The disclosure threshold for financial institutions is now increased for international money transfers, which exempts a greater number of institutions from the rule. Additionally, impacted banks and credit unions now have greater disclosure flexibility, thanks to recent action by the Consumer Financial Protection Bureau (CFPB).
On May 11, 2020, CFPB issued a Final Rule amending the Electronic Funds Transfer Act (Regulation E), as it applies to remittance transfers. Regulation E requires certain financial institutions (those exceeding a transaction volume threshold) to make disclosures to consumers about the transfer. These disclosures include the exact exchange rate, the exact amount of any covered-third party fees, and the exact amount that the designated recipients will receive.
What is a remittance transfer?
The electronic transmittal of money from U.S. consumers to recipients in foreign countries is called a remittance transfer. Examples include cash-to-cash transfers, cash-to-account transfers, international wire transfers, international automated clearing house (ACH) transfers, and certain prepaid card transactions. There is no dollar amount cap on the size of a remittance transfer.
Changes to the rule
Starting July 21, 2020, the following amendments take effect:
- Increases to the Remittance Transfer Rule’s normal course of business safe harbor threshold from 100 remittance transfers to 500 remittance transfers annually; and
- Creates two new tailored permanent exceptions that permit insured institutions to disclose estimates of certain fees and exchange rates if certain conditions are met.
How does this impact my financial institution?
Beginning on July 21, 2020, a person will not be subject to the Remittance Transfer Rule if the person provided 500 or fewer remittance transfers in the previous calendar year and provides 500 or fewer remittance transfers in the current calendar year. Thus, if a person provided 500 or fewer remittance transfer in 2019 and provides 500 or fewer remittance transfers in 2020, the person qualifies for the safe harbor and is not subject to the Remittance Transfer Rule in 2020 beginning on July 21, 2020.
The safe harbor will also apply to the person’s first 500 remittance transfers in 2021. However, at the 501st remittance transfer, the person has a reasonable period of time, not to exceed six months, to begin complying with the Remittance Transfer Rule.
Additionally, the Remittance Transfer Rule has two exceptions to the consumer disclosure requirements that permit certain remittance transfer providers to disclose estimates instead of exact amounts in certain circumstances.
1. Institutions may estimate the exchange rate and other disclosures that depend on the exchange rate if they meet certain conditions, such as:
- The remittance transfer provider is an insured institution.
- The insured institution cannot determine the exact exchange rate for the remittance transfer at the time it must provide applicable disclosures.
- In the prior calendar year, the insured institution did not exceed the exception’s threshold with regard to the particular country to which it is sending the remittance transfer.
- The remittance transfer is sent from the sender’s account with the insured institution.
If an insured institution is permitted to provide an estimated exchange rate for a remittance transfer under the new exception, the insured institution is permitted to provide estimates for the transfer amount, amount of any covered third-party fees disclosed in the currency that the designated recipient will receive and the total to recipient.
2. A new permanent exception permits insured institutions to estimate covered third-party fees and other disclosures that depend on covered third-party fees if all the following conditions are met:
- The remittance transfer provider is an insured institution.
- The insured institution cannot determine the exact covered third-party fees required to be disclosed for the remittance transfer at the time it must provide applicable disclosures.
- Either (a) the insured institution made 500 or fewer remittance transfers to the designated recipient’s institution in the prior calendar year or (b) a United States federal statute or regulation prohibits the insured institution from being able to determine the exact covered third-party fees required to be disclosed for that remittance transfer.
- The remittance transfer is sent from the sender’s account with the insured institution.
If this new exception applies, an institution may provide estimates for covered third party fees required and may also estimate the total to recipient. The Final Rule provides additional commentary on all of the required conditions, which all impacted institutions should review in detail.
Need help evaluating your institution’s remittance transfer level and the applicability of these new provisions? RKL’s Financial Services Industry Group includes a team of dedicated compliance experts with experience helping banks and credit unions maintain compliance with this and other regulatory requirements. Contact your RKL advisor or reach out through the form below.
