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Published: December 2011

New protections on remittances offer solid standards for consumers

Coalition: New Protections for Remittances

In a letter to the Federal Reserve Board, Consumer Action joined other advocates in praising new remittance protections for consumers and offering recommendations on problematic areas of the regulations.

Below is an excerpt from the letter:

Our views on these proposed regulations are informed by our recognition that the new statute providing protections for remittances is intended to provide three important and separate new protections:

1. Remittance senders will be able to shop for the lowest cost remittances by receiving before the transaction a commitment for the total cost of the remittance. The cost and benefit of the transaction will be portrayed by a) the total cost of the remittance to the sender, and b) the total amount to be received by the recipient.
2. The sender will receive a receipt after the transaction which expresses the contract between sender and the remittance provider, with the information that had been provided before the transaction, as well as a commitment for a date by which the funds will be available, plus information about the error resolution rights provided by the statute.
3. The statute provides comprehensive and privately enforceable error resolution rights to senders which flow directly from the information disclosed in the receipt.

Tens of billions of U.S. dollars are sent every year by American residents to their relatives overseas.  Remittances total at least three times official development assistance and are the largest source of external financing in many developing countries.  While many remittance transfers flow between financial institutions without issues, there have been far too many instances of serious problems with remittances. These problems range from the remittance not reaching its intended recipient, to overcharging remittance fees and changing exchange rates. 

The Dodd-Frank law amended the Electronic Fund Transfer Act to create a new set of enforceable requirements for all “senders” of remittances originated in the United States.  These new rules, which require new disclosures, error resolution procedures and – particularly importantly – protections against loss through error or theft, will provide a substantial improvement to the legal framework governing remittances.

In general, we applaud the proposed regulations. In some areas we have some suggestions for improvement of the disclosures. However, we have particular concerns regarding the following provisions in the proposed regulations. We believe that in these problematic provisions the Board has failed to follow the strict mandates of Congress:

• The proposal – in § 205.31(b)(2)(iv) – to allow remittance transfer providers to avoid informing remittance senders about their specific rights to error resolution procedures as explicitly required by the new statute.
• The proposal – in § 205.32 – to allow providers to use estimates without the specific delineation of those disclosures as estimates.
• The proposal – in § 205.32 – to permit providers to use estimates for transfers to certain countries based on the specific conditions in the country which make it difficult to know the full cost of the transfer; instead the Board is instructed by Congress to make the finding that estimates are necessary for each country to which estimates are permitted.

Lead Organization

National Consumer Law Center

Other Organizations

National Association of Consumer Advocates

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