Remittance transfer companion proposal made final
AML AND COMPLIANCE NEWS |
The Consumer Financial Protection Bureau (Bureau) published a final rule on Feb. 7, 2012 amending Regulation E regarding remittance transfers. On the same day, the Bureau issued a remittance transfer companion proposal seeking comments on whether to provide additional safe harbors for smaller institutions and how the rule should apply to transfers set up more than three business days in advance of the transfer date. The companion proposal became final on Aug. 7, 2012 and will be effective on Feb. 7, 2013 along with the initial final rule on remittance transfers.
Before we get into the details of this companion final rule, here is the background on the initial final rule taken from our April 2012 newsletter article:
The final rule defines remittance transfer as follows: “Remittance transfer—(1) General definition. A ‘remittance transfer’ means the electronic transfer of funds requested by a sender to a designated recipient that is sent by a remittance transfer provider. The term applies regardless of whether the sender holds an account with the remittance transfer provider, and regardless of whether the transaction is also an electronic fund transfer, as defined in section 1005.3(b).” The provisions of the rule provide for:
(i) Disclosures concerning the price of a transfer (fees), the amount of currency to be delivered to the recipient, and the exchange rate, prior to and at the time of payment by the consumer for the transfer.
(ii) Federal rights regarding transaction cancellation periods (generally, the consumer will have 30 minutes after making payment to cancel the transaction).
(iii) Investigation and remedy of errors by remittance transfer providers.
(iv) Standards for the liability of remittance transfer providers for the acts of their agents (providers are responsible for the mistakes made by certain people who work for them).
This final rule essentially modifies the final rule published in February 2012 that amended Regulation E to create protections over remittance transfers sent by consumers in the United States to individuals and businesses in foreign countries.
The final rule revises the following aspects of the February 2012 final rule:
Remittance transfer provider
A person is subject to the requirements of the remittance transfer rule if deemed to be a remittance transfer provider. The definition of remittance transfer provider is ‘‘any person that provides remittance transfers for a consumer in the normal course of its business, regardless of whether the consumer holds an account with such person.” The commentary to the definition defined normal course of business very generally. This final rule provides a safe harbor clarifying normal course of business for purposes of determining if a person is deemed to be a remittance transfer provider. The final rule states, “a person is deemed not to be providing remittance transfers for a consumer in the normal course of its business if the person provided 100 or fewer remittance transfers in the previous calendar year and provides 100 or fewer remittance transfers in the current calendar year.”
The commentary provides clarification and states, “a person that qualifies for the safe harbor in section 1005.30(f)(2)(i) is not a remittance transfer provider, and is thus not subject to the requirements of subpart B of Regulation E.” Further guidance from the commentary states, “…for the purposes of determining whether a person qualifies for the safe harbor, the number of remittance transfers provided includes any transfers that are excluded from the definition of remittance transfer due simply to this safe harbor. In contrast, the number of remittance transfers provided in a calendar year does not include any transfers that are excluded from the definition of remittance transfer for reasons other than the safe harbor, such as the small value transactions and securities and commodities transfers that are excluded from the definition.”
The final rule allows for a transition period of six months for complying with the remittance transfer rules. Therefore, providers have six months after exceeding the 100 transaction threshold to comply with the rules. The commentary provides specific examples for considering all the facts and circumstances in applying the safe harbor and transition period.
Disclosures for transfers scheduled before date of transfer
Estimates on disclosures are permitted in certain circumstances and may be used on the prepayment disclosure, the receipt disclosure and the combined disclosure. This final rule modifies the February final rule and stipulates that estimates can be used when “a sender schedules a one-time transfer or the first in a series of pre-authorized remittance transfers five or more business days before the date of the transfer. If a provider gives disclosures that include estimates under this exception, the final rule also requires that the provider give the sender an additional receipt with accurate figures (unless a statutory exception applies), which generally must be provided no later than one business day after the date on which the transfer is made.”
In addition, this final rule eliminates the requirement that providers mail or deliver a prepayment disclosure for each subsequent transfer in a series of pre-authorized transfers; however, a receipt must be sent within a reasonable time prior to a subsequent transfer if certain disclosed information is changed from the first pre-authorized remittance transfer. The receipt may contain estimates but the final rule requires the provider to give an accurate receipt to a sender after a transfer is made.
Disclosure rules for remittance transfers scheduled three business days in advance
This final rule revises various sections and associated commentary regarding the disclosures provided to senders of remittance transfers scheduled at least three business days before the date of the transfer and of certain pre-authorized remittance transfers. The rule requires the provider to disclose the date of transfer in the receipt provided when payment is made. This provision also applies to the initial transfer in a series of pre-authorized transfers. The transfer date must be disclosed on any subsequent receipts provided with respect to that transfer (the date of transfer will enable the sender to calculate the date the right to cancel will expire).
For subsequent pre-authorized remittance transfers, “the final rule requires the remittance transfer provider to disclose the date or dates on which the provider will make those subsequent transfers in the series, with certain other information. The final rule provides providers some flexibility in how they may make these disclosures to senders. However, for subsequent pre-authorized remittance transfers for which the date of transfer is four or fewer business days after payment is made for the transfer, the final rule requires disclosure of future dates of transfer in the receipt provided for the first transfer in the series.”
The February final rule adopted a cancellation policy for remittance transfers. A sender has 30 minutes after payment is made to cancel the transfer. For a remittance transfer that is scheduled at least three business days before the date of transfer, the provider must cancel the remittance transfer if the request to cancel is received at least three business days before the scheduled date of the transfer and the request to cancel enables the sender to identify the transfer to be cancelled. This final rule does not change these cancellation periods but provides revisions and associated commentary on the content and format of the disclosures that are required to be provided to senders. Essentially, this final rule permits “providers to describe on a receipt both the three-business-day and 30-minute cancellation periods and either describe the transfers to which each deadline applies, or alternatively, use a checkbox or other method to designate which cancellation period is applicable to the transfer.”
This final rule was effective Feb. 7, 2012.
The Bureau recently issued a listing of countries that qualify for an exception whereby estimates for certain disclosures are permitted. In this instance, the countries listed (Aruba, Brazil, China, Ethiopia and Libya) have laws that do not permit a determination of the exact total amount the recipient will receive and the applicable exchange rate, taxes and fees. The final rule permits remittance transfer providers to estimate those amounts. The Bureau intends to revise this list of countries as needed and send an alert notifying those who sign up to receive such an alert that there has been a change to the list. View the Bureau’s safe harbor list of countries.