Consumer Compliance Outlook > 2016 > Second Issue 2016

Consumer Compliance Outlook: Second Issue 2016

An Overview of the Regulation E Requirements for Foreign Remittance Transfers

By Kenneth Benton, Senior Consumer Regulations Specialist, Federal Reserve Bank of Philadelphia

Coverage

• Clarifying that U.S. military installations in foreign countries are located in a U.S. state for purposes of the rule. The rule only applies to transfers to designated recipients in foreign countries, so transfers to an installation would not be covered by the rule, while transfers from an installation to a foreign country would be covered.
• Providing guidance on how a provider can determine if a sender is making a remittance transfer primarily for personal, family, or household purposes.

Disclosures

• Adding a new disclosure to the prepayment form, when third-party fees and taxes may apply, stating that third-party fees or taxes may apply to the remittance transfer, which could result in the designated recipient receiving less than the amount disclosed.

• Extending the sunset date for the temporary provision allowing insured depository institutions and credit unions to rely on estimates from July 21, 2015, to July 21, 2020.
• Publishing a safe-harbor list of recipient countries qualifying for the permanent exception for the use of estimates in lieu of the exact amounts because the laws of these countries do not permit the provider to determine the exact amounts.

Error resolution

• Explaining that when a transfer is delayed because the provider or third party was investigating suspicious, blocked, or prohibited activity that could not have been reasonably foreseen, the delay is not an error.
• Clarifying that when a provider makes a refund because a sender provided incorrect or insufficient information that prevented the transfer from being completed as requested, any taxes actually collected and fees imposed by an intermediary may be deducted from the refund, except for the fees the intermediary will refund to the provider.

The World Bank estimates that the global market for foreign remittance transfers, in which consumers electronically transfer funds to recipients in another country, was $581.6 billion in 2015.3   The United States ranked as the top transmitter, sending $56.3 billion in transfers to recipients in foreign countries in 2014.4   Many states have money transmitter laws and examine transmitters through their state banking departments, but until Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in 2010, no federal consumer protection law directly regulated foreign remittance transfers.

During congressional hearings conducted before the law’s enactment, witnesses testified about consumer protection issues for foreign remittance transfers. According to a report of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, immigrants send “substantial portions of their earnings to family members abroad. These senders of remittance transfers are not currently provided with adequate protections under federal or state law. They face significant problems with their remittance transfers, including being overcharged or not having the funds reach intended recipients.”5   The hearings suggested the need for reliable and standard disclosures, especially for the amount of the transfer the recipient would receive.6  

In response to these concerns, Congress amended the Electronic Fund Transfer Act (EFTA) in Section 1073 of the Dodd-Frank Act to add new EFTA Section 919,7   which created four new compliance requirements for foreign remittance transfers. Section 919:

• requires disclosures about important transaction terms, error resolution, and cancellation;
• establishes error resolution procedures;
• establishes cancellation and refund policies; and
• establishes a remittance transfer provider’s liability for the acts of its agents.8  

In May 2011, the Federal Reserve Board (Board) published a rulemaking proposal to amend Regulation E and its official staff commentary to implement Section 919’s requirements.9   Because the Dodd-Frank Act transferred rulemaking authority for the EFTA from the Board to the CFPB, effective on July 21, 2011, the CFPB inherited the responsibility for completing the rulemaking.

In February 2012, the CFPB published the final rule, which largely adopted the Board’s proposal.10   The rule, which became effective on February 7, 2013, is codified in subpart B to Regulation E, 12 C.F.R. §§1005.30–1005.36. The CFPB also subsequently amended the final rule several times. This article reviews the rule, including certain changes since 2012 noted at the beginning of this article.

