CFPB Enters into Consent Orders with Remittance Transfer Providers

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The CFPB recently entered into consent orders with two companies in connection with violations associated with their remittance transfer services.  Company 1 will pay $1.6 million in penalties, and Company 2 will pay $300,000 in penalties and over $99,000 in consumer restitution.

The CFPB alleged that both companies lacked adequate written policies and procedures to ensure compliance with error resolution requirements under the Remittance Rule, the implementing rule for the Electronic Funds Transfer Act (EFTA).  The CFPB also alleged that Company 1 did not have adequate policies and procedures concerning the investigation and disposition of error notices from consumers, and that Company 2’s policies and procedures allowed for verbal or written reporting to consumers in cases where the Remittance Rule only required written reporting.  It also used a narrow definition of “errors,” which may have resulted in under-compliance with the Remittance Rule.

The CFPB further alleged that Company 1 used misleading statements in its advertisements to describe its transfers.  The company allegedly advertised transfer speeds anywhere between instant to within 24-hours, when it did not provide transfers within those advertised timeframes.

The CFPB alleged numerous disclosure violations in connection with the transfer services of both companies.  Company 1 allegedly failed to disclose the date on which the designated recipient would receive funds, but, instead, provided an estimate.  It also failed to use the term “Transfer Fees,” or its equivalent, to disclose the fees collected on each transfer.  The CFPB alleged that the use of the terms “Service fee,” “Fee Rate,” Handling fee,” or “Discount” did not comply with this requirement.  The CFPB also alleged that the company failed to provide consumers a statement about their rights in connection with the transfers.

Company 2 allegedly failed to disclose the currency of the amounts, fees, and taxes listed in its prepayment disclosures and on receipts, or use the term “transfer amount” in its disclosures, and the CFPB found that the phrase “net before exchange” was not its equivalent.

The CFPB also alleged numerous deficiencies in their post-transfer practices.  Company 1 allegedly limited the time period consumers had to submit error notices to 90 days, when the required timeframe under the EFTA and the Remittance Rule was 180 days.  Company 1 also allegedly failed to process valid cancellation requests.

The CFPB alleged that both companies failed to investigate and determine if errors had occurred after they were properly notified of them by consumers, and failed to refund fees when transfers were not completed on the date disclosed.  Company 2 was further alleged to not have notified consumers of their rights after error investigations or of their remedies for correcting transfer errors. As part of the settlement, both companies are expected to submit a comprehensive compliance plan to address deficiencies with their remittance transfer services, but, in the case of Company 1, only if it intends to provide those services on or after the effective date of the consent order.

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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