On Jan. 22, the Consumer Financial Protection Bureau delayed the implementation of its final international remittance transfer rule to give the public time to comment on proposed changes intended to address community bankers’ concerns. As many as half of the community banks offering international remittances would have been unable to comply with the original rule and would likely have dropped out of the business. The rule originally was to become effective Feb. 7 but now it has been delayed indefinitely, with the new effective date to be announced later this year.
In November, the Bureau announced it would be proposing amendments to address the three primary issues that CFPB Journal reported in our post here. When the CFPB issued its first final rule on remittance transfers in February 2012, industry advocates posed three problems with the rule:
First, the final rule established a 180-day period, after the transaction, in which the customer could claim an error. This made banks liable for incorrect account information and encouraged fraud. Suppose the customer returns three months after a transaction saying payment was never received. When the banker produces the account number given, the customer realizes they gave the wrong information. Now, the bank must try to recover the funds from the receiving bank. And, if the account at the receiving bank happens to have been closed, then the sending bank is out the money. It’s not hard to imagine a fraud scheme with the same story line.
The second issue was the rule’s requirement that banks disclose international taxes to the customer. Since there is no global list of national, provincial or municipal taxes for a community bank to reference, it would have been difficult for them to comply.
The third issue was the rule’s effective date.
In December, the Bureau officially proposed changes to the original final rule which reflected the changes requested by the banking industry.
The Bureau proposes it exercise its exception authority to eliminate the requirement to disclose foreign taxes at the regional, state, provincial or local level. Now the rule would only require banks to disclose foreign taxes imposed on the remittance transfer by a country’s central government.
The CFPB also revised the error resolution provisions of the rule. In situations where a sender provides incorrect or insufficient information resulting in non-delivery of the remittance transfer, the bank is no longer liable for the lost funds. Provided the bank can demonstrate that the sender provided the incorrect account number and that the sender had notice that the funds could be lost, the bank would only be required to attempt to recover the funds. It would not be liable for the funds if those efforts were unsuccessful.
In December, the Bureau also proposed to temporarily delay the effective date of the final rule to allow the industry to comment on the proposed solutions. On Jan. 22, the CFPB further delayed implementation of the final rule to allow the industry additional time to comment. Formal comments can be made here.