DEFINITIONS

Before discussing the final rule, it is helpful to review several definitions it created:11  

• Agent: An agent, authorized delegate, or affiliate of the remittance transfer provider (as determined under state or applicable law) who, in connection with a foreign remittance transfer, acts for that remittance transfer provider.
• Business day: Any day in which the offices of a remittance transfer provider are open to the public for carrying on substantially all business functions.
• Designated recipient (recipient): A person who the sender specifies and authorizes to receive a remittance transfer in a foreign country. The rule and commentary provide guidance as to when a recipient is located in a foreign country. In 2014, the CFPB clarified that a designated recipient does not include a transfer to persons at U.S. military installations in foreign countries because they are treated by the rule as being on U.S. soil.12  
• Preauthorized remittance transfer: A remittance transfer authorized in advance to recur at substantially regular intervals.
• Remittance transfer: An electronic transfer of funds conducted by a remittance transfer provider at the request of a sender to a designated recipient. Small transfers in the amount of $15 or less are excluded. Commodity and securities transfers, as defined in §1005.3(c)(4), are also excluded.
• Remittance transfer provider (provider): A person who provides remittance transfers for a consumer in the normal course of business, regardless of whether the consumer holds an account with such person.
• Sender: A consumer in a state who, primarily for personal, family, or household purposes, asks a provider to send a remittance transfer to a recipient.13   As discussed previously, the rule considers a U.S. military installation in a foreign country to be located in a U.S. state. The CFPB explained the effect of this in its small entity compliance guide: “A transfer from the U.S. to an individual or an account located on a base in a foreign country is not an international money transfer for purposes of the rule, while a transfer from the base to a foreign country is an international remittance transfer.”14  

COVERAGE

The rule applies to providers, who are defined as persons providing remittance transfers to consumers in the “normal course of business.” To facilitate compliance, the CFPB established a bright-line safe harbor to determine when an institution makes transfers in the normal course of business. Specifically, the rule provides that a person who made 100 or fewer remittance transfers in the previous calendar year and continues to make 100 or fewer remittance transfers in the current year is deemed to not be providing remittance transfers in the normal course of business.15

The CFPB also established a transition period for providers who made fewer than 100 transfers in the previous year and then make more than 100 in the current year. In that case, once the provider exceeds 100 transfers in the current year and is determined to provide remittance transfers in the normal course of business, the provider has a reasonable period of up to six months to comply with the remittance transfer requirements in subpart B of Regulation E.16   The provider is not subject to subpart B compliance requirements for any remittance transfers made during the transition period.

While the bright-line rule creates a safe harbor, it does not preclude the possibility of a provider conducting more than 100 transfers per year without triggering a determination that it does so in the normal course of business. The Official Staff Commentary (commentary) provides further guidance on the meaning of the “normal course of business” with a facts and circumstances test:

Whether a person provides remittance transfers in the normal course of business depends on the facts and circumstances, including the total number and frequency of remittance transfers sent by the provider. For example, if a financial institution generally does not make international consumer wire transfers available to customers but sends a couple of international consumer wire transfers in a given year as an accommodation for a customer, the institution does not provide remittance transfers in the normal course of business. In contrast, if a financial institution makes international consumer wire transfers generally available to customers (whether described in the institution’s deposit account agreement or in practice) and makes transfers multiple times per month, the institution provides remittance transfers in the normal course of business.17  

Providers who conduct more than 100 transfers per year but believe they are still exempt from the regulation should review the facts and circumstances test carefully to verify if they are eligible for the exemption.

DISCLOSURE REQUIREMENTS FOR PROVIDERS: §1005.31

When a sender requests a remittance transfer, the provider must deliver prepayment disclosures listing critical terms of the transaction and, if the consumer continues with the transaction after receiving the disclosures, a post-payment receipt that repeats the prepayment disclosures and includes additional information such as error resolution rights. Disclosures generally must be provided in writing.18   To reduce regulatory burden, the rule also includes an option to provide a combined disclosure prior to payment, in lieu of the prepayment disclosure and receipt.

