CFPB Finalizes Revisions to Remittances Rule, Sets October 28 Effective Date

by Ballard Spahr LLP
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The Consumer Financial Protection Bureau has finalized revisions to its remittance transfers rule and set October 28, 2013, as the rule’s new effective date. While not entirely eliminating the requirement for remittance transfer providers to disclose recipient institution fees, the revised final rule does recognize some business realities and restricts the scope of that requirement and makes other favorable changes.

The revised final rule addresses the following areas:

Scope of Error Resolution Procedures

The error resolution procedures are amended to create an exception for instances when the sender of a remittance transfer gave the remittance transfer provider an incorrect account number or recipient institution identifier (RII), and as a result of that mistake, the funds were not delivered to the designated recipient. (The CFPB’s proposed revisions only covered mistakes involving incorrect account numbers.)

The transfer provider would not be liable to resend or refund the funds only if all of the following apply:

  • The provider can show that the sender provided an incorrect account number or RII.
  • In spite of an incorrect RII, the provider used reasonable means to verify that the RII corresponded to the recipient institution name the sender provided.
  • Before the sender paid for the transfer, the provider gave the sender notice in the form allowed by the rule that he or she could lose the transfer amount if an incorrect account number or RII was given.
  • The incorrect account number or RII resulted in the deposit of the transfer into the wrong account.
  • The provider promptly used reasonable efforts to recover the amount the designated recipient was to receive.

The revisions also make changes to the remedy that applies when an error occurred because the sender gave the provider incorrect or insufficient information other than an incorrect account number or RII.

The CFPB plans to monitor industry’s ability to verify account numbers and RIIs and will consider modifying the exception if “it thinks such verification methods become reasonably available and are able to prevent most errors from occurring.”

Disclosure of Recipient Institution Fees

Except where the recipient institution is acting as the provider’s agent, the requirement to disclose certain recipient institution fees and to include such fees in the calculation of the disclosed amount to be received by the designated recipient is eliminated. To explain its decision to retain the requirement for a provider’s agent, the CFPB states that it believes the fee information “should be readily available to or obtainable by the provider and that the provider can control such fees, based on the terms of the contract between the provider and the agent.”

For similar reasons, the final rule also retains the requirement to disclose fees assessed for remittance transfers to credit cards, prepaid cards, or virtual accounts held by an Internet-based or mobile phone company that is not a bank, credit union, or equivalent institution.

Disclosure of Foreign Taxes or Other Third-Party Taxes

The requirement to disclose foreign taxes—subnational taxes or taxes imposed by a foreign country’s central government—and include them in the calculation of the disclosed amount to be received by the designated recipient is eliminated. The final rule also eliminates the requirement to disclose taxes collected by any person other than the provider or to include such taxes in the calculation of the disclosed amount to be received. (The CFPB’s proposal would have eliminated these requirements only for subnational taxes.)

Ballard Spahr attorneys are available to advise credit card and prepaid card issuers and other participants in the remittance transfer industry on compliance with the CFPB’s remittance transfer rule, as well as other applicable consumer financial services laws. Our Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

The group also produces CFPB Monitor, a blog that focuses exclusively on important CFPB developments. To subscribe, use the link provided to the right.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, CFS Practice Leader Jeremy T. Rosenblum at 215.864.8505 or rosenblum@ballardspahr.com, or Mercedes Kelley Tunstall at 202.661.2221 or tunstallm@ballardspahr.com.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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