Earlier this week, the Consumer Financial Protection Bureau ("Bureau") published, in the Federal Register, a final rule setting forth an entirely new regulatory scheme for companies that provide remittance transfers, including banks.1 Remittance transfers are electronic transfers of money from U.S. consumers to recipients in foreign countries. Among other things, the Bureau's final rule: (1) requires that specific disclosures be given to each "sender" of a remittance transfer showing how much money will be received by the recipient of the transfer in local currency; (2) enables senders to dispute errors for up to 180 days following a remittance transfer; and (3) allows senders to cancel remittance transfer transactions within 30 minutes.

BACKGROUND

Section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act added a new section 919 to the Electronic Fund Transfer Act ("EFTA") to require certain disclosures and error resolution procedures with respect to remittance transfers.2 The new rule implements these EFTA provisions.

REQUIRED DISCLOSURES

The final rule requires a remittance transfer provider to provide to each "sender" of a remittance transfer a prepayment disclosure describing: (i) the amount that will be transferred to the designated recipient, in the currency in which the remittance transfer is funded, using the term "Transfer Amount" or a substantially similar term; (ii) any fees and taxes imposed on the remittance transfer by the provider, in the currency in which the remittance transfer is funded, using the terms "Transfer Fees" for fees and "Transfer Taxes" for taxes, or substantially similar terms; (iii) the total amount of the transaction in the currency in which the remittance transfer is funded, using the term "Total" or a substantially similar term; (iv) the exchange rate used by the provider for the remittance transfer using the term "Exchange Rate" or a substantially similar term; (v) the amount that will be received by the designated recipient in the currency in which the funds will be received, but only if, fees and taxes are imposed by a person other than the remittance transfer provider; (vi) any fees and taxes imposed on the remittance transfer by a person other than the provider, in the currency in which the funds will be received by the designated recipient, using the terms "Other Fees" for fees and "Other Taxes" for taxes, or substantially similar terms; and (vii) the amount that will be received by the designated recipient, in the currency in which the funds will be received, using the terms "Total to Recipient" or a substantially similar term.

The remittance transfer provider must also provide the sender with a receipt showing all of the information above required for the prepayment disclosure, as well as: (i) the date in the foreign country on which funds will be available, using the term "Date Available" or a substantially similar term; (ii) the name and, if provided by the sender, the telephone number and/or address of the designated recipient, using the term "Recipient" or a substantially similar term; (iii) a statement about the rights of the sender regarding the resolution of errors and cancellation, using language set forth in the final rule or substantially similar language (for any remittance transfer scheduled by the sender at least three business days before the date of the transfer, a statement about the rights of the sender regarding cancellation as set forth in the final rule); (iv) the name, telephone number(s), and Web site of the remittance transfer provider; (v) a statement that the sender can contact the state agency that licenses or charters the remittance transfer provider with respect to the remittance transfer and the Bureau for questions or complaints using language set forth in the final rule or substantially similar language; and (vi) the name, telephone number(s) and Web site of the state agency that licenses or charters the remittance transfer provider and the name, toll-free telephone number(s) and Web site of the Bureau.

Under the final rule, banks and credit unions are only required to provide a "reasonably accurate estimate of the foreign currency to be received" if the transfer is conducted through an account that the sender holds with the bank or credit union and the bank or credit union is unable to know the exact amount of foreign currency that will be received. This safe harbor would sunset on July 21, 2015. In addition, all remittance transfer providers, bank and non-bank, may provide estimates for those countries where local law or other circumstances do not permit the provider to determine a precise exchange rate.

The Bureau provides model forms for the required disclosures, and also has indicated that remittance transfer providers may provide the initial "pre-payment" disclosure and the receipt at the same time, prior to payment, as a combined disclosure. See Figure A (initial disclosure), Figure B (receipt), and Figure C (combined disclosure) below.

The disclosures must be provided to the sender clearly and conspicuously, in writing and in a form that the sender can keep, with some exceptions for transactions conducted through mobile applications or text message. Disclosures must be provided in English and in each of the foreign languages principally used by the remittance transfer provider at the office from which the transfer is being initiated or, if applicable, in the foreign language used by the sender to conduct business with the remittance transfer provider.

The final rule allows electronic disclosures, as long as they are in a form that may be retained by the sender, where the sender requests the transfer electronically. In addition, the final rule would allow verbal disclosures for telephone transactions.

ERROR RESOLUTION PROCEDURES

The Bureau's final rule sets forth error resolution procedures that take the place of the EFTA's existing error resolution procedures for electronic fund transfers. See EFTA §§ 908 and 909 (EFTA error resolution and unauthorized transaction provisions). Under the final rule, if a remittance transfer provider receives notice that an error occurred from a sender within 180 days of the promised delivery of the remittance transfer, the provider must, within 90 days, conduct an investigation and report the results of the investigation to the sender within three days of completion. Where the provider determines that an error has occurred, the provider is required to offer the sender the option of obtaining a refund or making available to the designated recipient the funds necessary to resolve the error. The provider is only required to refund fees where the provider failed to make funds available to the designated recipient by the date of availability specified in the receipt or combined disclosure, unless the sender provided incorrect or insufficient information to the remittance transfer provider. See Figures B and C.

Providers are required to provide senders with a notice of their dispute rights. The Bureau has provided a model form for this purpose. See Figure D.

SENDER RIGHT OF CANCELLATION AND REFUND

The final rule requires that remittance transfer providers afford senders a 30-minute cancellation period for all remittance transfers, except those that are scheduled at least three business days prior to the date of transfer. In electing a 30-minute window, instead of the 24-hour period originally proposed, the Bureau indicated its belief that 30 minutes strikes the appropriate balance between providing the sender an opportunity to ensure that the transfer is sent as he or she intended and the expeditious processing of remittance transfers.

Footnotes

1 See http://www.gpo.gov/fdsys/pkg/FR-2012-02-07/pdf/2012-1728.pdf .

2 Remittance transfers of less than $15 are not subject to the final rule. 12 C.F.R §1005.30(e)(2)(i).

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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