Prepayment Disclosures
When a sender requests a remittance transfer, the provider must disclose the information listed below (as applicable) in a retainable form before payment is made.19   But if the transaction is conducted orally or entirely by mobile telephone via mobile application or text message, the prepayment disclosures may be provided orally, by mobile application, or by text message, provided that the right of cancellation (discussed later in the article) is also disclosed either orally or by mobile application or text message.20  

The following information must be disclosed using substantially similar terms:21  

• Transfer amount: The amount that will be transferred to the recipient disclosed in the currency used to fund the remittance transfer. But if other fees or taxes are imposed by someone other than the provider, the amount that will be transferred to the recipient must be disclosed in the currency in which the funds will be received.
• Transfer fees and transfer taxes: Any fees and taxes imposed on the remittance transfer by the provider and disclosed in the currency used to fund the remittance transfer.
• Total: The total amount of the transaction disclosed in the currency used to fund the remittance transfer. The total is calculated by adding the transfer amount, transfer fees, and transfer taxes.
• Exchange rate: The rate used by the provider for the transfer, rounded to at least two and no more than four decimal places. A provider must round consistently for each currency.
• Other fees and other taxes: Any covered third-party fees imposed on the remittance transfer by a person other than the provider, disclosed in the currency in which the funds will be received by the designated recipient.
• Total to recipient: The amount the designated recipient will receive, disclosed in the currency in which the funds will be received by the designated recipient and based on the exchange rate listed in the prepayment disclosure prior to any rounding. This does not include noncovered third-party fees or taxes collected by a person other than the provider regardless of whether such fees or taxes are disclosed pursuant to this section.
• Statement that noncovered third-party fees or taxes may apply to the remittance transfer and result in the designated recipient receiving less than the amount disclosed: A provider may only include this statement if such fees or taxes do or may apply, using the language of Model Forms A-30(a)–(c) as applicable or substantially similar language. The provider has the option of disclosing the amount of these fees and taxes. If the provider chooses this option, it must disclose fees and taxes in the currency in which the funds will be received using the actual information or estimates, as long as the estimates are derived from reasonable sources of information.

The disclosures for the transfer amount, transfer fees and taxes, and the total show the sender the total cost of the transaction in the sender’s currency (the amount the sender is transmitting plus any fees and taxes), while the remaining disclosures provide a breakdown of the net amount the recipient receives (the amount the sender transmitted less any applicable fees or taxes) in the currency in which the funds will be received. The exchange rate is required to enable the sender to understand the conversion from the sender’s currency to the recipient’s currency. To facilitate compliance, Model Form A-30 shows a prepayment disclosure with all of the required terms. Model Form A-33 is similar except that it does not show an exchange rate because it is based on a dollar-to-dollar transfer.

Receipt
If a consumer continues with the transfer after receiving the prepayment disclosures, a receipt must be provided (generally when payment is made) that includes all of the prepayment disclosures and these additional disclosures (using the following or substantially similar terms), as applicable:22  

• The date on which funds will be available to the designated recipient in the foreign country, using the term Date Available. Providers are not permitted to use a range of dates. If the provider does not know the exact date, it may disclose the latest date by which funds will be available. It may also indicate that funds may be available sooner than the date disclosed using the term may be available sooner.
• The name and, if provided, the telephone number and/or address of the designated recipient, using the term Recipient.
• The statement about the sender’s rights to resolve errors and cancel the transaction, using the language in Model Form A-37. If the transfer is scheduled by the sender at least three business days before the date of the transfer, the cancellation disclosure must reflect the requirements of §1005.36(c).
• The name, phone number, and website of the remittance transfer provider.
• A statement that the sender can contact the state agency that licenses or charters the remittance transfer provider and the CFPB for questions or complaints, using language set forth in Model Form A-37. The disclosure must include the name, telephone number, and website of the state agency and the CFPB. Providers can use the format of Model Forms A-32, A-34, A-35, and A-39 (as applicable) to satisfy these requirements.23  

For transactions conducted by telephone, mobile application, or text message, the receipt may be mailed or delivered to the sender no later than one business day after payment. However, for telephone transactions, if a payment was made by transferring funds from the sender’s account held by the provider, the receipt may be provided on or with the next regularly scheduled periodic statement for that account or within 30 days after payment if no periodic statement is provided.

Model Form A-31 shows a receipt based on the same transaction used in the Model Form A-30 prepayment disclosure. Model Form A-34 is similar except that it does not show an exchange rate because it is based on a dollar-to-dollar transfer.

