Remittance Transfer Rule

On May 11, the CFPB issued its Final Rule on Regulation E’s remittance transfers requirements, effective July 21, 2020.

In advance of the expiration of a statutory exception in July 2020, the Final Rule amendments allow financial institutions to provide estimates of certain fees and the exchange rates related to remittance transfers if they meet certain conditions. The Final Rule also increases the threshold that determines whether an entity is subject to the Remittance Transfer Rule.

Estimates:

Exchange Rate:

The Final Rule adds a new permanent exception that permits insured institutions to estimate the exchange rate and other disclosures that depend on the exchange rate if certain conditions are met. This exception applies to a remittance transfer to a particular country if the designated recipient will receive funds in that particular country’s local currency and all the following conditions are met:

  • The remittance transfer provider is an insured institution;
  • The insured institution cannot determine the exact exchange rate for the remittance transfer at the time that it must provide applicable disclosures;
  • In the prior calendar year, the insured institution did not exceed the exception’s threshold (1,000 or fewer) with regard to the particular country to which it is sending the remittance transfer, and
  • The remittance transfer is sent from the sender’s account held with the insured institution.

If the new exception applies to a remittance transfer, the insured institution is permitted to estimate the exchange rate that must be disclosed pursuant to 12 CFR 1005.31(b)(1)(iv). Additionally, if an insured institution is permitted to provide an estimated exchange rate for a remittance transfer under the new exception, the insured institution is permitted to provide estimates for the following disclosures if the estimated exchange rate affects the amount of the disclosure:

  • The amount that will be transferred to the designated recipient disclosed in the currency that the designated recipient will receive, inclusive of covered third-party fees (i.e., “Transfer Amount” as described in 12 CFR 1005.31(b)(1)(v))
  • The amount of any covered third-party fees disclosed in the currency that the designated recipient will receive (i.e., “Other Fees” as described in 12 CFR 1005.31(b)(1)(vi))
  • The amount the designated recipient will receive disclosed in the currency that the designated recipient will receive, after deducting covered third-party fees (i.e., “Total to Recipient” as described in 12 CFR 1005.31(b)(1)(vii))

Third-Party Fees

The Final Rule also adds a new, permanent exception that permits insured institutions to estimate covered third-party fees and other disclosures that depend on covered third-party fees if certain conditions are met. This new, permanent exception applies to a remittance transfer to a particular designated recipient’s institution if all the following conditions are met:

  • The remittance transfer provider is an insured institution
  • The insured institution cannot determine the exact covered third-party fees required to be disclosed for the remittance transfer at the time it must provide applicable disclosures
    • The insured institution does not have a correspondent relationship with the designated recipient’s institution
    • The designated recipient’s institution does not act as the insured institution’s agent
    • The insured institution does not have an agreement with the designated recipient’s institution with respect to the imposition of covered third-party fees on the remittance transfer
    • The insured institution does not know at the time the disclosures are given that the only intermediary financial institutions that will impose covered third-party fees on the transfer are those institutions that have a correspondent relationship with or act as an agent for the insured institution, or have otherwise agreed upon the covered third-party fees with the insured institution
  • Either (a) the insured institution made 500 or fewer remittance transfers to the designated recipient’s institution in the prior calendar year, or (b) a United States federal statute or regulation prohibits the insured institution from being able to determine the exact covered third-party fees required to be disclosed for that remittance transfer
  • The remittance transfer is sent from the sender’s account held with the insured institution

Normal Course of Business Threshold:

Effective July 21, 2020, the Final Rule increases the normal course of business (§1005.30(f)) safe harbor threshold to 500 remittance transfers annually. Beginning on that date, an institution will not be subject to the Remittance Transfer Rule if it provided 500 or fewer remittance transfers in the previous calendar year and provides 500 or fewer remittance transfers in the current calendar year. For the 501st and any subsequent remittance transfers, the institution will need to determine if it is a remittance transfer provider, and if so, the institution has a reasonable period of time, not to exceed six months, to begin complying with the Remittance Transfer Rule.

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