CFPB Proposes To Regulate Large International Money Transfer Providers

Jan 27, 2014   

On January 23, 2014, the Consumer Financial Protection Bureau (“CFPB”) issued a proposed rule that would extend its regulatory authority to certain nonbank international money transfer providers. A copy of CFPB’s press release can be read hereand the proposed rule can be read here.

Generally speaking, CFPB regulates electronic fund transfers through a series of regulations known as “Regulation E” found at 12 C.F.R. Part 1005. With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), CFPB was tasked with supervising an additional comprehensive system of new consumer protections for remittance transfers sent by consumers in the United States to individuals and business in foreign countries. Dodd-Frank expanded the scope of the Electronic Funds Transfer Act to cover international remittance transfers. (Generally speaking, prior to Dodd-Frank, international money transfers were not specifically covered by federal consumer protection regulations, but have always been regulated for purposes of combating money laundering, terrorist financing, drug trafficking and fraud.)

Pursuant to this authority, CFPB issued its “Remittance Rule” which implemented new protections, including disclosure requirements, and error resolution and cancellation rights, to consumers who send remittance transfers to foreign countries. (The Remittance Rule is actually a series of regulations within Regulation E found at 12 C.F.R. Part 1005, Subpart B.). The Remittance Rule went into effect October 28, 2013. More information regarding the Remittance Rule can be found on CFPB’s website here.

Currently, CFPB has authority to assess large banks’ and credit unions’ compliance with the Remittance Rule. However, the proposed rule would subject any nonbank international money transfer provider that provides more than $1 million in international money transfers annually to CFPB’s regulatory authority. (Dodd-Frank gave CFPB the authority to supervise “larger participants” in consumer financial markets as defined by rule.)This would include brick and mortar and online money transmitting businesses, and may also include remitters and issuers of virtual currencies, such as Bitcoin.

The proposed rule would not only require that these larger nonbank institutions be compliant with the Remittance Rule, but it would also subject them to possible CFPB on-site examination and follow-up monitoring. CFPB’s examination methods are set forth in the proposed rule and allow CFPB to use the same examination procedures it uses for banks. Further, the proposed rule makes clear that money remitters who would not be considered “larger participants” may still be subject to CFPB’s supervisory authority if the Bureau has reasonable cause to determine that they pose a risk to consumers. Comments on the proposed rule may be submitted through for 60 days after the proposed rule’s publication in the federal register.

Fuerst Ittleman David & Joseph, PL will continue to monitor the progress of CFPB’s proposed rule for the latest developments. The attorneys at Fuerst Ittleman David & Joseph, PL have extensive experience in the areas of anti-money laundering compliance, administrative law, constitutional law, white collar criminal defense and litigation against the U.S. Department of Justice. You can reach an attorney by emailing us or by calling us at 305.350.5690.