Compliance Blog

Earlier this week, the CFPB issued a final rule on remittance transfers. As you all may recall, the CFPB’s remittance rule, found in Subpart B of Regulation E, applies to transfers of funds requested by a sender to send money to a person or business located in a foreign country, which is conducted by the credit union in the normal course of business. The final rule makes two key changes to the rules for these types of transfers.

First, is the definition of what it means for a credit union to provide remittances in the “normal course of business.” Section 1005.31(f)(2) explains a credit union is not providing remittances in the normal course of business if it provided 100 or fewer remittance transfers in the previous calendar year and provides 100 or fewer remittance transfers in the current calendar year. Effective July 21, 2020, these thresholds will increase to 500.

As the rule takes effect mid-year, the CFPB also provided some guidance on the transition period. For those credit unions who provided 500 or fewer remittance transfers in 2019 and provide 500 of fewer remittance transfers in 2020, new section 1005.31(f)(2)(iii) explains the credit union “may cease complying with the requirements of this subpart with respect to any remittance transfers for which payment is made” on or after July 21, 2020. The error resolution, cancellation and record retention requirements will continue to apply to transfers that were covered before the effective date. The new commentary provides additional examples of how the transition periods work.

Second, are the rules for providing estimates. Section 1005.32(a) currently provides a temporary exception for insured institutions, including insured credit unions, to provide estimates for four disclosures:

1. the exchange rate; 
2. the transfer amount, in the currency the designated recipient will receive and based on the disclosed exchange rate; 
3. covered third-party fees, in the currency the designated recipient will receive and based on the disclosed exchange rate; and
4. the total amount that will be received by the designated recipient, in the currency in which it will be received and based on the disclosed exchange rate.

In order to qualify for the exception, the insured institution must not be able to determine the exact amounts for reasons beyond its control and the remittance transfer is sent from the sender’s account with the institution. Estimates of these disclosures may be provided in the pre-payment disclosure and receipt or the combined disclosure. This section of the rule is set to expire July 21, 2020.

The final rule essentially makes this exception permanent but changes some of the conditions for qualifying for the exception. For the exchange rate, new section 1005.32(b)(4) explains insured institutions may provide an estimate for the four disclosures listed above if:

1. the exact exchange rate cannot be determined at the time the disclosure must be provided;
2. the insured institution made 1,000 or fewer remittance transfers in the prior calendar year to the particular country for which the designated recipients of those transfers received funds in the country’s local currency; and
3. the remittance transfer is sent from the sender’s account with the insured institution.

For covered third-party fees, new section 1005.32(b)(5) explains insured institutions may provide an estimate in accordance with section 1005.32(c) for disclosures 3 and 4 listed above if:

1. the exact covered third-party fees cannot be determined at the time the disclosure must be provided;
2. the insured institution made 500 or fewer remittance transfers in the prior calendar year to that designated recipient’s institution, or a U.S. statute or regulation prohibits the insured institution from being able to determine the exact covered third-party fees; and
3. the remittance transfer is sent from the sender’s account with the insured institution.

To help credit unions understand these changes, the CFPB also issued an executive summary and an unofficial redline. NAFCU members can also keep an eye out for our forthcoming final regulation.

These amendments do not change the CFPB’s current position that in light of the COVID-19 pandemic, it will not take supervisory or enforcement action against insured institutions for providing estimates for remittance transfers occurring on or after July 21, 2020, and before January 1, 2021.