Compliance Blog

Written by Steve Van Beek

How many others had their Tuesday altered by the CFPB's final rule?  Glad I'm not alone - and I'm also still hoping the CFPB sets some sort of regular schedule for their proposed and final rules so that compliance officers - Like Sally - don't have to fear when the next shoe is going to drop.  I don't think that is too much to ask.  

***

Remittances Final Rule(s).  The CFPB announced their final rule to the public via a press release.  The latest final rule - including the safe harbor discussion - is available here.  However, it is very important to remember that the prior final rule also needs to be consulted as it contains the details on which remittance transfers are covered by the new requirements (we'll have more on this in a future blog post).

To prevent confusion between the final rules - it may be best to refer to the rules by when they were finalized:

• February Final Rule (417 pages)
• August Final Rule (168 pages)   

The CFPB has also indicated their intent to provide a "small business compliance guide" to help with implementation issues.  From Page 4: 

"As noted in the February Final Rule, the Bureau intends to continue working with consumers, industry, and other regulators in the coming months regarding implementation issues.  In the near future, the Bureau expects to release a small business compliance guide and a list of countries that providers may rely on for purposes of determining whether estimates may be provided under certain circumstances.  The Bureau also expects to conduct a public awareness campaign to educate consumers about the new disclosures and their other rights under the Dodd-Frank Act with respect to remittance transfers."

Hopefully, this small business compliance guide will include a "Fact Sheet for Compliance Officers" which clearly explains which transactions are considered remittances transfers and subject to the new rules and which are not.  Hopefully.

***

Safe Harbor.  The August Final Rule provides a safe harbor for credit unions providing 100 or fewer remittance transfers in a calendar year.  Additionally, you would have had to perform 100 or fewer remittance transfers in the prior calendar year as well to obtain the safe harbor.  And, credit unions will need to track the number of remittances transfers during each year as they will need to comply with the requirements within six months - the transition period - of making their 101st remittance transfer.  

Thus, in order for credit unions to fall under the safe harbor - your credit union would need to provide 100 or fewer remittance transfers in the prior year and 100 or fewer in the current year.   This safe harbor language will be located in 12 CFR 1005.30(f) (page 143):

"(f) Remittance transfer provider.  (1) General definition. “Remittance transfer provider” or “provider” means 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.

(2) Normal course of business.  (i) Safe harbor.  For purposes of paragraph (f)(1) of this  section, a person is deemed not to be providing remittance transfers for a consumer in the normal  course of its business if the person:  

(A) Provided 100 or fewer remittance transfers in the previous calendar year; and  

(B) Provides 100 or fewer remittance transfers in the current calendar year.

(ii) Transition period.  If a person that provided 100 or fewer remittance transfers in the previous calendar year provides more than 100 remittance transfers in the current calendar year, and if that person is then providing remittance transfers for a consumer in the normal course of its business pursuant to paragraph (f)(1) of this section, the person has a reasonable period of  time, not to exceed six months, to begin complying with subpart B.  Compliance with subpart B will not be required for any remittance transfers for which payment is made during that reasonable period of time."   

The CFPB determined that credit unions that perform 100 or fewer remittance transfers per year are not providing the transfers in the "normal course of business" and, thus, are not covered by the remittance transfer requirements. 

Transition Period.  As noted in 12 CFR 1005.30(f)(2)(ii), if your credit union qualifies for the safe harbor and subsequently makes more than 100 remittance transfers - you'd be given a six month transition period from the 101st transaction with which to comply with all the requirements.  In other words, that 101st transaction is going to be very costly.  

Compliance Date.  Of course, this transition period applies for future years (where credit unions had the safe harbor but then lose it).  If your credit union conducts more than 100 transactions currently, you'd need to comply with all the requirements of the February Final Rule and the August Final Rule by February 7, 2013.    

***

100 Transfers.  You may be thinking the 100 transfers is pretty low.  And, you would be right.  The CFPB knew this would be a low number, but they determined - from their perspective - that it was appropriate.  

Not 100 Members.  Not 100 Accounts.  The rule is transaction based and not related to how many members or how many accounts conduct remittance transfers.  Thus, credit unions will need to count the actual transactions to determine if the safe harbor applies or not.

As few as 9 Members.  I had to pass along this from the CFPB's preamble to the August Final Rule (page 29):

"Similarly, the Bureau believes that because it is not uncommon for consumers who send money abroad to do so 12 or more times per year….....One hundred transfers per year is equivalent to an average of approximately two remittance transfers per week, or the number of remittance transfers needed to satisfy the needs of a handful of customers sending money abroad monthly." (emphasis added).

When we argue that regulators just don't get it - this will have to be part of the discussion.  If you had 9 members sending monthly remittance transfers - you'd be conducting 108 transfers a year - and your safe harbor would go poof!