U.S. consumers seeking to send money overseas. The CFPB’s first-of-its-kind enforcement action emphasizes the importance of compliance with the Rule, and should be of interest to providers of remittance transfers including depository institutions, traditional money services businesses, and FinTech companies.

The Rule, which was first promulgated in 2012, implements the Electronic Fund Transfer Act (EFTA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Rule generally applies to remittance transfers and to remittance transfer providers.  For purposes of the Rule, a “remittance transfer” is an electronic transfer of funds over $15 requested by a U.S. consumer primarily for personal, family, or household purposes to a recipient who will receive the transfer in a foreign country. To qualify as a “remittance transfer,” a transfer must be sent by a “remittance transfer provider,” which is a person or entity that provides remittance transfers in the normal course of its business.  

By way of background, the Rule imposes three major obligations on remittance transfer providers. First, a remittance transfer provider must generally provide clear and conspicuous pre-payment disclosures and receipts to remittance transfer senders that contain specific information about remittance transfers, such as information about fees and taxes, exchange rates, and the amount to be received by the recipient. Relevant to the Maxi consent order, these disclosures must include the amount that will be transferred to the recipient in the currency in which the remittance transfer is funded (e.g., U.S. Dollars), using the term “Transfer Amount” or a substantially similar term, as well as the amount that will be received by the recipient in the currency in which funds will be received (e.g., Mexican Pesos), using the term “Total to Recipient” or a substantially similar term. Second, the Rule provides a remittance transfer sender with the right to cancel certain remittance transfers for up to 30 minutes after the remittance transfer sender makes payment, as well as the concomitant right to a refund. Third, the Rule contains error resolution procedures that require remittance transfer providers to investigate alleged errors and to remedy errors.

CFPB data suggests that 95.6% of remittance transfers are conducted by non-bank money services businesses such as Maxi. Using six retail branches and a network of more than 1,600 third-party agent locations in U.S. locations such as grocery stores and pharmacies, Maxi sent approximately 14.5 million remittance transfers for U.S. consumers from October 2013 until May 2017. According to the findings and conclusions in the CFPB’s consent order, which Maxi neither admitted nor denied, Maxi violated the Consumer Financial Protection Act of 2010 by deceptively stating in a disclosure form provided to remittance transfer senders that Maxi was not responsible for errors made by its agents. To the contrary, the Rule specifies that remittance transfer providers such as Maxi are responsible for errors made by their agents.  The consent order also alleges that Maxi failed to comply with the Rule by failing to develop and maintain written policies and procedures designed to ensure compliance with the Rule’s error resolution requirements; by failing to report the results of its error investigations to remittance transfer senders and by failing to note remittance transfer senders’ rights to request the documents on which Maxi relied in making its error determinations; by failing to use terms specified by the Rule in its disclosures (i.e., by using the term “Dollars” instead of “Transfer Amount” or a substantially similar term, and by using the term “Amount MXP (Mexican Pesos)” instead of “Total to Recipient” or a substantially similar term); and by failing to treat its international bill-pay services, which facilitated the real-time transfer of funds from U.S. consumers to pay bills in foreign countries, as remittance transfers covered by the EFTA and the Rule.

The consent order requires Maxi to develop a comprehensive written plan for ensuring compliance with the Rule.  It also requires Maxi to pay a civil money penalty of $500,000 to the CFPB. 

The CFPB’s enforcement action against Maxi suggests that the CFPB (and in the case of community banks, the prudential banking regulators) may more aggressively enforce the Rule going forward. Depository institutions, traditional money services businesses, and FinTech companies that qualify as “remittance transfer providers” should carefully assess their policies, procedures, and disclosures and consult with legal counsel to ensure full compliance with the EFTA and the Rule.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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