ABA Supports Proposed Changes to Remittance Rule

Comment Intake
Bureau of Consumer Financial Protection
1700 G Street NW
Washington, D.C. 20552

Dear Sir or Madam:

The American Bankers Association (ABA) appreciates the opportunity to comment on the Consumer Financial Protection Bureau’s (Bureau) proposal to make two key changes to Regulation E, the rule that implements the Electronic Fund Transfer Act, particularly the subchapter on remittances. The Bureau has proposed these changes to the regulation to mitigate the negative consequences for consumers that would occur due to the expiration of a temporary exception allowing depository institutions to estimate certain fees and the exchange rate for transfers. In addition, the Bureau is proposing to change the threshold on the number of transfers that determines whether a provider is offering remittance transfers in the normal course of business and therefore is subject to all the rule’s requirements.

ABA supports both changes, which are consistent with recommendations we made last summer in response to the Bureau’s Request for Information on Adopted Regulations and New Rulemaking Authorities.

In a separate letter written in conjunction with a coalition of financial trade associations, we comment more specifically on the proposed additions to the rule that would let depository institutions estimate both the exchange rate and applicable fees. In this letter, we address only the proposal to increase the threshold that determines whether a remittance transfer provider is sending remittances in the normal course of business. ABA continues to believe—as we have noted since our initial comment on the remittances proposal—that the threshold should be increased, which will significantly reduce burdens for low-volume remittance transfer providers while minimally impacting those consumers that will be affected. Equally important, the Bureau should take comfort in the fact that providers that are no longer subject to the rule will still provide their customers with information about the fees and charges associated with sending a remittance and will also take steps to help consumers when there is a problem. Moreover, without the associated costs and time needed for compliance, more institutions, particularly those in rural areas, are likely to offer remittances to their customers.

Impact of the Increased Threshold

As the Bureau estimates in the proposal, raising the threshold from 100 to 500 transfers will reduce burden for approximately 414 banks. Importantly, this impacts only 0.8% of all bank transfers.Since bank transfers, according to the Bureau’s figures, are less than 5% of all remittances sent during a given year, the number of consumers affected by this change is minimal.
Discussions with ABA members that would be impacted by the change support the remittance proposal. Several small volume remittance providers stated that the costs of compliance had convinced them to exit the business. Those that had exited the business said they might reconsider re-offering remittances to consumers if the threshold was increased. While few reported efforts to manage transfers to stay beneath the current threshold, it does occur. For example, a bank with a customer that was doing a high volume of remittances (the majority of the bank’s remittance transfers) explained the bank had been considering terminating the customer relationship to avoid exceeding the threshold, a step that would not be needed if the threshold increases.

It is critical to note that while a bank might be covered by the safe harbor and therefore not subject to the error resolution or disclosure mandates of the rule, our members report that they will still assist customers when there are errors and will also provide information about the transaction when consumers send remittances. Many community banks indicated that the exemption simply will give them flexibility in how they provide information to customers, particularly with respect to the formatting of the disclosures. As far as error resolution, they will continue to resolve errors to assist customers as they did before the rule went into effect. As we have noted since the initial remittance proposal, and as we pointed out in a comment letter filed with the Bureau on April 9, 2012, setting too low a threshold discourages providers which is counter-intuitive, especially when the study conducted by the Board of Governors of the Federal Reserve determined that few consumers had raised complaints about the way remittances were handled prior to the adoption of the rule.

Transition

To cover those situations where a provider that was covered by the rule but now qualifies for the safe harbor under the increased threshold, the Bureau would add a new comment, 30(f)-2.v, to provide that transfers made before a provider qualified for the safe harbor would still be subject to the disclosure and error resolution requirements of the rule.

The ABA appreciates this proposed additional guidance. The ability to transition without disruption is important. ABA recommends the Bureau also clarify that the existing transition rule that applies when a bank exceeds the threshold, 12 CFR 1005.30(f)(2)(ii), continue to apply so that when a bank goes above the threshold, it has six months to come into compliance.

Conclusion

ABA appreciates the Bureau’s efforts to alleviate burden and ensure that community banks continue to be able to provide remittances to their customers. Since the proposed threshold increase will only affect a small percentage of all consumers sending remittances, and since banks will continue to provide customers with information about their transactions and assist customers resolve errors, the impact is further minimized. The key benefit to consumers is that it is likely that more banks will consider offering remittances to customers, a step that can be extremely beneficial in rural areas where access to providers is limited.

Therefore, ABA supports the change.

If you have any questions or need additional information, please contact me at [email protected].

Sincerely,

Robert G. Rowe, III
Vice President & Counsel, Regulatory Compliance and Policy