Combined Disclosure Option
To reduce the compliance burden, the rule includes an option for providers to combine the prepayment disclosures and the receipt.24   If a provider selects this option, it must provide the combined disclosure prior to payment. If the sender proceeds with the transaction after receiving the combined disclosure, the provider must deliver written or electronic proof of payment when the transaction is paid. The proof of payment may appear on the combined disclosure or a separate piece of paper.25  

Language Requirements
When disclosures are provided in a retainable form, providers have two compliance options for the languages used for the disclosures. The first option is to provide the disclosures in English and each of the foreign languages principally used by the provider to advertise, solicit, or market remittance transfers at the office where a sender conducts the transaction or asserts an error.26   For example, if the provider’s office contains advertisements for remittance transfers in English, Spanish, and Vietnamese, providers could make disclosures in all three languages.

The second language disclosure option is to provide the disclosures in English and (if applicable) the foreign language primarily used by the sender to conduct business with the provider. For example, if the sender requests the transfer in Spanish, providers could provide the disclosures in English and Spanish. But if the sender requests the transfer in English, only disclosures in English are required.27   The commentary for §1005.31(g) provides additional guidance on the language requirements, including a detailed discussion of the factors relevant to determining the language or languages a provider principally uses to advertise, solicit, or market remittance transfer services and the language primarily used by the sender with the remittance transfer provider to conduct the transaction or assert an error. For example, if a sender requests remittance transfer information from a provider in English about sending a remittance transfer to a person in Mexico, and the provider and the sender begin communicating in Spanish, Spanish is the language primarily used to conduct the transaction.28   To facilitate compliance, some of the model forms show disclosures printed in Spanish.29  

ESTIMATES: §1005.32

Disclosures must be accurate when the sender makes a payment.30   However, because providers may not always be able to determine all of the transaction terms with certainty, the rule permits the use of estimates for certain terms in three circumstances.

Temporary Exception for Depository Institution or Credit Union
First, providers that are either an insured depository institution or a credit union may rely on estimates that are “reasonably accurate” when the exact amounts cannot be determined for reasons beyond their control.31   This exception only applies to the exchange rate and fees and taxes imposed by other persons. The transfer must also be sent from the sender’s account with the depository institution or credit union. The exception is temporary and was scheduled to sunset on July 21, 2015; however, Congress authorized the CFPB to extend it by rule for five additional years if necessary to allow depository institutions and credit unions to continue offering foreign remittance transfers.32   On September 18, 2014, the CFPB exercised this authority to extend the temporary exception until July 21, 2020.33  

The commentary for §1005.32(a)(1) provides guidance and examples for determining whether disclosures are within the institution’s control and whether estimates may be used under this exception. For example, if the exchange rate is determined when the funds are deposited in the recipient’s account and the institution does not have a correspondent relationship with the recipient’s institution, estimates for the exchange rate are permitted.34   Institutions should review the commentary carefully to determine if they may rely on estimates for any of the required disclosed terms.

This exception is important for the many depository institutions and credit unions that make foreign remittance transfers using open-network systems such as wire transfers or an international automated clearing house (ACH). In an open-network system, the provider usually does not have a relationship with all of the intermediaries involved in completing the transaction. As a result, it may be difficult for an open-network provider to disclose certain terms, such as the fees imposed by an intermediary or the taxes imposed in the recipient’s country.

This contrasts with a closed-network system, in which the provider has relationships with the other intermediaries involved in the transaction. For example, a Western Union remittance transfer initiated in the United States will likely be sent to the local Western Union office in the recipient’s country. In a closed-network system, the provider can ascertain some of the transaction terms that must be disclosed from the other intermediaries with which it has a relationship.

Permanent Exception for Transfers to Certain Countries
The second exception is permanent and applies to all providers. It permits estimates under two circumstances: 1) if a remittance transfer provider cannot determine the exact amounts when disclosure is required because of a recipient nation’s laws, or 2) the methods by which transfers are made to a recipient nation do not permit providers to know the amount of currency to be received.35   The latter circumstance will apply only to an international ACH on terms negotiated between the U.S. government and the recipient country’s government, in which the exchange rate is set by the central bank of the recipient country or other governmental authority on the business day after the provider has sent the remittance transfer.36   The commentary for §1005.32 provides helpful guidance for determining if either of the two exceptions applies.

