Can remittance transfer providers be held liable under the Consumer Financial Protection Act (CFPA) when marketing about the speed and cost of their services? According to a March 27 Circular issued by the Consumer Financial Protection Bureau (CFPB or Bureau), the answer to that question is yes, if the marketing is deceptive. Specifically, according to the CFPB, providers may be liable under the CFPA for deceptive marketing practices if they market: remittance transfers as being delivered within a certain time frame when transfers actually take longer; remittance transfers as “no fee” when in fact the provider charges fees; promotional fees or promotional exchange rates for remittance transfers without sufficiently clarifying when an offer is temporary; and remittance transfers as “free” if they are not in fact free.
According to the CFPB’s Remittance Rule found in Regulation E, the term “remittance transfer” includes most electronic transfers of funds sent by U.S. consumers to recipients in other countries. The CFPB’s Circular applies both to traditional providers of international money transfers and to “digital wallets” that offer the capability to send money internationally.
Under the CFPA, it is unlawful for a provider of consumer financial products or services to engage in deceptive acts or practices. A “deceptive act or practice” is one that misleads or is likely to mislead the consumer, the consumer’s interpretation is reasonable under the circumstances, and the misleading act or practice is material.
According to the CFPB, remittance transfer providers violate the CFPA’s prohibition on deceptive acts or practices if they market transfers as being delivered within a certain time frame, when transfers actually take longer to reach recipients. For example, representations that transfers would be delivered “instantly,” “in 30 seconds,” or “within seconds” could be found misleading if the transfers were not actually delivered instantly or within seconds.
According to the CFPB, remittance transfer providers also violate the CFPA’s prohibition on deceptive acts or practices if they market remittance transfers as having “no fee,” when in fact the providers charge fees to send the remittance transfer. For example, if a provider were to market a “no fee” remittance transfer but include in the FAQs that remittance transfers carried a 1% fee, that could be found to be misleading.
The CFPB further contends that remittance transfer providers may violate the CFPA by advertising promotional pricing for remittance transfers without sufficiently clarifying that the offer is only limited or temporary in scope. The CFPB contends it would still be deceptive even if the promotional nature of the offer is disclosed in fine print or later in the transaction. Consumers should understand that the pricing is promotional and may increase in subsequent transactions.
Lastly, the CFPB states that remittance transfer providers also violate the CFPA by marketing remittance transfers as “free” if they are not actually free for the consumer. For example, the CFPB warns that marketing a remittance transfer as “free” if the provider is imposing costs on consumers through the exchange rate spread for the transfer or, with respect to digital wallets or other prepaid products, if the provider imposes costs on recipients to convert funds into a different currency or to withdraw funds from the product, may constitute deceptive practices.
This latest Circular from the CFPB seems to be highlighting and underscoring the general proposition that compliance with the letter of the disclosure regulations surrounding remittance transfers does not eliminate the need to comply with the general obligation to refrain from engaging in marketing practices that could be seen as misleading or deceptive.
