CFPB Proposes Increase for Remittance 'Safe Harbor' Exemption
NAFCU believes the rule is a good step, but does not go far enough.
The CFPB on Tuesday proposed to continue to allow certain banks and credit unions to estimate fees and exchange rates for remittances and proposed increasing the “safe harbor” for financial institutions making few transfers each year.
In a notice of proposed rulemaking, the agency suggested that financial institutions making fewer than 500 remittances a year be exempt from compliance. The current threshold is 100 remittances.
In addition, insured financial institutions could estimate the exchange rate for a remittance transfer to a particular country if, among other things, the recipient will receive funds in the country’s local currency and the institution made fewer than 1,000 transfers to that country during the previous year.
The bureau also proposed allowing insured institutions to estimate third-party fees if, among other things, the institution made 500 or fewer transfers to that country during the previous calendar year.
The fee and exchange rate exemptions are currently in place, but they are scheduled to expire in July 2020.
“The Bureau found that in 2017, banks and credit unions conducted 4.2 and 0.2 percent of all remittance transfers, respectively,” the agency said, in announcing the proposal. “However, the average amount that banks and credit unions transferred was much greater than the average amount transferred by [money services businesses].”
The CFPB said that when the agency announced it was examining the rule, several commenters said that the regulatory burden it placed on banks and credit unions has caused some institutions to exit the remittance business.
The rule is a good step, but does not go far enough, said Carrie Hunt, NAFCU’s Executive Vice President of Government Affairs and General Counsel.
She said NAFCU is pleased with the increase in the safe harbor threshold but said the rule should not apply to credit unions at all.
“While the proposal’s increase to the transaction threshold for compliance purposes fell short of NAFCU’s recommendations, it will provide relief to credit unions. NAFCU will continue to push for credit unions, as community-based lenders, to be exempt from the rule altogether,” she said.
In the past CUNA has suggested that the safe harbor exemption should be increased from 100 remittances to 1,000 remittances.