CONSUMER FINANCIAL PROTECTION BUREAU FINAL RULE ON REMITTANCE TRANSFERS - 12 CFR PART 1005, SUBPART B

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1 CONSUMER FINANCIAL PROTECTION BUREAU FINAL RULE ON REMITTANCE TRANSFERS - 12 CFR PART 1005, SUBPART B Appleseed Briefing on the Consumer Financial Protection Bureau Remittance Rule, the Fair Remittance Alliance and Fair Remittance Certification Kathleen A. Scott, Esq. Arnold & Porter LLP April 18, 2012 (updated August 30, 2012) 1

2 BACKGROUND: Short History of Rule: Previous legislative attempts Appleseed invitation to participate in negotiations Final Passage of Bill Notice of Proposed Rulemaking Appleseed comment Issuance of Final Rule 2

3 DISCLOSURES Formatting requirements Clear and conspicuous Made in Writing Exceptions for telephone, text and mobile Language requirements English Other languages Timing of disclosures 3

4 DISCLOSURES (PRE-PAYMENT) Transfer Amount: Amount to be transferred to the designated recipient, in the currency in which the remittance transfer is funded Transfer Fees: Fees imposed on the remittance transfer by the remittance transfer provider (RTP) in the currency in which the remittance transfer is funded Transfer Taxes: Taxes imposed on the remittance transfer by the RTP in the currency in which the remittance transfer is funded Total: Total amount of the transaction (the sum of the transfer amount, taxes and fees) in the currency in which the remittance transfer is funded Exchange Rate: Exchange rate used by the RTP rounded consistently for each currency to no fewer than 2 and no more than 4 decimal points 4

5 DISCLOSURES (PRE-PAYMENT) (cont d) Transfer Amount: Amount that will be transferred to the recipient in the currency in which the funds will be received by the designated recipient, but only if fees or taxes are imposed by a person other than the RTP Other Fees: Any fees imposed on the remittance transfer by a person other than the RTP, in the currency in which the funds will be received by the designated recipient Other Taxes: Any taxes imposed on the remittance transfer by a person other than the provider, in the currency in which the funds will be received by the designated recipient Total to Recipient: Amount that will be received by the designated recipient, in the currency in which the funds will be received by the designated recipient 5

6 Model Form for Pre-Payment Disclosures 6

7 DISCLOSURES (POST-PAYMENT RECEIPT) All of the information required in the pre-payment disclosure Date Available: Date in the foreign country on which the funds will be available to the designated recipient Recipient: Name of the recipient, and a phone number and/or address of the recipient if provided Statement of Rights: Summary statement of rights on error resolution or cancellation (long form provided upon request) RTP Identification: name, phone number, and web site of the RTP 7

8 DISCLOSURES (POST-PAYMENT RECEIPT) (cont d) State Regulator and CFPB Contact: Statement that sender may contact the relevant state regulatory agency or the CFPB, along with the appropriate contact information for questions or complaints Combined Disclosure: RTP can provide pre and post payment disclosures together in a single document before payment If RTP uses combined disclosure and the sender completes the transfer, the RTP must provide the sender with proof of payment when payment is made for the transfer Proof of payment must be clear and conspicuous, provided in writing or electronically, and provided in a retainable form 8

9 EXCHANGE RATES AND ESTIMATES Except for pre-authorized transfers, the information must be accurate when a sender makes payment for the remittance transfer, unless estimates are permitted When estimated exchange rates are permissible: Temporary exception for insured institutions Permanent exception for transfers to certain countries 9

10 EXCHANGE RATES AND ESTIMATES (cont d) Permissible methods of calculating exchange rate: Most recent publicly available wholesale exchange rate (and spread, if any) Most recent rate set by the recipient country s central bank or other governmental authority and reported by a Federal Reserve Bank (for certain international ACH transfers) Most recent exchange rate used by the person making the funds available directly to designated recipient or by the person setting exchange rate 10