To facilitate compliance, the CFPB established a safe-harbor list of countries that qualify for the second exception. Five countries are currently on the list: Aruba, Brazil, China, Ethiopia, and Libya.37   A provider can still use estimates for a country not on the list if the provider determined that the requirements of §1005.32(b)(1)(i) apply to the designated recipient’s country, but the provider would not obtain a safe harbor.38  

In an open-network system, the provider usually does not have a relationship with all of the intermediaries involved in completing the transaction. As a result, it may be difficult for an open-network provider to disclose certain terms ...

Methodology for Calculating Estimates
If a provider relies on estimates, it must comply with the requirements in §1005.32(c) for the methodology to be used in calculating estimates for the exchange rate, the transfer amount in the recipient’s currency, other fees and taxes, and the amount of currency the designated recipient will receive. The commentary for §1005.32(c) provides further guidance on the estimates methodology.

ERROR RESOLUTION: §1005.33

Because Congress created specific error resolution procedures for remittance transfers, which the CFPB implemented in §1005.33, the regular error resolution procedures for electronic fund transfers in §1005.11 generally do not apply to remittance transfer providers. Instead, the procedures in §1005.33 apply, subject to certain exceptions.

Issues Covered by Error Resolution
The following issues are subject to error resolution procedures:

• An incorrect amount paid by a sender unless the disclosure was an estimate and the difference results from application of the actual exchange rate, fees, and taxes, rather than any estimated amounts
• A computational or bookkeeping error made by the provider
• The failure to make funds available to a designated recipient in the amount of currency stated in the disclosure, unless any of the following apply:
  • The disclosure was an estimate and the difference results from the application of the actual exchange rate, fees, and taxes, rather than any estimated amounts.
  • The failure resulted from extraordinary circumstances outside the provider’s control that could not have been reasonably anticipated.
  • The discrepancy resulted from third-party fees or taxes collected by a person other than the provider, and the provider disclosed on the prepayment or combined disclosure that the amount received could be less because of taxes and fees.
• The failure to make funds available to a designated recipient by the date stated in the disclosure unless any of the following apply:
  • The failure resulted from extraordinary circumstances outside the provider’s control that could not have been reasonably anticipated. 39
  • The delays resulted from the remittance transfer provider’s fraud screening procedures or in accordance with the Bank Secrecy Act, Office of Foreign Assets Control requirements, or similar laws or requirements.40 
  • The sender or person acting in concert with the sender acted with fraudulent intent.41  
  • The sender provided an incorrect account number or institution information to the provider, provided certain conditions are met.42  
  • The sender requested documentation, additional information, or clarification concerning a remittance transfer.

The commentary provides additional guidance on errors. For example, if a designated recipient receives less than the amount the provider disclosed to the sender because the provider and the provider’s agent in the foreign country used different exchange rates, an error has occurred.43   Similarly, if the amount the designated recipient receives is less than the disclosed amount because of local taxes in the recipient’s country or fees assessed by the provider’s agent in the foreign country that were not disclosed, an error has occurred.44   However, discrepancies resulting from the use of estimates do not qualify as errors unless the provider failed to use the methodology for making estimates in §1005.32(c).45  

The commentary further clarifies the exception to the definition of error when providers fail to make funds available on the date specified on the receipt or combined disclosure because of extraordinary circumstances outside the provider’s control that could not have been reasonably anticipated. The commentary cites as examples “war or civil unrest, natural disaster, garnishment or attachment of the funds after the transfer is sent, and government actions or restrictions that could not have been reasonably anticipated by the remittance transfer provider, such as the imposition of foreign currency controls.”46  

In addition, the commentary clarifies the exception to the definition of error when an incorrect amount is received because of extraordinary circumstances outside the provider’s control that could not have been reasonably anticipated. The commentary provides the following examples: “war or civil unrest, natural disaster, garnishment or attachment of some of the funds after the transfer is sent, and government actions or restrictions that could not have been reasonably anticipated by the remittance transfer provider, such as the imposition of foreign currency controls or foreign taxes unknown at the time the receipt or combined disclosure is provided.”47  

