Five Democratic Senators — Elizabeth Warren (MA), Dianne Feinstein (CA), Brian Schatz (HI), Jack Reed (RI), and Alex Padilla (CA) — recently petitioned the Consumer Financial Protection Bureau (CFPB) to “take action to eliminate hidden fees associated with international remittance payments.”
The Remittance Transfer Rule requires transfer providers to provide prepayment disclosures to consumers prior to paying for a remittance transfer. According to the senators’ letter, though remittance providers are required to display the exchange rate and fees associated with a transaction, some providers collect additional revenue by increasing exchange rates. The senators equated the remittance payment fees to the so-called “junk fees” that the CFPB has been laser focused on eliminating as of late.
The senators contend that, as a result of certain loopholes in the rules, remittance providers may technically comply with the CFPB’s remittance rule requirements, while providing insufficient price transparency to allow consumers to make informed comparisons and choose the lowest-cost provider. For example, they allege some providers may “[take] advantage of the CFPB’s exemption for the “optional disclosure of non-covered third-party fees,” which are fees imposed by the designated remittance recipient’s financial institution for receiving the transfer. Despite technological advances that facilitate near-instantaneous information sharing, the exemption allows remittance providers to continue to estimate non-covered third-party fees, rather than provide accurate, fixed third-party cost.”
The petition urged the CFPB to strengthen the remittance rule to “ensure greater transparency.” Specifically, the senators urged the CFPB to: (1) require remittance providers to display mid-market exchange rates, while only collecting revenue through added costs, including fixed third-party fees openly displayed as “total cost”; and (2) rescind the permanent exemption for noncovered third-party fees and encourage the adoption of new technology that would provide transparent, pre-transfer cost information.
Troutman Pepper will continue to monitor important developments involving the CFPB and the Remittance Transfer Rule and will provide further updates as they become available.