Today's Trends in Credit Regulation

CFPB to Supervise Nonbank International Money Transfer Providers
By Webb McArthur

The Consumer Financial Protection Bureau recently proposed a rule that would allow it to supervise certain nonbank "larger participants" that provide international money transfer services. The proposed rule would bring new oversight to the nonbank international money transfer industry, and would supplement recently-effective CFPB rules that provide consumer protections in connection with international "remittance transfers".

CFPB Rules Governing Remittance Transfers

Prior to the passage of Dodd-Frank, federal consumer protection regulations did not generally cover international money transfers. The Dodd-Frank Act expanded the scope of the Electronic Fund Transfer Act (EFTA) to provide protections for consumers who send "remittance transfers". A "remittance transfer" is an electronic transfer of money from a consumer in the U.S. to a person or business in a foreign country. The transfer is most often made by wire but can be by automated clearing house or other means.

The CFPB's Remittance Transfer Rule, found at Subpart B to CFPB Regulation E, which implements these new consumer protections took effect on October 28, 2013. The rule requires that companies that provide remittance transfers - including banks, thrifts, credit unions, and broker-dealers - provide certain disclosures to consumers and comply with other requirements for transfers of more than $15 so long as the entity provides over 100 transfers annually.

Under the Remittance Transfer Rule certain basic consumer protections are provided, including:

  • Disclosures. Remittance transfer providers must generally disclose information about the exchange rate, fees, the amount of money that will be delivered abroad, and the date the money will be available. Consumers generally receive these disclosures in English and sometimes in other languages. 12 CFR § 1005.31.
  • Ability to Cancel. Typically, consumers have at least 30 minutes after payment to cancel a remittance if it has not yet been received. If they cancel within the 30-minute window, they will get their money back regardless of the reason the consumer wants to cancel. 12 CFR § 1005.34.
  • Error Correction. Remittance transfer providers are held accountable for certain types of errors. If a remittance sender reports a problem with a transfer within 180 days, the provider must generally investigate and correct certain errors. A sender may be able to get a refund or have the transfer sent again free of charge if the money was not received. Companies that provide remittance transfers may also be responsible for mistakes made by their agents. 12 CFR § 1005.33.

CFPB Proposed Rule to Supervise Larger Nonbank International Money Transfer Providers

The recently-proposed rule takes the protections one step further by allowing the Bureau to supervise certain large nonbank international money transmitters. The Dodd-Frank Act gave the CFPB authority to supervise "larger participants" in consumer financial markets as defined by rule. This proposed rule brings under the CFPB's supervision authority certain nonbank international money transfer providers by defining them as "larger participants." If the rule is finalized, the proposal would be the Bureau's fourth larger participant rule. The first three rules involved markets for student loan servicing, debt collection, and consumer reporting.

As proposed, the rule would subject any nonbank international money transfer provider that provides more than one million aggregate international money transfers annually to the CFPB's supervisory authority. The one million aggregate transfer threshold would be calculated by averaging transfers over a three year period (if in business for less than three years, it would be calculated by creating an annual estimate using weekly figures). Transfers would be counted in determining larger participants regardless of amount, varying from the $15 requirement under the Remittance Transfer Rule. The proposed rule also provides for calculation of transfers by affiliated companies. According to the proposal, entities would remain larger participants for 2 years after the first day of the tax year in which the person has last met the applicable test.

The Bureau estimates that nonbank providers transfer approximately $50 billion annually through about 150 million individual international money transfers. As drafted the proposed rule would bring approximately 25 larger participants in the international money transfer industry under the CFPB's supervision. Those 25 providers are responsible for an estimated 140 million transfers annually (with an estimated volume of $40 billion), which would amount to about 90% of the market. Providers who are not considered "larger participants" subject to the proposed rule remain subject to the requirements of the Remittance Transfer Rule.

Under the proposal, CFPB examiners can supervise larger nonbank international money transfer providers by gathering reports and regularly communicating with regulated entities as well as conducting on-site examinations for compliance with consumer laws. The CFPB has indicated it will use the same examination procedures for international money transfer providers that it uses for bank remittance transfer providers. Examiners will ensure that these nonbanks comply not only with the consumer protection requirements of the Remittance Transfer Rule requirements, but also other consumer laws, including Regulation E and Dodd-Frank's prohibition on unfair, deceptive, or abusive acts or practices.

Webb McArthur is an associate in the Maryland office of Hudson Cook, LLP. Webb can be reached at 410-865-5424 or by email at

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