WITH RECENT CHANGES ISSUED BY THE CFPB, FINAL REMITTANCE TRANSFER REGULATIONS TO BECOME EFFECTIVE FEBRUARY 7, 2013

Financial Institutins Client Service Grup T: Our Clients and Friends September 19, 2012 WITH RECENT CHANGES ISSUED BY THE CFPB, FINAL REMITTANCE TRANSFER REGULATIONS TO BECOME EFFECTIVE FEBRUARY 7, 2013 One prvisin f the Ddd-Frank Wall Street Refrm and Cnsumer Prtectin Act f 2010 (the Ddd- Frank Act ) that generated cmparatively little cncern when it was passed was sectin 1073 entitled Remittance Transfers. Clser examinatin and subsequent issuance f regulatins has nw drawn scrutiny t this prvisin, which was already s detailed and lengthy when it was inserted int the Ddd-Frank Act that there was little rm fr mdificatin by the CFPB when the bureau issued its implementing regulatins. The CFPB s new regulatins are clearly cmprehensive. Amng ther things, they: (i) (ii) (iii) (iv) mandate certain disclsures, including the amunt f the exchange rate and the amunt t be received, prir t and at the time f payment by the cnsumer fr the transfer; prvide fr Federal rights regarding cnsumer cancellatin and refund plicies; require remittance transfer prviders t investigate disputes and remedy errrs regarding remittance transfers; and establish standards fr the liability f remittance transfer prviders fr the acts f their agents and authrized delegates. With the recent issuance by the CFPB f sme mdificatins intended t sften the impact f the Remittance Transfers law and implementing regulatins (the Remittance Rules r Rules ), we nw have the cmplete and final picture f hw these new Remittance Rules will wrk. Unfrtunately, they will still be exceedingly (and many argue unnecessarily) burdensme t implement as Sectin 1073 f the Ddd-Frank Act requires specific disclsures and errr reslutin rights fr cnsumers wh send remittance transfers t freign cuntries. The Rules scpe includes certain prepaid card-based internatinal transfers and, t the cncern f many banking and depsitry institutins, als includes internatinal wire transfers, ACH transfers, and even bill pay transactins within its scpe. The purpse f this Client Alert is t assist Bryan Cave s clients and friends in their effrts t cmply with the new law and regulatins in time fr its February 7, 2013 effective date. Any underlining r Bryan Cave LLP Americas Asia Eurpe www.bryancave.cm

blding f terms in this Alert has been added by us, t assist yu in interpreting and applying these cmplex Rules. 1. What are remittance transfer prviders and which remittance transactins are cvered? The Remittance Rules apply t the electrnic transfer f funds requested by a sender t a designated recipient that is sent by a remittance transfer prvider t be received by a designated recipient in a freign cuntry. The term remittance transfer prvider includes any persn that prvides remittance transfers (i) fr a cnsumer (ii) in the nrmal curse f its business, whether r nt the cnsumer hlds an accunt with such persn. The transfer must be sent t a freign lcatin. Remittance transfer prviders can include bth banks and nn-financial institutins, such as mney transmitters. Small value transactins f $15 r less are excluded and persns wh prvided 100 r fewer remittance transfers in bth the current and the previus calendar year are als excluded. T cnstitute a remittance transfer cvered by the Rules, the transfer must be specifically requested by a cnsumer in the U.S., wh is requesting the transfer primarily fr persnal, family r husehld purpses, and must be sent t a specifically identified recipient. The recipient may be either a cnsumer r a business. The Official Interpretatins accmpanying the Rules clarify that a transfer is still sent by a remittance transfer prvider even when there is an intermediary directly engaged with the sender t send the transfer f funds. Examples f remittance transfers include: (1) cnsumer wire transfers t an internatinal recipient, (2) internatinal ACH transactins, (3) nline bill payments t an internatinal recipient, and (4) an additin f funds t certain prepaid cards used by a persn in a freign cuntry. The Rules apply t electrnic transfers f funds, regardless f whether thse transfers are cnsidered electrnic fund transfers under ther parts f Regulatin E, but d nt apply t nn-electrnic remittance methds such as the mailing f checks r cash directly t a recipient. 2. What prepaid card prgrams are cvered by the Rules? The prepaid card prvisins have been drafted relatively narrwly. Only lads/relads t prepaid cards in which the issuer (r prgram manager r ther prepaid prgram participant) sends the card directly t the freign persn at a freign address are subject t these Remittance Rules. If the freign persn receives his r her card frm a friend r family member, and nt the card issuer, the Rules wuld nt apply. Fr thse prepaid card prgrams that invlve cards sent by the issuer r prgram manager t a freign persn, any additin f funds by the card issuer r its agent (r anther prepaid prgram participant) is cvered by the Remittance Rules, even if a persn in the US als retains the ability t withdraw funds. Hwever, a payment card netwrk r ther similar third-party payment service that prvides tw cards t an individual cardhlder and allws the cardhlder t mail the card t a freign recipient des nt cnstitute a remittance transfer under the Rules. Bryan Cave LLP Americas Asia Eurpe www.bryancave.cm

