CFPB Issues Safe Harbor Countries List for Remittance Transfer Providers
The Consumer Financial Protection Bureau (CFPB) has published a “Safe Harbor Countries List” which provides guidance to remittance transfer providers (RTPs) about when they are exempted from some of the disclosure requirements set forth in the agency’s “Remittance Rule.”
Remittance transfers are money transfers sent internationally from individuals in one country (often immigrants) to family or friends in a different country. The size of the remittance transfer market has exploded in recent years as individuals increasingly leave their own countries to find steady work and a means of supporting their families abroad. When they do, they use RTPs to facilitate the transaction by arranging wire transfers or money orders, enabling them to send wages back to their home countries to support family or friends.
Due to the large and increasing number of consumers in the United States that use the services of remittance transfer providers to send money internationally, the Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) granted the CFPB authority to regulate such transactions where transfers are initiated by individual consumers.
The Remittance Rule implements Section 1073 of the Dodd-Frank Act, which amends the Electronic Funds Transfer Act (EFTA) to require that RTPs comply with certain transparency requirements aimed at protecting consumers. Section 919(a)(2)(A)
of the EFTA now requires providers to give senders of remittance transfers a written disclosure that states how much the designated recipient will receive in local currency, the amount to be transferred and any fees charged by the provider, and the exchange rate used in the transaction.
The CFPB published its final Remittance Rule in February 2012, which elaborates on the new disclosure requirements that RTPs are required to meet by February 2013 and provides additional compliance guidelines. The Rule also sets forth a “permanent exception” to the disclosure requirements in the amended EFTA. This permanent exception will apply whenever the laws of a recipient’s country would make it impossible for the provider to calculate the exact exchange rate used and amount that would be received in local currency at the time the transaction is authorized. For countries that fall under this exception, remittance transfer providers are permitted to disclose estimates of the amounts received and exchange rates used to consumers.
Based on comments and requests from the industry, the CFPB determined that to assist RTPs in complying with requirements it would provide a list of countries whose laws met the specifications set forth in the permanent exception. The rule specifies that providers may rely on the Safe Harbor Countries List published by the CFPB in determining whether they must fully disclose exact numbers. However, the rule also notes that regardless of whether a country or area is listed on the CFPB’s Safe Harbor Countries List, the exception does not apply when a remittance transfer provider has knowledge that the country’s laws would permit it to disclose the exact amount to consumers.
According to the CFPB’s recently published guidance, the countries and other areas currently exempted are Aruba, Brazil, China, Ethiopia, and Libya. The CFPB has determined that the laws in these countries make it impossible for RTPs in the U.S. to know exchange rates ahead of time, making it impossible to disclose precise numbers to consumers. When a consumer wants to send a remittance to Libya, for example, a remittance transfer provider like Western Union or MoneyGram may rely on the Safe Harbor Countries List and provide the consumer with only an estimate of the relevant amounts in the required disclosure statements.
Like the Remittance Rule itself, the Safe Harbor Countries List will take effect in February 2013. However, the CFPB has stressed that it anticipates that the list of countries and other areas falling under the exception will change over time as it gains more information and as foreign countries’ exchange rate laws and regulations change. In its guidance, the CFPB notes that no countries currently on the list will be removed before May 1, 2013, in order to allow some degree of certainty to remittance transfer providers. Along the same lines, the CFPB will provide 90 days of notice whenever it is considering the removal of a country or other area from the list.
The CFPB is seeking input from the public on any suggestions for countries or other areas that should be added to or removed from the Safe Harbor Countries List, and will be hosting a webinar on October 16, 2012 for those interested in learning more about the list and all of the new Remittance Rule requirements that will take effect in February.