CFPB Proposes Remittance Rule Amendments

Posted on April 17th, 2014 in E-Commerce, Federal Issues, Payments By BuckleySandler

On April 15, the CFPB issued a proposed rule and request for comment to extend a temporary exception to Regulation E’s requirement that remittance transfer providers disclose certain fees and exchange rates to consumers. Pursuant to Regulation E, as amended to implement section 1073 of the Dodd-Frank Act, insured depository institutions are permitted to estimate certain third-party fees and exchange rates in connection with a remittance transfer until July 21, 2015, provided the transfer is sent from the sender’s account with the institution, and the institution is unable to determine the exact amount of the fees and rates due to circumstances outside of the institution’s control. The CFPB is proposing to exercise its statutory authority to extend this exception for an additional five years, until July 21, 2020. The agency explained that, based on its outreach to insured institutions and consumer groups, allowing the initial temporary exception to lapse would negatively affect the ability of insured institutions to send remittance transfers. Comments on the proposed rule are due within 30 days of its publication in the Federal Register.

The proposed rule also includes several clarifications and technical corrections to the CFPB’s final remittance rule and official commentary, which were subsequently amended or delayed—including in August 2012 and January 2013—leading to a May 2013 revised final rule. In this latest round of proposed amendments, the CFPB is seeking to address concerns about the remittance rule’s applicability to U.S. military installations abroad. Because the rule does not expressly address transfers to such installations, the CFPB now seeks (i) comments on whether to treat locations on U.S. military installations abroad as being located within a State or a foreign country for the purposes of the rule, (ii) data on the relative number of transfers sent to and from individuals and/or accounts located on U.S. military installations abroad, and (iii) comments on the appropriateness of extending any clarification regarding U.S. military installations to other U.S. government installations abroad, such as U.S. diplomatic missions.

With respect to transfers from accounts (as defined under Regulation E), the CFPB is also proposing amendments to make clear that whether a transfer is for personal, family, or household purposes—and thus, whether the transfer could be a remittance transfer subject to the rule—is determined by ascertaining the purpose for which the account was established, rather than the purpose of the particular transfer. The proposed amendments would therefore clarify that the rule does not apply to, e.g., transfers from an account that was established as a business or commercial account or an account owned by a business entity. In addition, the proposed rule seeks to clarify that faxes are considered writings for purposes of the remittance rule, and that, in certain circumstances, a remittance transfer provider may give oral disclosures after receiving a written remittance inquiry from a consumer. The CFPB is also proposing to revise the rule’s error resolution requirements, including with regard to errors based on the sender’s provision of incorrect or insufficient information. Specifically, the proposed amendment would clarify that, where such errors occur, the remittance transfer provider may not deduct its own fee from the amount refunded or applied towards a new transfer.

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