Dear Boards of Directors and Chief Executive Officers:
Earlier this month, the Consumer Financial Protection Bureau issued a final rule (opens new window) amending parts of Regulation E (opens new window), which implements the Electronic Fund Transfer Act. The final rule, which is effective on July 21, 2020, increases the normal course of business safe harbor threshold from 100 remittance transfers to 500 remittance transfers in Subpart B to Regulation E (the Remittance Rule). The final rule also creates two new permanent exceptions – one for third-party fees and one for foreign exchange rates. These permanent exceptions permit credit unions to use estimates in required disclosures if they meet certain conditions.
Normal Course of Business Safe Harbor Threshold
The final rule amends Regulation E to increase the normal course of business safe harbor threshold from 100 to 500 remittance transfers annually. As a result, if a credit union provided 500 or fewer remittance transfers in the previous calendar year and provides 500 or fewer remittance transfers in the current calendar year, that credit union is not considered to be providing remittance transfers in the normal course of business. Therefore, the credit union is not a “remittance transfer provider” and not subject to the Remittance Rule.1
Permanent Exceptions to Estimate Covered Third-Party Fees and the Exchange Rate
Under the final rule, credit unions may disclose certain estimated third-party fees for a particular remittance transfer to a designated recipient’s institution if:
- the credit union made 500 or fewer transfers to the designated recipient’s institution in the prior calendar year;
- at the time the disclosures must be given, the credit union cannot determine the exact amount of the covered third-party fees that will be imposed on that particular transfer; and
- the remittance transfer is sent from the sender’s credit union account, provided the sender’s account does not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account.
Also under the final rule, credit unions may disclose an estimate of the exchange rate for a transfer to a country if:
- the remittance payment is made in the local currency of the designated recipient’s country;
- the credit union processing the transaction made 1,000 or fewer remittance payments to that country in the prior calendar year; and
- the credit union cannot determine the exact exchange rate for that particular remittance transfer.
Regarding the covered third-party fees exception, the final rule adds an exception to allow a credit union to estimate such fees when another federal statute or regulation prohibits it from determining the exact amount of covered third-party fees, and the credit union meets the other conditions in the final rule. The CFPB is also developing improved procedures to consider requests to make changes to the countries list.
The final rule provides credit unions that exceed the thresholds in these new permanent exceptions a reasonable amount of time to come into compliance, not to exceed the later of six months after the applicable threshold is crossed or January 1 of the following year.
Credit unions should read the provisions of the final rule (opens new window) and Regulation E (opens new window) to determine the effect on their operations. You can find additional resources on the NCUA’s Consumer Compliance Regulatory Resources page and on the CFPB’s website (opens new window).
If you have questions about this information, please contact NCUA’s Office of Consumer Financial Protection at 703.518.1140 or ComplianceMail@ncua.gov, or contact your NCUA regional office or state supervisory authority.
Rodney E. Hood
1 Beginning on July 21, 2020, if a credit union that provided 500 or fewer remittance transfers in the previous calendar year provides more than 500 remittance transfers in the current calendar year, generally the credit union has a reasonable period of time, not to exceed six months, to begin complying with this rule. Compliance with the rule will not be required for any remittance transfers for which payment is made during that reasonable period of time.