In the Federal Register preamble t the Rules, the CFPB nted that any r all f the parties invlved in a prepaid card prgram (which may include a prgram spnsr, prgram manager, and issuing bank, amng thers) may be a remittance transfer prvider invlved in prviding a remittance transfer. In such a situatin, hwever, nly ne set f disclsures must be given, and the prviders must agree amng themselves which party will take the actins necessary t cmply with the requirements impsed by the Rules. 3. When persns use payment cards, such as credit, debit r prepaid cards in a freign lcatin r at a freign merchant, wuld that be a cvered remittance? N. A payment netwrk r ther payment card prgram participant des nt send a remittance transfer when a cnsumer prvides a credit, debit r prepaid card directly t a freign merchant as payment fr gds r services, because the netwrk is prviding payment prcessing and settlement services n behalf f the freign merchant r the card issuer, rather than the sender. 4. Fr cvered remittance transfers what disclsure requirements apply? The Rules cntain detailed requirements fr (1) pre-payment disclsures, (2) written receipts, (3) errr reslutin rights, (4) cancellatin and refund rights, and (5) liability fr the actins f agents. Disclsures must be clear and cnspicuus and must generally be in writing. Disclsures can be given electrnically, if the sender s requests, but must be prvided in a frm that can be retained. Fr remittance transfers that are dne entirely by telephne, specific instructins are included fr ral disclsures. Fr remittance transfers that are dne entirely by mbile phne, mbile applicatin r text message, specific instructins are includes fr thse disclsures as well. As nted belw, the disclsure requirements generally set frth specific terms that are t be used in the disclsures, but please nte that substantially similar terms may als be used. The Rules require the fllwing disclsures: Prepayment disclsures: The remittance transfer prvider must prvide the fllwing disclsures t the sender when the transfer is requested by a cnsumer sender, but prir t payment: The transfer amunt (that is, the amunt that will be transferred t the designated recipient), stated in the sender s currency. The amunt f any transfer fees and transfer taxes impsed by the remittance transfer prvider, each stated separately. The ttal amunt f the transactin (the sum f the abve tw amunts) in the sender s currency, stated as the ttal. The exchange rate used by the prvider fr the transfer (which must be cnsistently runded t 2, 3 r 4 decimal places). Bryan Cave LLP Americas Asia Eurpe www.bryancave.cm

