2020 Remittance Transfer Rule Amendments

The Remittance Transfer Rule under Regulation E affords a variety of protections to consumers who engage in remittance transfers transactions. The Electronic Fund Transfer Act (EFTA) which is implemented by Regulation E, outlines the rights, responsibilities, and the liabilities of both the consumers and the financial institutions who participate in electronic fund transfers and remittance transfers.  Over the years, there have been a number of revisions made to Regulation E, including the 2013 and 2014 amendments to the Remittance Transfer Rule.  Those amendments established a disclosure and error resolution system for consumers using remittance transfer providers when sending remittances to recipients located in foreign countries.  Changes were brought about again on May 11, 2020 when the Bureau of Consumer Financial Protection (CFPB) issued a final rule amending the Remittance Transfer Rule.  So, what does the latest amendment mean and how does it impact financial institutions?

The final rule, effective July 21, 2020, provides two major changes to the Remittance Transfer Rule or Subpart B of Regulation E.  First, the rule increased the safe harbor threshold, which is used to determine whether remittance transfers are part of the normal course of business, from 100 remittance transfers annually to 500 remittance transfers annually. A person is deemed to be providing remittance transfers for a consumer in the normal course of its business if they exceed 500 remittance transfers annually, likewise, they are deemed not to be providing remittance transfers for a consumer in the normal course of its business if they do not exceed this threshold annually.  This means that a person will qualify for safe harbor and the Remittance Transfer Rule requirements will not apply if 500 or fewer remittance transfers were provided in the previous calendar year and in the current calendar year.  For example, if a person provided 499 remittance transfers in 2019 and 499 remittance transfers in 2020, they would not be subject to the Remittance Transfer Rule and they would also qualify for safe harbor beginning on the effective date of the final rule. Second, the rule mitigates the effects of the expiration of insured institutions to disclose estimates for certain fees and exchange rates when certain conditions are met.  To disclose an estimate of covered third-party fees, the conditions which must be met include: 500 or fewer transfers by an insured financial institutions to a designated recipient’s institution in the prior calendar year; and the insured financial institution cannot determine, at the time the disclosures are required to be provided, the exact amount of the covered third-party fees which will be imposed on a particular transfer. The conditions which must be met to disclose an estimate of the exchange rate for a particular transfer to a country when the designated recipient of the remittance transfer will receive funds in the country’s local currency include: the insured institution made 1,000 or fewer transfers to the country in the previous calendar year; and the exact exchange rate cannot be determined for a particular remittance transfer.  One thing to keep in mind about providing estimates is that this is temporary.  Exact amounts are required to be provided and the allowance for providing estimates of fees and exchange rates expired on July 21, 2020.  However, the CFPB allowed insured institutions a “reasonable period of time” as they transition from providing estimates to providing exact amounts.  Exact fees and exchange rates must be provided after a “reasonable time period” (not to exceed six month) setting a  deadline of January 21, 2021.