The Electronic Fund Transfer Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act, establishes certain protections for consumers sending international money transfers, or remittance transfers. The Bureau of Consumer Financial Protection (CFPB) remittance rule in Regulation E (Remittance Rule) implements these protections. On May 11, 2020, the CFPB amended Regulation E and the official interpretations of Regulation E to provide tailored exceptions to address compliance challenges that insured institutions may face in certain circumstances upon the expiration of a statutory exception that allows insured institutions to disclose estimates instead of exact amounts to consumers. That exception expires on July 21, 2020. In addition, the CFPB increased a safe harbor threshold in the Remittance Rule related to whether a person makes remittance transfers in the normal course of its business. This Remittance Rule, as amended, is final and effective as of July 21, 2020.

The Remittance Rule provides three significant consumer protections: it specifies the information that must be disclosed to consumers who send remittance transfers, including information related to the exact cost of a remittance transfer; it provides consumers with cancellation and refund rights; and it specifies procedures and other requirements for providers to follow in resolving errors.

Consumers in the United States send billions of dollars in remittance transfers to recipients in foreign countries each year. The term “remittance transfers” is sometimes used to describe consumer-to-consumer transfers of small amounts of money, often made by immigrants supporting friends and relatives in other countries. The term may also include, however, consumer-to-business payments of larger amounts, for instance, to pay bills, tuition, or other expenses.

Money services businesses (MSBs) as well as banks and credit unions send remittance transfers on behalf of consumers. MSBs, however, provide the overwhelming majority of remittance transfers for consumers in the United States. For example, in the CFPB's October 2018 Remittance Rule Assessment Report, the CFPB observed that in 2017, MSBs provided approximately 95.5% of all remittance transfers for consumers. The average amount of a remittance transfer sent by MSBs on behalf of consumers was approximately $381.

Banks and credit unions generally send fewer remittance transfers on behalf of consumers than MSBs. The CFPB found that in 2017, banks and credit unions conducted 4.2% and 0.2% of all remittance transfers, respectively. However, the average amount that banks and credit unions transferred was much greater than the average amount transferred by MSBs. For example, based on the CPPB's analysis, the average transfer size of a bank-sent remittance transfer was more than $6,500. As such, based on information it received as part of its assessment of the Remittance Rule, while banks and credit unions provide a small percentage of the overall number of remittance transfers, because the average amount of the transfers they send is higher than MSBs, banks and credit unions collectively sent approximately 45% of the Dollar volume of all remittance transfers sent for consumers in the United States (43% attributed to banks and 2% attributed to credit unions).

In addition, MSBs differ from banks and credit unions in the means by which they provide remittance transfers. Traditionally, MSBs sending remittance transfers have predominantly relied on a storefront model and a network of the MSBs’ employees and agents (such as grocery stores and neighborhood convenience stores). Because MSBs receive and disburse funds either through their own employees or agents, the payment system by which MSBs facilitate remittance transfers is typically referred to as a “closed network” payment system. A single entity in this system (the MSB) exerts a high degree of end-to-end control over a transaction. Such level of control means, among other things, that an entity that uses a closed network payment system to send remittance transfers can disclose to its customers precise and reliable information about the terms and costs of a remittance transfer before the entity sends the remittance transfer on its customers’ behalf.

In contrast to MSBs, banks and credit unions have predominantly utilized an “open network” payment system made up of the correspondent banking network to send remittance transfers on behalf of consumers. The open network payment system based on the correspondent banking network lacks a single, central operator. This feature distinguishes it from closed network payment systems. The correspondent banking network is a decentralized network of bilateral banking relationships between the world’s tens of thousands of banks and credit unions. Generally speaking, a correspondent banking network is made up of individual correspondent banking relationships, which consist of bilateral arrangements under which one bank (correspondent) holds deposits owned by other banks (respondents) and provides payment and other services to those respondent banks. Most institutions only maintain relationships with a relatively small number of correspondent banks but can nonetheless ensure that their customers’ remittance transfers are able to reach a wide number of recipient financial institutions worldwide. Banks and credit unions can reach these institutions even if the banks and credit unions do not have control over, or a relationship with, all of the participants involved in the transmission of a remittance transfer. The decentralized nature of the correspondent banking system has presented certain challenges to the ability of banks and credit unions to disclose precise and reliable information about the terms and costs of remittance transfers to its customers before these institutions send remittance transfers on their customers’ behalf.

The CFPB noted that some methods of sending cross-border money transfers, including remittance transfers, include elements of closed and open payment networks and some providers may also rely on both types of systems to facilitate different transfers. For example, the CFPB noted that banks may offer low-cost international fund transfers to its commercial clients through the use of the automated clearing house (ACH) system, and a minority of banks also offer international ACH to their consumer clients.

Prior to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), remittance transfers fell largely outside of the scope of Federal consumer protection laws. Section 1073 of the Dodd-Frank Act amended EFTA by adding new section 919, which created a comprehensive system for protecting consumers in the United States who send remittance transfers to individuals and businesses in foreign countries. EFTA applies broadly in terms of the types of remittance transfers it covers. EFTA section 919(g)(2) defines “remittance transfer” as the electronic transfer of funds by a sender in any State to designated recipients located in foreign countries that are initiated by a remittance transfer provider; only small dollar transactions are excluded from this definition. EFTA also applies broadly in terms of the providers subject to it, including MSBs, banks, and credit unions.

The CFPB adopted subpart B of Regulation E to implement EFTA section 919 through a series of rulemakings that were finalized in 2012 and 2013, and which became effective on October 28, 2013. The CFPB subsequently amended subpart B several times.

This final Remittance Rule, as amended on May 11, 2020 and effective on July 21, 2020, amends several elements of the Remittance Rule, as follows:

The CFPB evaluated potential impacts of the Remittance Rule as amended, and identified the following:

Please see the full release of the amended Remittance Rule here.