CFPB Proposes Rule to Define Larger Participants of the International Money Transfer Market

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Noting the challenges to providers and consumers, the CFPB issuedproposed rule to define “larger participants” of the international money transfer market that, when finalized, will hold certain nonbank international money transfer providers to the similar compliance requirements as the largest banks and credit unions under the Electronic Funds Transfer Act and its implementing regulation, Regulation E. Under the Dodd-Frank Act, the CFPB has the authority to supervise nonbank “larger participant[s] in markets for other consumer financial products or services.” The proposal establishes a test to determine whether a nonbank entity is a “larger participant” of the international money transfer market. An entity would be considered a “larger participant” if it has at least 1 million aggregate annual international money transfers (without regard to the individual or aggregate dollar amount of the transfers). This amounts, according to the CFPB, to supervision of approximately 25 of the largest nonbank providers (of the roughly 150 nonbank providers in the market), or 90% of the transfers made in the nonbank provider market. Of note, the annual international money transfers of a nonbank includes international money transfers in which an agent acts on behalf of a nonbank, but does not include transfers in which another person provided the international money transfer and the nonbank covered person performed activities as an agent on behalf of that other person. The CFPB noted that it is considering lower (e.g., 500,000 transfers) and higher thresholds (e.g., 3 million transfers); and whether it should adopt an alternative approach—establishing different thresholds for different destination regions.

The CFPB has already finalized rules defining “larger participants” of the debt collection, consumer reporting, and private student loan markets (see November 13, 2012 Alert, July 24, 2012 Alert, and December 10, 2013 Alert, respectively).  Comments must be received by April 1, 2014.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Topics:  CFPB, EFTA, Larger Participant, Money Transfer, Regulation E

Published In: Consumer Protection Updates, Finance & Banking Updates, International Trade Updates

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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