The CFPB issued a new circular advising remittance transfer providers that false advertising about the cost or speed of sending remittance transfers can be considered a violation of the Consumer Financial Protection Act even if a provider’s disclosures are in compliance with the CFPB’s Remittance Rule. The circular is intended to address CFPB concerns regarding fees charged on international money transfers and false claims regarding the speed of such transfers. According to CFPB Director Rohit Chopra, “Consumers should not be paying junk fees on international money transfers that are advertised as free.”
The circular specifically addresses several practices used by remittance transfer providers, including digital wallet providers. First, it addresses the marketing of “no fee” or “free” services, which have hidden costs. An example provided by the CFPB is digital wallets that impose costs to convert funds into a different currency or withdraw funds from the product. The CFPB also notes that it can be deceptive to market international money transfers as “free” if the transfer provider imposes costs on consumers via the exchange rate spread.
The second practice addressed by the CFPB is the use of fine print to hide promotional conditions. In particular, the CFPB indicates that it may be considered deceptive to market promotional fees or exchange rates without sufficiently clarifying when an offer is temporary or otherwise limited. The CFPB expressed concern that such behaviors may have a material impact on first-time customers who seek to continue using the provider for subsequent remittances. These customers may face unexpected cost increases and have difficulty finding a new provider. Finally, the CFPB states that marketing that remittance transfers will be delivered within a certain timeframe, when they may actually take much longer to complete, may be considered a deceptive act.
The CFPB’s circular is part of the Bureau’s ongoing efforts to protect consumers sending international money transfers. Within the past several years, the CFPB has taken action against several entities for issues related to the provision of remittance transfers. For example, Servico UniTeller was ordered to pay a $700,000 penalty, reimburse harmed customers, and bring its business practices into compliance with the law when it failed to refund customers after making money transfer errors.
The circular is also part of the CFPB’s efforts directed at reducing junk fees and improving competition in the marketplace. In its Fall 2023 Supervisory Highlights, the CFPB stated that examiners found certain remittance transfer providers had failed to disclose or refund fees as required by applicable regulations. The CFPB’s concerns regarding transparency in fees is shared by some members of Congress, with Senators Elizabeth Warren (D-Mass.), Dianne Feinstein (D-Calif.), Brian Schatz (D-Hawaii), Jack Reed (D-R.I.), and Alex Padilla (D-Calif.) sending a joint letter in 2022 to the CFPB to urge the entity to revise the Remittance Transfer Rule to require providers to provide prepayment disclosures to consumers.
In light of its recent circular, examination findings, and pressure from Congress, we can expect the CFPB to continue to focus on fee practices of remittance transfer providers, potentially leading to more enforcement actions in the near future.
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