If you send money to foreign countries as a member service, you may have to comply with the new remittance transfers provisions under Regulation E (the Electronic Fund Transfer Act) issued by the Consumer Financial Protection Bureau (CFPB). The requirements take effect on February 7, 2013.
This notice briefly explains what is covered by CFPB’s final rule, what disclosures are required, and what you need to do to ensure compliance.
What Is Covered?
A “remittance transfer” is an electronic transfer of funds requested by a sender to a designated recipient and sent by a remittance transfer provider. The final rule applies to a remittance transfer that is:
- More than $15;
- Made by a consumer in the United States; and
- Sent to a person or business in a foreign country.
If you facilitate international wire transfers or international automated clearinghouse (ACH) transfers on behalf of your members, you may be subject to the new requirements.
Which Credit Unions Are Exempt?
Credit unions that facilitate low volumes of international wire/ACH transfers during their normal course of business will earn a safe harbor exemption.
According to CFPB, your credit union will be exempt from its new requirements if you provided 100 or fewer remittance transfers in the previous calendar year and if you provide 100 or fewer remittance transfers in the current calendar year.
You are expected to track the number of remittance transfers conducted annually to confirm eligibility for the safe harbor exemption. When you are no longer eligible for the safe harbor exemption, you will have up to six months to begin complying with CFPB’s regulatory requirements.
If you exceed the safe harbor exemption, you must begin complying with the regulatory requirements on February 7, 2013.
What Are CFPB’s New Requirements?
Pre-payment Disclosure – The final rule requires you to provide a disclosure to your member when a remittance transfer request is made, but prior to payment for the transfer. The disclosure must list (as applicable):
- The transfer amount to be sent to a designated recipient;
- Transfer fees and taxes;
- The total transaction amount; and
- The exchange rate.
Some flexibility is allowed in how the required information is presented.
Receipt – The final rule requires you to provide a receipt or proof of payment to your member that repeats the information in the initial disclosure. The receipt also must indicate (as applicable):
- The date that funds will be available to the designated recipient;
- The recipient’s name and, if provided, telephone number and/or address;
- Statements about cancellation and error resolution;
- Your name, telephone number(s), and website address;
- Contact information for questions or complaints; and
- The transfer date of any transaction scheduled three or more business days in advance.
Additional Requirements – The final rule contains additional requirements for any subsequent transfer in a series of preauthorized remittance transfers.
All disclosures must be clear and conspicuous. Disclosures generally must be provided in writing, but can be delivered electronically, if the sender electronically requests the remittance transfer. Written and electronic disclosures usually must be in a retainable form.
The information must be grouped together and presented in close proximity to other required content. Written disclosures must be provided on the front of a page on which the disclosure is printed. Disclosures provided in writing or electronically must be at least eight-point font, except for disclosures provided via mobile application or text message. Disclosures must be in equal prominence to each other.
Disclosures must be made in English and, if applicable, any foreign language(s) you use to advertise, solicit, or market money transfer services.
Cancellation and Error Resolution – The final rule also prescribes that:
- Members generally have 30 minutes to cancel a transfer after making payment. You must be able to identify the sender and particular transfer, and funds must not have already been received by, or deposited into an account of, the designated recipient. Members can get their money back, at no additional cost, within three business days of you receiving the cancellation notice.
- You must timely investigate a member’s notice about an error or problem with a transfer. For certain errors, a member can get a refund of the money that was not delivered as promised. Otherwise, the designated amount can be made available to the recipient without additional cost to resolve an error.
- You are responsible for mistakes made by certain people who work for you. If you are a remittance transfer provider and ineligible for the safe harbor exemption, you must comply with the disclosure requirements, even if an agent or other entity performs certain functions. It does not matter whether you have an agreement with a third party that transfers or makes funds available to a designated recipient.
What Should You Do?
- Track the number of international wire transfers and international ACH transfers you complete each year.
- Be familiar with the new remittance transfer requirements.
- Modify your data processing systems, as necessary, to generate proper terms and content for the required disclosures.
- Develop and maintain written policies and procedures to ensure compliance with the error resolution provisions. Your policies and procedures should specifically address:
- A member’s notice of error (oral and written);
- A request for additional information or clarification;
- The time limits for investigation, reporting results, and correcting an error (if one occurred);
- A member’s request for documentation you used to make a decision; and
- Records retention related to error investigations.
If you have questions, please contact NCUA’s Office of Consumer Protection (703-518-1140 or OCPMail@NCUA.gov), your regional office, or state supervisory authority.
2 The number of transfers is not related to your asset size or complexity, number of members, or number of accounts engaged in money transfer services. Instead, you must count the actual number of international transactions to determine whether the safe harbor exemption applies. For example, if one member routinely sends money outside the United States twice a month beginning in January, you will have provided 24 remittance transfers by the end of December for that calendar year. If nine members routinely send money abroad once a month over the same timeline, you will have provided 108 transactions for that year.
3 CFPB intends to continue working with consumers, industry, and other regulators regarding implementation issues.
4 While specific terms are defined in CFPB’s final rule, substantially similar terms may be used instead. Estimates may be provided for certain amounts, if exact amounts cannot be determined and the money transfer is sent from your member’s account. Estimates must be based on one of the approaches discussed in the final rule. The use of estimates is a temporary provision and will expire on July 21, 2015. However, the final rule contains permanent exceptions for transfers to certain countries.
5 Regulation E includes sample language in Model Form A-37 of Appendix A to subpart B. You may use language substantially similar to the model form.