Issues Not Subject to Error Resolution
The rule also identifies sender requests that do not qualify as errors triggering error resolution procedures:

• An inquiry about the status of remittance transfers, unless the funds from the transfer were not made available to a designated recipient by the disclosed date of availability
• A request for information for tax or recordkeeping purposes
• A change requested by the designated recipient
• A change in the amount or type of currency received by the designated recipient from the amount or type of currency stated in the disclosure provided to the sender if the provider relied on information provided by the sender48  

Procedure When Provider Confirms an Error Has Occurred
A provider must investigate an alleged error promptly and determine if an error occurred within 90 days of receiving an error notice.49   If the provider finds that an error has occurred, the sender must be offered the option of obtaining a refund or making funds necessary to resolve the error available to the recipient within one business day or as soon as reasonably practicable. In addition, if the error involves a failure to make funds available on the date specified on the receipt or combined disclosure, the remittance transfer provider must also refund any fees and (to the extent not prohibited by law) taxes imposed for the remittance transfer unless the sender provided incorrect or insufficient information to the remittance transfer provider. If the sender provided incorrect or insufficient information, fees imposed by an intermediary as part of the first unsuccessful attempt may be deducted from the refund, unless the intermediary ultimately will refund those fees to the provider.50  

If a financial institution receives an error notice involving an incorrect electronic fund transfer from the sender’s account held by the institution and used to fund a remittance transfer, it must investigate under the Regulation E error procedures in §1005.11, provided the institution was not the remittance transfer provider.51   However, if the institution is also the provider for the transaction, the §1005.33 procedures apply.52  

Reasserting an Error
If a provider completes an investigation that fully complies with the requirements of §1005.33, and the sender reasserts the error, the provider is not obligated to reinvestigate unless the error is asserted again after the provider responded to a sender’s request for documentation or for additional information or clarification concerning a remittance transfer.

Unauthorized Remittance Transfers
If a sender alleges an unauthorized electronic fund transfer for payment of a remittance transfer, the error resolution procedures in §§1005.6 and 1005.11 apply to the account-holding institution. For an alleged unauthorized use of a credit account to pay for a remittance transfer, the creditor must use the error resolution provisions in Regulation Z, 12 C.F.R. §1026.12(b), if applicable, and §1026.13.

Policies and Procedures and Record Retention
Providers must establish policies and procedures to comply with the requirements of the remittance transfer regulations and retain records of senders’ error notices and documentation and the provider’s responses for at least two years.

CANCELLATION AND REFUND POLICIES: §1005.34

A sender generally has 30 minutes after payment to cancel the transaction provided the recipient has not yet picked up the funds and the provider is able to identify the transaction to be canceled.53   Once a provider receives a valid cancellation request, it has three business days to refund the total amount of funds the sender provided, including fees and taxes (unless prohibited by law). The provider cannot impose fees for canceling the transaction.54  

PROVIDER’S LIABILITY FOR THE ACTS OF ITS AGENTS: §1005.35

Because remittance transfers involve multiple parties and countries, Congress was concerned about the consumer’s ability to redress errors caused by parties acting on behalf of a provider and included a provision in EFTA §919(f) that makes providers liable for the acts of their agents, authorized delegates, or affiliates. The rule implements this requirement in §1005.35 of Regulation E, under which a provider is liable for any violation of subpart B of Regulation E when an agent or authorized delegate acts on behalf of the provider. EFTA §919(f) also provides that a regulator enforcing compliance with these requirements may consider, when taking action against the provider, the extent to which the provider has policies and procedures in place, including procedures to exercise oversight of agents or authorized delegates acting on behalf of the provider.55   

TRANSFERS SCHEDULED IN ADVANCE: §1005.36

The compliance requirements for transfer scheduled in advance are slightly different with respect to the use of estimates and cancellation. When a sender requests a single transfer or the first in a series of recurring transfers to occur at least five business days before a future transfer date, the provider may provide estimates for certain terms in the prepayment disclosures and the receipt provided at the time of payment.56   If a provider gives the consumer disclosures that include estimates under this exception, a second receipt with accurate figures must be provided generally no later than one business day after the transfer has been made.57   

