Dodd-Frank and How it Applies to Consumer Remittances

Senators Barney Frank & Chris Dodd

What is Dodd-Frank?

The Dodd-Frank Act is an important piece of consumer protection legislation that was passed in response to the financial crisis. It created the Consumer Financial Protection Bureau (CFPB)and imposed stricter regulations on Wall Street. But some of its provisions have since been rolled back. If you want to know more you can find all the details in this great article from Credit Karma.

What does Dodd-Frank have to do with Consumer Remittances?

In 2013 the CFPB issued protections for consumers sending money internationally that generally require companies to give disclosures to consumers before they pay for the remittance transfers. In addition, there are other important protections to be aware of including a right to cancel a transfer.

How does the CFPB define “Remittance Transfer”

A “remittance transfer” is an electronic transfer of money from a consumer in the United States to a person or business in a foreign country. It can include transfers from retail “money transmitters” as well as banks and credit unions that transfer funds through wire transfers, automated clearing house (ACH) transactions, or other methods.

Notice it does not call out fintech as the law was written in 2013 but since most fintechs are sponsored by a US bank it is the bank’s responsibility to ensure their Fintech partner is adhering to the CFPB’s consumer remittance protections. Surprisingly most of the US banks that are sponsoring fintech’s do not have the processes in place to cover these requirements for consumer remittances because, for the most part, these banks' retail customers were not sending funds internationally. However, with the emergence of Fintechs that are serving US consumers who likely want to send funds back to their relatives, these companies need to ensure their application is following these rules.

What is required for Dodd-Frank Consumer Remittance rules?

Disclosures

The rules generally require companies to give disclosures to consumers before they pay for the remittance transfers. The disclosures must contain:

• The exchange rate.
• Fees and taxes collected by the companies.
• Fees are charged by the companies’ agents abroad and intermediary institutions.
• The amount of money expected to be delivered abroad, not including certain fees charged to the recipient or foreign taxes.
• If appropriate, a disclaimer that additional fees and foreign taxes may apply.

Companies must also generally provide a receipt that matches any amounts given in the first disclosure. The receipt also will include information about:

• When the money will be available at its destination.
• The consumer’s right to cancel the transfer.
• What to do in case of an error.
• How to submit complaints.

In most cases, companies must generally either provide this receipt when the consumer pays, or provide all of the required information in a single disclosure before payment is made and proof of payment afterward.

Companies must provide the disclosures in English. Sometimes companies must also provide the disclosures in other languages.

Other Protections

The rules also generally require that:

• Consumers get 30 minutes (and sometimes more) to cancel a transfer. Consumers can get their money back if they cancel.
• Companies must investigate if a consumer reports a problem with a transfer. For certain errors, consumers can generally get a refund or have the transfer sent again free of charge if the money did not arrive as promised.
• Companies that provide remittance transfers are responsible for mistakes made by certain people who work for them

The rules also contain specific provisions applicable to transfers that consumers schedule in advance and for transfers that are scheduled to recur regularly.

Coverage

The rules apply to most remittance transfers if they are:

• More than $15
• Made by a consumer in the United States
• Sent to a person or company in a foreign country

This includes many types of transfers, including wire transfers.

The rules apply to many companies that offer remittance transfers, including:

• Banks
• Thrifts
• Credit unions
• Money transmitters
• Broker-dealers

Important footnote — However, the rules do not apply to companies that consistently provide 100 or fewer remittance transfers each year.