CFPB Proposal Prompts Customers to Contact Providers Before Regulators With Remittance Questions

With remittances, when in doubt, check it out.

But don’t head straight to the regulators.

That seems to be the message conveyed by the Consumer Financial Protection Bureau (CFPB), which on Friday (Sept. 20) issued a proposed rule with what it termed “a narrow amendment to disclosure requirements for certain international money transfers, or remittances.”

The proposed amendment would, in a nutshell, offer individuals “clearer” information on various inquiries that would be better handled by the remittance companies instead of those same consumers taking their concerns to the CFPB or to state regulators. The amendment tweaks the industry practices under the terms of the Electronic Fund Transfer Act and Regulation E. Those mandates require remittance companies to give senders a disclosure at the time of payment, including on a receipt. The disclosures must include contact information for those state regulators and the CFPB.

The latest proposal comes after a circular issued by the CFPB warning remittance transfer providers about making false claims regarding the cost and speed of international money transfers, which would be violations of federal law.

First Line of Questioning

By first dealing with the providers for issues tied to the actual remittances, the CFPB said, “the proposal can potentially save consumers time by resolving their inquiries more quickly. Additionally, it may reduce the number of inquiries sent to states and the CFPB that would be more appropriately addressed initially by the providers themselves.”

As is standard practice, a commentary period will now follow, lasting until Nov. 4.

In the proposed rule itself, we find that the CFPB contends that the current rules “likely causes consumers to contact the CFPB with questions that are more appropriately directed to the remittance transfer provider in the first instance, and indeed, such questions can often only be answered by the remittance transfer provider because they are customer inquiries related to a particular transfer for which the CFPB lacks knowledge.”

As many as 35% of the telephone calls received by the CFPB’s toll-free number have been tied to these types of queries. The agency said that in testing various models of disclosure with consumers, “the participants also all indicated that they found the disclosures clear, including about whom they could contact if they had questions or concerns.”

As for who’s affected, the CFPB estimated that in the U.S, “of the 9,280 depository institutions, we expect that 483 will be covered by the proposed rule and will need to change the statement on relevant disclosures.”

Elsewhere, the CFPB said it “believes that large money transmitters are likely to facilitate compliance for their agents, achieve substantial benefits to scale, and widely leverage the systems and software investments required for compliance across a large base of agent locations. Therefore, the CFPB assumes the cost of compliance with the proposed rule will be negligible for money transmitter agents. The CFPB requests comment on this assumption about compliance costs for money transmitter agents.”

Factoring in the average revenues per transaction, employee time to adjust the disclosures and the impact to business operations, the CFPB said that it “expects the one-time cost to be less than the revenue from one transfer for depositories and less than the revenue from twelve transfers for non-depository money transmitters.”

The impact to the CFPB and consumers, per the agency’s own estimates, can be significant: The CFPB’s Office of Consumer Response estimates that the CFPB receives approximately 1,800 calls per month with questions related to remittance transfers that it is not best placed to answer.

“For these calls, the average call time is between 7 and 10 minutes. Using 8.5 minutes (the midpoint of 7 and 10) and 1,800 calls per month, the CFPB estimates the total time spent per year is equivalent to 183,600 minutes, or 3,060 hours where consumers call the CFPB’s toll-free number seeking answers that the CFPB is not able to provide. Therefore, we estimate that the proposed amendment to Regulation E will save consumers about 3,060 hours, annually.”