11 ERROR RESOLUTION Errors Covered: Incorrect amounts paid by the sender Computational or bookkeeping errors made by the RTP Failure to make available to a designated recipient the amount of currency listed in the post-payment disclosure/receipt (subject to exceptions) Failure to make funds available by the date listed in the post-payment disclosure/receipt (subject to exceptions) Request for documentation of disclosures or for additional information or clarification regarding remittance transfer 11

12 ERROR RESOLUTION (cont d) Errors not covered by the regulations: Inquiry about the status of a transfer, unless it otherwise falls within the definition of error Request for information for tax or other recordkeeping purposes Change requested by the designated recipient Change in the amount or type of currency received by the recipient from that disclosed to the sender on the receipt if RTP relied on information provided by the sender 12

13 ERROR RESOLUTION (cont d) Error resolution process: 180 days after disclosed date of availability to initiate process and file a notice of error RTP has 90 days after receipt of notice of error to determine if there was an error RTP must report results of determination within three business days after completing its investigation If RTP determines there is no error, then it must provide written explanation to customer and note right of sender to request documentation relied on in making decision 13

14 ERROR RESOLUTION (cont d) If RTP determines that there was an error, RTP generally has one business day after receipt of sender s instructions on the appropriate remedy to correct the error Remedies include refunding money to the sender, or making funds available to the recipient at no additional cost Compliance program required 14

15 Cancellation and Refund Sender has a right to make an oral or written request to RTP to cancel transfer no later than 30 minutes after sender makes payment if Request to cancel enables RTP to identify sender and transfer to be cancelled AND Transferred funds have not been picked up by recipient or deposited into an account of recipient For remittances scheduled at least three business days before date of transfer, request to cancel must be made at least three business days before date of scheduled transfer Refund must be made within three business days of request to cancel At no additional cost to sender, RTP must refund total amount of funds provided by sender in connection with a transfer, including any fees and, to the extent not prohibited by law, taxes imposed in connection with the remittance transfer 15

16 MISCELLANEOUS Agent Liability Pre-authorized transfers Conflicts of Laws Definitions Interpretations Additional Proposals 16

17 August 20, 2012 Federal Register Notice Final Rule Amending Remittance Rule Two amendments were made by the final rule published by the CFPB in the Federal Register on August 20, 2012: Amendment #1 clarifies the safe harbor as to when a remittance transfer provider provides remittance transfers in the normal course of business Amendment #2 modifies the February 2012 final rule regarding remittance transfers scheduled before the day of transfer, including preauthorized transfers. 17

18 August 20, 2012 Federal Register Notice Final Rule Amending Remittance Rule (cont d) Amendment #1: A person is not deemed to be providing remittance transfers in the normal course of business if the person provided 100 or fewer remittances in the previous calendar year and the current calendar year. If a person provided 100 or fewer remittances in the previous calendar year and provides more than 100 remittances in the current year, and is then providing remittances in the normal course of business, the person has up to six months after exceeding 100 remittances to come into compliance with the rule 18

19 August 20, 2012 Federal Register Notice Final Rule Amending Remittance Rule (cont d) Amendment #2: When a sender schedules a one-time transfer or the first in a series of preauthorized remittance transfers 5 or more business days before the date of transfer, RTPs may estimate certain information in the pre-payment disclosure and the receipt provided when payment is made for the remittance transfer; RTP must provide sender with an additional receipt with accurate figures no later than one business day after the transfer 19

20 August 20, 2012 Federal Register Notice Final Rule Amending Remittance Rule (cont d Requirement to mail a pre-transfer receipt for subsequent pre-authorized transfers is eliminated, unless certain information has changed since the first set of disclosures were made If estimates are used in that receipt, then RTP must provide accurate receipt after transfer 20

21 August 20, 2012 Federal Register Notice Final Rule Amending Remittance Rule (cont d For remittance transfers scheduled at least 3 business days in advance, and for preauthorized remittance transfers: Date of transfer must be on the receipt at time of payment and on any subsequent receipts provided with a respect to a given transfer RTP needs to provide subsequent transfer dates in a series of preauthorized transfers Cancellation periods for regular remittances and preauthorized remittances may be on the same receipt 21

22 Questions? Contact: Kathleen A. Scott, Esq. Counsel Arnold &Porter LLP (212)