The transfer amunt restated in the recipient s currency, but nly if there are ther fees r taxes impsed by anyne ther than the prvider, calculated in accrdance with the exchange rate shwn. If any fees r taxes are impsed by any persns ther than the prvider, the amunt f such ther fees and taxes, each stated separately as ther fees and ther taxes. The ttal amunt t be received by the designated recipient in the currency that the funds are t be received, using the term ttal t recipient. Receipt disclsures: The fllwing disclsures must be made t the sender, as part f the receipt when the sender pays fr the transactin: All f the prepayment disclsures described abve. The date n which the funds will be available t the recipient stated as the date available. 1 The name f the recipient, using the term recipient. The telephne number and/r address f the recipient, if prvided by the sender. A statement abut the sender s errr reslutin and cancellatin rights which must cmprt with the fllwing terms (frm the Mdel Disclsures): Yu have a right t dispute errrs in yur transactin. If yu think there is an errr, cntact us within 180 days at [insert telephne number] r [insert Web site]. Yu can als cntact us fr a written explanatin f yur rights. Yu can cancel fr a full refund within 30 minutes f payment, unless the funds have been picked up r depsited. Fr questins r cmplaints abut [insert name f remittance transfer prvider], cntact:2 The name, telephne number(s) and website f the remittance transfer prvider. A statement that the sender can cntact the state agency that licenses r charters the prvider with respect t the remittance transfer and the CFPB fr questins r cmplaints abut the prvider. The name, telephne number(s) and website fr bth the state agency that licenses/charters the prvider and the CFPB. 1 The date available shuld be the latest date that the funds may be available. Remittance transfer prviders are invited t disclse that the funds may be available sner. 2 Nte: Fr remittance transfers scheduled at least 3 business days in advance, different rights f cancellatin apply and different disclsure language is required. In additin, remittance transfer prviders must prvide lng frm ntices f errr reslutin and cancellatin rights upn request. Bryan Cave LLP Americas Asia Eurpe www.bryancave.cm

Fr any transfer scheduled by the sender at least three business days befre the date f transfer, r the first in a series f preauthrized remittance transfers, the date that the prvider will make the remittance transfer, using the term transfer date. Cmbined disclsure: In lieu f prviding separate prepayment and receipt disclsures, a remittance transfer prvider may prvider all the receipt disclsures at the time the sender requests the transfers, but prir t payment fr the transactin. The prvider must als prvide prf f payment t the sender when payment is made.3 The Rules include specific requirements fr presentatin f disclsures, including frmatting, fnt size (minimum eight-pint fnt except fr mbile and text disclsures) lcatin, gruping and timing f disclsures. If the remittance transfer is advertised in any freign languages, then the disclsures must als be in such freign languages. 5. Hw d the Remittance Rules impact disclsures fr prepaid card prgrams? With respect t the exchange rate requirements fr remittance transfers invlving prepaid cards, the CFPB explained in the preamble t the Rule that the funds t be received by the designated recipient are thse that are laded nt the prepaid card by the sender at the time f the transactin. The CFPB nted that a prepaid card is ften bth funded and laded in U.S. dllars, and the funds remain in U.S. dllars until a cardhlder withdraws funds in a freign currency. In such instances, the prvider need nt prvide an exchange rate disclsure, because the transfer is sent and received in the same currency. 6. Hw d the Rules deal with remittance transfer prviders wh d nt have the disclsure data required under the Rules? Certain remittance transfer prviders, including many licensed mney transmitters, perate a clsed netwrk, meaning that they have direct cntracts with the entities that pay ut the transfer amunts t recipients. Parties t these clsed netwrk transactins are cnnected by cntractual agreements. The preamble t the Rules acknwledges that this makes it easier t predict fees and taxes deducted ver the curse f a transactin, t btain infrmatin abut exchange rates and ther matters, and t ensure cmpliance with prcedures designed t reduce and reslve errrs. Cmpliance, hwever, is much mre difficult with pen netwrk remittances when there is n preexisting cntractual relatinship with ptential intermediaries invlved in the transfer. This is cmmn with respect t bank wire transfers and ACH transfers. Temprary Exceptin: T deal with these issues, the CFPB has added t the Rules certain temprary measures that allw fr estimated disclsures. These temprary measures, which expire n July 21, 2015, are intended t benefit depsitry institutins by permitting them t use estimates instead f 3 Fr transfers scheduled in advance where payment is nt prcessed at the time the transfer is scheduled, the prvider may prvide cnfirmatin that the transfer has been scheduled in lieu f prf f payment. Bryan Cave LLP Americas Asia Eurpe www.bryancave.cm