For each subsequent transfer in a series of recurring transfers, the provider need not deliver a prepayment disclosure. However, if certain information has changed with respect to what was disclosed with the first preauthorized remittance transfer, the provider must deliver a receipt within a reasonable period before the date of the transfer.58   If estimates were provided or an updated receipt was unnecessary, the provider must deliver an accurate receipt no later than one business day after the transfer.59   

With respect to the cancellation requirements, when transfers are scheduled at least three business days before transfer, senders may cancel the transfer if the provider receives the request at least three business days before the scheduled transfer. For single transfers scheduled at least three business days in advance or the first transfer in a series of preauthorized remittance transfers, the date of the transfer must be disclosed on the receipt.60   For subsequent transfers, senders must also be informed of future transfer dates.61  

Conclusion

The changes the CFPB has made to the remittance transfer rule since it was first published in 2012 are an important reminder that financial institutions must have procedures in place to monitor and implement regulatory changes; to test systems to ensure the changes are implemented properly, including disclosure software; and to provide adequate training for staff on the changes. Specific issues should be discussed with the CFPB and your primary regulator.

Endnotes 

• 1 Kenneth Benton, “An Overview of the New Regulation E Requirements for Foreign Remittance Transfers,” Consumer Compliance Outlook, Third Quarter 2012.
• 2 Links to the final rule and its amendments, including descriptions of the amendments, are available on the CFPB’s website at www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/electronic-fund-transfers-regulation-e/. On November 22, 2016, the CFPB issued a final rule under Regulation E on prepaid accounts, which also made minor changes to the foreign remittance transfer rule that CFPB stated are intended to continue the current application of those rules to prepaid products. 81 Fed. Reg. 83,934 (November 22, 2016).
• 3 Migration and Remittances Recent Developments and Outlook (World Bank Group, April 2016), p. 6, available at http://pubdocs.worldbank.org/en/661301460400427908/MigrationandDevelopmentBrief26.pdf.
• 4 Migration and Remittances Factbook 2016 (Third Edition, World Bank Group), p. 31, available at http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1199807908806/4549025-1450455807487/Factbookpart1.pdf.
• 5 S. Rep. 111-176, at 179 (2010)
• 6 The hearings and legislative history are discussed in the final rule for foreign remittance transfers. See 77 Fed. Reg. 6,194, 6,199 (February 7, 2012).
• 7 The Dodd-Frank Act, Section 1073. Section 919 of the EFTA is codified at 15 U.S.C. §1693o-1.
• 8 In addition to creating federal consumer protections for foreign remittance transfers, the Dodd-Frank Act provided the CFPB with the legal authority to examine and supervise larger nonbank participants, in particular consumer financial services markets. See 12 U.S.C. §5514(a)(1)(B). In September 2014, the CFPB issued a final rule implementing its supervision and examination of the larger nonbank participants in the international money transfer market, defined as nonbanks that conduct at least 1 million aggregate annual international money transfers. 79 Fed. Reg. 56,631 (September 23, 2014) (codified at 12 C.F.R. §1090.107).
• 9 76 Fed. Reg. 29,902 (May 23, 2011)
• 10 77 Fed. Reg. 6,194 (February 7, 2012)
• 11 12 C.F.R. §1005.30
• 12 Comment 30(c)—2.i
