Remittance Transfers

by C/A Staff

With the new Regulation E (Reg E) Remittance Transfer Final Rule becoming effective on July 21, 2020, our Members have been asking many questions on how they would be affected. The most commonly asked questions related to the new safe harbor thresholds and the compliance dates that the Banks needed to update their policies by. The first thing to note in the Final Rule is that the safe harbor threshold to be considered a “Remittance Transfer Provider” was increased from 100 to 500 or fewer remittance transfers in the calendar year. The section of the Reg E that is being modified is:

(i) Safe harbor. For purposes of paragraph (f)(1) of this section, a person is deemed not to be providing remittance transfers for a consumer in the normal course of its business if the person:

(A) Provided 100 500 or fewer remittance transfers in the previous calendar year; and

(B) Provides 100 500 or fewer remittance transfers in the current calendar year.[1]

This means that some Banks that were previously considered “Remittance Transfer Providers” would be covered under the new safe harbor as long as the Banks have provided 500 or fewer remittance transfers in both the previous and current calendar years. For Banks covered under the new thresholds and deciding to stop providing disclosures for remittance transfers, the Banks are not required by Reg E or the Final Rule to provide a change in terms notice to its customers. However, Banks are also not prohibited from sending a notice if they wish to inform their customers of these newly adopted changes.

Assuming the Bank exceeds the thresholds for the safe harbor, the Bank would be subject to the disclosure rules of Reg E. With the temporary exception for allowing estimates going away on July 21, 2020, the Bank would have to modify its Reg E procedures depending on whether the Bank qualifies for the two new exceptions that would permit the Bank to continue to use estimates. The first exception is if the Bank made 500 or fewer remittance transfers to the designated recipient’s institution in the prior calendar year and cannot determine the exact amount of the covered third-party fees at the time of disclosures. The second is if the Bank made 1000 or fewer transfers in the prior calendar year to the country for which the designated recipients of those transfers were received in the country’s local currency and the Bank cannot determine the exact exchange rate for that particular transfer.

The Final Rule is providing a transition period to adopt these new changes. The length of the transition period is a “reasonable period of time” not to exceed six months. Consequently, Banks would be required to comply with these newly issued changes by January 21, 2021 at the latest. This same “reasonable period of time” applies to Banks in the future as well when they eventually exceed the safe harbor thresholds in the future from the date that Banks make the 501st Remittance Transfer in the second consecutive year.