defined amunts and rates in their disclsures. The temprary measures nly apply under the fllwing circumstances: (i) (ii) (iii) A remittance transfer prvider cannt determine the exact amunts fr reasns beynd its cntrl; A remittance transfer prvider is an insured institutin;4 and The remittance transfer is sent frm the sender s accunt with the institutin. Permanent Exceptin fr Transfers t Certain Cuntries: In additin, estimates may be prvided fr remittance transfers t certain cuntries, when the remittance transfer prvider cannt determine the exact amunts at the time that the disclsure is required because: (A) (B) The laws f the recipient cuntry d nt permit such a determinatin, r The methd by which transactins are made in the recipient cuntry des nt permit such determinatin. The CFPB will publish a list f cuntries fr which estimates can be prvided, due t thse cuntries laws r methds f prviding transfers. Such list will prvide a safe harbr fr the remittance transfer prvider s use f estimates, unless the prvider has infrmatin that a cuntry s laws r the methd f transfer permits a determinatin f the exact disclsure amunt. Permanent Exceptin fr Transfers Scheduled in Advance: The CFPB s recent revisins t the Rules als created a permanent exceptin allwing estimates t be used fr certain disclsures when a transfer is scheduled five r mre business days befre the date f transfer. The Rules g int detail setting frth when estimates can be used and hw such estimates must be determined. 7. What prcedures are required fr reslving errrs? The Rules prescribe the prcedures fr dealing with five types f errrs: (i) (ii) (iii) An incrrect amunt paid by a sender in cnnectin with a remittance transfer (unless the discrepancy relates t an estimate used fr the amunt t be paid by the sender). A cmputatinal r bkkeeping errr made by the remittance transfer prvider relating t a remittance transfer. The failure t make available t the recipient the amunt f currency stated in the disclsure prvided t the sender unless the disclsure was an estimate permitted by the Rules r unless the failure was caused by extrardinary circumstances utside the remittance transfer prvider s cntrl. 4 The term insured institutin means FDIC insured depsitry institutins (which includes uninsured U.S. branches and agencies f freign depsitry institutins) and insured credit unins. Bryan Cave LLP Americas Asia Eurpe www.bryancave.cm

(iv) (v) The failure t make funds available t a designated recipient by the date f availability stated in the disclsure unless the failure was caused by extrardinary circumstances utside the remittance transfer prvider s cntrl, r the delay was caused by antimney laundering cmpliance screenings, anti-fraud screenings, Office f Freign Assets Cntrl (OFAC) requirements, r if there is evidence f fraudulent intent. A request frm the sender fr further dcumentatin r clarificatin, including seeking infrmatin abut a pssible errr. Fr these kinds f errrs, detailed prcedures must be fllwed, including requiring the sender t prvide ral r written ntice t the prvider within 180 days, and requiring the remittance transfer prvider t investigate and respnd within 90 days. The Rules als set frth specific remedies as well as prcedures t be fllwed if the prvider determines that n errr has ccurred. 8. Hw d the Rules address preauthrized transfers? Specific prvisins are included in the Rules fr preauthrized remittance transfers, which ccur when a sender preauthrizes future transfers t recur at substantially regular intervals. The Rules include sme mdificatins t the disclsure and cancellatin requirements, based n the fact that the sender s instructins may be received weeks, mnths and even years befre the actual transfer ccurs. 9. What is the impact f the new supplementary final rule? In August 2012, the CFPB issued an additinal final rule n remittance transfers cntaining revisins t the riginal Remittance Rules. The revisins create a safe harbr fr transfers that are nt made in the nrmal curse f business, and mdify requirements fr preauthrized transfers scheduled in advance as well as cancellatin and disclsure requirements. Sme f the mre significant changes include the fllwing: Safe harbr fr transfers nt made in the nrmal curse f business. As discussed abve, the Rules define a remittance transfer prvider as any persn that prvides remittance transfers fr a cnsumer in the nrmal curse f its business, regardless f whether the cnsumer hlds an accunt with such persn. The CFPB has added a safe harbr t that definitin fr any persn wh prvided 100 r fewer remittance transfers in the previus calendar year and prvides 100 r fewer transfers in the current calendar year. If a persn prvided 100 r fewer remittance transfers in the previus calendar year but in the current year prvides mre than 100 transfers, and is prviding thse transfers fr cnsumers in the nrmal curse f its business, that persn is granted a reasnable perid f time, nt t exceed six mnths, t begin cmplying with the Rule. Cmpliance with the rule is nt required fr any transfers where payment is made during that six mnth perid. Whether a persn prvides remittance transfers in the nrmal curse f its business, hwever, remains a matter f facts and circumstances. In the revised Official Interpretatins accmpanying the Rules, the CFPB ntes that the number f remittance transfers used fr the abve calculatins des nt include any Bryan Cave LLP Americas Asia Eurpe www.bryancave.cm

