- Sixteen House Financial Services Committee Republicans, in a letter published Monday, urged the Consumer Financial Protection Bureau (CFPB) to extend an exemption allowing banks to continue estimating third-party fees and exchange rates, rather than providing exact figures, for money consumers send abroad.
- The exemption, which is set to expire in July 2020, applies to roughly 6% of bank transfers, or a fraction of 1% of all remittance transfers, according to CFPB data. But that figure was still 886,000 transactions as of 2017.
- No single institution has control over a remittance from end to end, the lawmakers wrote, making it a potential challenge for a bank to provide exact figures for fees and exchange rates that apply while money is in transit. If the exemption ends, many institutions may stop providing remittance services for fear they'd no longer comply with the rule, the lawmakers wrote.
If banks stop providing remittances, it could be a boost for wire transfer services such as Western Union or Moneygram, or payment companies such as PayPal or TransferWise.
Remittance transfers come into play most often when consumers transfer money to family or friends abroad or pay bills or tuition internationally. The CFPB's 2013 remittance rule requires providers of money transfers to disclose to consumers the price of a remittance transfer, the exact exchange rate, the amount to be delivered to a recipient and the date of availability.
Banks and credit unions have two ways to know the exact fees that apply when a transaction originates, the lawmakers wrote:
- The "split and cover" method, which, they wrote, "requires a particular technical relationship between the originating bank and the beneficiary bank," or
- Sending a serial wire with an OUR charge code to a correspondent bank that is also the beneficiary. With an OUR code, the payer bears the full cost of transaction fees.
Neither method works for every type of remittance, the lawmakers wrote. Beyond that, banks can't always convert all foreign currencies at the time of transfer. "If the currency exchange takes place after the transfer is initiated, a consumer's financial institution may only be able to estimate the applicable exchange rate," the lawmakers wrote.
The CFPB released a request for information this spring seeking comment on the remittance rule exception, but no further action has been made public.