• 13 A financial institution can determine if a transfer is for personal, family, or household purposes by examining the type of account from which the transfer is made. If the account is used for personal, family, or household purposes, the institution can assume the transfer was for that purpose – unless the institution has specific information to the contrary. See Comment 30(g)—2.iii.
• 14 See International Fund Transfers Small Entity Compliance Guide, p. 14 (V. 3.0 August 22, 2014).
• 15 12 C.F.R. §1005.30(f)(2)(i)
• 16 12 C.F.R. §1005.30(f)(2)(ii)
• 17 Comment 30(f)—2(i)
• 18 The regulation has a limited exception for oral disclosures for certain oral telephone transactions and error resolution notices. See §1005.31(a)(3) and (4). Disclosures required by §§1005.31 and .36 may be provided by fax when the sender is not in the provider’s office. See Comment 31(a)(2)—5.
• 19 12 C.F.R. §1005.31(b)(1)
• 20 12 C.F.R. §1005.31(a)(5); see Comment 31(a)(5)—1.
• 21 12 C.F.R. §1005.31(b)(1)
• 22 12 C.F.R. §1005.31(b)(2)
• 23 Comment 31(b)(2)—4
• 24 12 C.F.R. §1005.31(b)(3)
• 25 Comment 31(b)(3)—1
• 26 12 C.F.R. §1005.31(g)
• 27 Comment 31(g)—1.ii
• 28 Comment 31(g)—2.i
• 29 See Model forms A-38, A-39, A-40, and A-41.
• 30 12 C.F.R. §1005.31(f)
• 31 12 C.F.R. §1005.32(a)
• 32 12 U.S.C. §1693o–1(a)(4)(B)
• 33 12 C.F.R. §1005.32(a)(2). 79 Fed. Reg. 55,970 (September 18, 2014)
• 34 Comment 32(a)(1)—2.i
• 35 12 C.F.R. §1005.32(b)(1)
• 36 77 Fed. Reg. at 6,245-46
• 37 78 Fed. Reg. 66,251 (November 5, 2013)
• 38 12 C.F.R. §1005.32(b)(1)(ii)
• 39 12 C.F.R. §1005.33(a)(1)(iv)(A)
• 40 12 C.F.R. §1005.33(a)(1)(iv)(B). The CFPB clarified in a later amendment that this includes a provider or third party investigating potentially suspicious, blocked, or prohibited activity that could not have been reasonably foreseen. See Comment §1005.33(a)—7.
• 41 12 C.F.R. §1005.33(a)(1)(iv)(C)
• 42 12 C.F.R. §1005.33(a)(1)(iv)(D)
• 43 Comment 33(a)—3.i
• 44 Comments 33(a)—3.ii and 33(a)—3.iii
• 45 Comment 33(a)—3.v
• 46 Comment 33(a)—6
• 47 Comment 33(a)—4
• 48 12 C.F.R. §1005.33(a)(2)(iv)
• 49 12 C.F.R. § §1005.33(c)(1)
• 50 Comment 33(c)—12
• 51 12 C.F.R. §1005.33(f)(1)
• 52 For transfers funded by an extension of credit, different rules apply. See 12 C.F.R. §1005.33(f)(2).
• 53 12 C.F.R. §1005.34(a)
• 54 12 C.F.R. §1005.34(b)
• 55 A related question is the effect of the final rule on wire transfers covered by Article 4A of the Uniform Commercial Code (UCC). Article 4A establishes the legal framework for the rights and responsibilities of the parties to a wire transfer, including intermediaries. However, Article 4A does not apply to transactions covered by the EFTA, and consumer remittance transfers are now governed by Section 919 of the EFTA as a result of the Dodd-Frank Act amendments to the EFTA. Therefore, if a provider was held liable to the consumer under §1005.35 for an error committed by an agent, the provider could not look to the UCC to determine its rights against the agent. Other aspects of consumer remittance transfers previously governed by Article 4A are also affected. This issue was discussed in the CFPB’s 2012 final rule. See 77 Fed. Reg. at 6,211-12. In response to concerns about this issue for Fedwire transfers, the Board amended §210.25 of its Regulation J to clarify that Article 4A applies to Fedwire transfers. As a result of the Board’s amendment, which became effective on July 12, 2012, consumer remittance transfers conducted through Fedwire will still be subject to Article 4A unless there is a conflict with Section 919 of the EFTA, in which case the EFTA will prevail. See 77 Fed. Reg. 21,854, 21,856 (April 12, 2012).
• 56 12 C.F.R. §1005.36(a)(1)(i)
• 57 12 C.F.R. §1005.36(a)(1)(ii)
• 58 12 C.F.R. §1005.36(a)(2)(i)
• 59 12 C.F.R. §1005.36(a)(2)(ii)
• 60 12 C.F.R. §1005.31(b)(2)(vii)
• 61 12 C.F.R. §1005.36(d)