Banks and CUs Among the Only Means for Lowering Remittances Costs, National Hispanic Group Says

WASHINGTON – A report from The National Council of La Raza, the nation’s largest Hispanic organization, has called for more Hispanic immigrants to use banks and credit unions to send remittances home rather than wire transfer companies such as Western Union. Reforming the Remittance Transfer Market points out that one key reason for high fees is a lack of competition from banks and credit unions. Seven in 10 Hispanics (70%) in the U.S. who send remittances use a wire transfer company. Only 11% remit funds through a bank and 2% through a credit union, despite the fact that these financial institutions provide a wider menu of services at a lower cost. “Almost half of remittance senders do not have bank accounts, yet studies show that they send an average of $100 to $300 a month to family members. It is not only the right thing to do, but also the smart thing, for more financial institutions to offer low- or no-cost remittance services as part of checking or savings accounts, which would help these workers enter the financial mainstream,” noted Janet Murguia, NCLR CEO. Beatriz Ibarra, a policy analyst for La Raza and the report’s author, said it is hard to measure the bank and credit union responsibility for making an effort to offer remittances because of different legal and regulatory barriers that banks and credit unions face. In terms of credit unions, for example, the report charged that “many” credit unions are unaware that NCUA has published an opinion letter in 2002 which allows credit unions to offer remittance services to credit unions on a limited basis in order to promote membership. Ibarra said La Raza had reached that conclusion after discussions with CUNA and other industry sources interested in the problem. The report cited three major problems banks and credit unions face in offering remittance services. First, the higher cost remittance service providers, such as Western Union, have the advantage of being where most Hispanics are. “Western Union alone has more than 196,000 Agent locations in more than 190 countries worldwide,” the report noted. “MoneyGram has more than 60,000 MoneyGram Agent locations.” Second, the identification requirements for opening a bank account or becoming a credit union member still present a barrier for many Hispanics seeking to send a remittance through a bank or credit union. Wire transfer agents, by contrast, will generally only ask for identification for amounts over $1,000, a figure which is well above the average amounts remitted. Third, too many remittance purchasers are unaware that banks and credit unions can provide a more cost effective remittance service because there is not enough transparency about the real costs of these services. “For example, many Latinos are unaware that they are charged an exchange rate fee in addition to the fee charged for transmitting funds,” the report noted, and the lack of knowledge of how much remittances really cost makes it hard for Hispanics to effectively shop for or understand the lower rates banks and credit unions offer. -