Ed. Note: En Español aquí.
As President Obama welcomed President Calderon of Mexico to the White House for a state visit yesterday, we were reminded of the many little known benefits the Wall Street reform bill will have for middle class families. Every year, millions of working Americans send financial assistance back to their families in Mexico. In 2006, Mexico received over $23 billion in remittances, the vast majority of which came from the United States. While each transaction averages less than $300, there are frequently hidden fees and costs associated with each transaction.
Remittance transfer providers currently are not required to disclose, prior to initiating a transaction for a consumer, the amount that will be received at the other end, making it essentially impossible for consumers to effectively comparison shop. No federal agency is specifically charged with protecting the rights of consumers using remittance services and federal regulations that apply to many other consumer payments transactions generally do not apply to remittance transfers. Although most states regulate remittance transfer providers to some degree, few require disclosures designed with consumers in mind. Meanwhile, researchers have found that the millions of families sending financial assistance Mexico frequently have difficulty understanding the total cost of sending a remittances, specifically the exchange rate and fees charged by the provider, before they engage in a transaction.
That’s where Wall Street reform comes in. The bureau for consumer financial protection – which would be established under the bill pending before the Senate – will be able to provide, for the first time, federal consumer oversight over companies that provide remittance transfer services to consumers. The bureau will have the authority to lay down and enforce common-sense rules of the road to ensure that consumers are protected from unfair practices and that remittance transfers are subject to fair rules and accountability. The bureau will also enforce new consumer protections, including requirements to provide consumers easy-to-understand pricing disclosures and receipts, and be the place for consumers to turn to with complaints and questions about remittance transfers.
This piece of the Wall Street reform bill – along with many others – benefits hardworking individuals here in the United States as well as their families abroad. As we look ahead to the Senate cloture vote this afternoon we are hopeful that the millions of working people who have not had a voice, have not had an advocate standing up for what is good for consumers, will find themselves one step closer to long overdue changes to the financial system.
Diana Farrell is Deputy Director of the White House National Economic Council