Earlier this month the Consumer Financial Protection Bureau (CFPB) issued a Notice of Proposed Rulemaking (Proposed Rule) to amend the Remittance Rule in Regulation E, which implements the Electronic Fund Transfer Act. Comments on the Proposed Rule are due no later than January 21, 2020.
The Proposed Rule follows the CFPB's latest request for information issued earlier this year. Industry participants have raised concerns regarding, among other things, the effects of the expiration of a statutory exception on July 21, 2020 that allows institutions to disclose estimates instead of exact amounts to consumers. In its proposal, the CFPB states that its proposed changes to the Rule are intended to mitigate these effects.
1) Raising the normal course of business safe harbor threshold from 100 remittance transfers to 500 transfers annually
The Remittance Rule requires a remittance transfer provider to disclose the exact exchange rate that applies to a remittance transfer and the exact amount to be received by the recipient of the transfer. The safe harbor provision specifies that a provider that provides 100 or fewer remittance transfers in each of the previous and current calendar years does not provide remittance transfers in the "normal course of its business." Currently, providers that provide 100 or fewer transfers are exempted from the rule. The Proposed Rule would raise the threshold to 500 transfers per year.
2) Permitting insured depository institutions and insured credit unions to use estimates in required disclosures
The Remittance Rule's temporary exception that permits certain insured institutions to estimate certain fees, other disclosures, and the exchange rate that applies to remittance transfers will expire on July 21, 2020. The exception applies if 1) the institution is insured; 2) the institution cannot determine the exact third-party fees for a remittance transfer to the recipient's institution at the time it must provide the applicable disclosures; 3) the institution made 500 or fewer remittance transfers in the prior calendar year to that designated recipient's institution; and 4) the remittance transfer is sent from the sender's account with the insured institution. The Proposed Rule would permanently allow for these exceptions.
3) Requesting comments on the Safe Harbor Countries List
The Remittance Rule provides a permanent exception that allows a provider to estimate the exchange rate and certain amounts a recipient will receive if "the laws of the recipient country do not allow determination of the exact amounts to be disclosed" or "if the method by which transactions are made in the recipient country does not permit a remittance transfer provider to determine the exact amounts that must be disclosed." The CFPB maintains a Safe Harbor List of five countries, Aruba, Brazil, China, Ethiopia, and Libya, whose laws prevent providers from determining, at the time the required disclosures must be provided, the exact exchange rate. The CFPB noted that in its prior RFI several providers have requested that potential regions or countries be added to the Safe Harbor List. This request for comment seeks industry input on the process for adding countries to the Safe Harbor List and on countries that should be added to the list.
In issuing the Proposed Rule, the CFPB voiced concerns that should the temporary exceptions expire, insured institutions may cease providing remittance transfers to recipients with accounts at certain institutions or may pass along the cost of compliance to consumers.