transfers that are generally excluded frm the definitin f remittance transfer, such as small value transfers f $15 r less r securities and cmmdities transfers. Revised disclsure rules fr preauthrized transfers and transfers scheduled in advance. Fr a ne-time transfer scheduled five r mre business days in advance r fr the first in a series f preauthrized transfers, the remittance transfer prvider may estimate certain infrmatin in the prepayment disclsure and the receipt that is prvided when payment is made. The requirement that prepayment disclsures be mailed r delivered fr each subsequent preauthrized remittance transfer has been eliminated. If a remittance transfer prvider gives disclsures that include such estimates, the prvider must mail r deliver t the sender an additinal receipt with accurate figures n later than ne business day after the date f the transfer. Hwever, if the transfer f funds is made frm the sender s accunt held by the prvider, this receipt may be prvided n r with the next peridic statement fr that accunt, r, if a peridic statement is nt prvided, within 30 days after the date f the transfer. If any infrmatin n the mst recent receipt is n lnger accurate fr a subsequent transfer, the remittance transfer must mail r deliver an updated receipt t the sender within a reasnable perid f time prir t the scheduled date f the next preauthrized transfer. The new receipt, which may cntain estimates, must clearly and cnspicuusly indicate that it cntains updated disclsures. Date disclsures fr transfers scheduled in advance. Fr transfers scheduled at least three business days in advance and fr the first in a series f preauthrized transfers, the remittance transfer prvider must disclse the date f the transfer in the receipt that is prvided when payment is made. The transfer date fr a specific transfer als must be disclsed n any subsequent receipts prvided fr that transfer. Fr subsequent preauthrized transfers, the remittance transfer prvider must disclse the date(s) n which it will make subsequent transfers as well as a statement abut the sender s cancellatin rights. This disclsure must be received by the sender n mre than twelve mnths and n less than five business days prir t the date f any subsequent transfer t which it relates. The Rules, including the recent revisins, are currently slated t becme effective n February 7, 2013. The riginal Rules are available at http://www.gp.gv/fdsys/pkg/fr-2012-02-07/pdf/2012-1728.pdf. The recent revisins t the Rules are available at http://www.gp.gv/fdsys/pkg/fr-2012-08- 20/pdf/2012-19702.pdf. If yu have any questins r wuld like mre infrmatin abut the Remittance Rules, please cntact Judie Rinearsn r Kris Andreassen. Bryan Cave LLP Americas Asia Eurpe www.bryancave.cm

Judith Rinearsn Bryan Cave LLP 1290 Avenue f the Americas New Yrk, NY 10404 (212) 541-1135 phne (212) 541-1385 fax judith.rinearsn@ bryancave.cm Kristine M. Andreassen Bryan Cave LLP 1155 F Street NW Washingtn, DC 20004 (202) 508-6117 phne (202) 220-7417 fax kristine.andreassen@ bryancave.cm This Alert is published fr the clients and friends f Bryan Cave LLP. T stp this Alert, please reply t this email. T stp this Alert and all future cmmercial e-mail frm Bryan Cave LLP, please reply t: pt-ut@bryancave.cm and leave the message blank. Infrmatin cntained herein is nt t be cnsidered as legal advice. Under the ethics rules f certain bar assciatins, this bulletin may be cnstrued as an advertisement r slicitatin. Bryan Cave LLP Americas Asia Eurpe www.bryancave.cm