Late last month, the Consumer Financial Protection Bureau (CFPB) issued a new Consumer Financial Protection Circular (Circular) which provides guidance about when a remittance transfer provider may be in violation of the prohibition on unfair, deceptive or abusive acts or practices in the Consumer Financial Protection Act (CFPA) when making certain representations in their marketing about the speed and cost of sending a remittance transfer. In its press release, the CFPB noted that the Circular was part of the continued effort by the CFPB to "rein in junk fees" and "spur competition." According to CFPB Director Rohit Chopra, "consumers should not be paying junk fees on international money transfers that are advertised as free."
The majority of the remittance transfers sent are electronic transfers of funds sent by consumers in the United States to recipients in other countries. Remittance transfers also include cross-border consumer-to-business payments for goods or services. It is estimated that consumers in the United States send tens of billions of dollars in remittance transfers to recipients in other countries. Remittance transfers are governed by the Electronic Fund Transfer Act (EFTA) and its implementing regulation, Regulation E.
EFTA and Regulation E require specific disclosures to be made to consumers at certain points of the remittance transfer including disclosures about the amount that will be transferred to the recipient in the designated currency, any fees or taxes that will be collected and the exchange rate. However, compliance with those disclosure requirements does not negate the requirement to refrain from misleading marketing practices. The CFPB noted that it has identified problems with the transparency and accuracy in marketing practices about the speed of a remittance transfer, including the use of the terms "instantly," in "30 seconds" or "within seconds" when in reality the transfers were taking much longer than that. The CFPB also noted that it has received customer complaints concerning remittance transfer providers marketing their services as "no fee" or burying the fact that the "no fee" was only limited or temporary in scope, when in actuality, there were fees associated for currency conversation or for withdrawing funds.
In the Circular, the CFPB unequivocally states that it would be deceptive to market a remittance transfer as being delivered within a certain time frame, when the transfer actually takes longer to be made available to recipients and to market a transfer as "no fee" when in fact a fee is charged. It warns remittance transfer providers to take care not to engage in deceptive acts or practices in their marketing claims about the speed or cost of a remittance transfer and points to a recent consent order as illustrative. In that action, the CFPB entered into a consent order with a remittance transfer provider which resulted in a $1.5 million civil monetary penalty and $1.5 million in redress to customers resolving allegations of violations of the CFPA, including the provider's purported failure to disclosure the date of fund availability or exchange rate.
Given the CFPB's interest in "junk fees," we can expect to see examiners scrutinizing any marketing materials which may result in an increase in enforcement.
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