Ed note: This has been cross-posted from the consumerfinance.gov blog.
Over my years of public service, I’ve met a lot of hard-working people who regularly send money transfers, or remittances, to family members and others abroad. Remittances from the U.S. to other parts of the world total in the tens of billions of dollars each year.
Remittance senders are a diverse group from every income bracket. We know that some remittance senders work in the lowest paying jobs for the longest hours. For them, every dollar counts; for their families abroad, every one of these dollars has even more significance. Remittance senders also include consumers paying bills abroad, and mothers and fathers sending funds to their children studying abroad or family members on travel.
Remittance senders have not always been able to get full information about their transactions, including how much money will be received on the other end. If an error was made, there was uncertainty for consumers about how the error would be resolved, if at all. There have been limited federal consumer protections for remittance senders.
With direction from Congress through the Dodd-Frank Act, the CFPB has now changed that. We have adopted new rules that will go into effect in February 2013. These rules will make the costs of remittances clear and hold remittance transfer providers and their agents accountable for errors.
Better Disclosures: With this rule, remittance transfer providers must generally disclose the exchange rate, any fees related to the remittance, the amount of money that will be delivered abroad, and the date the money will be available. Certain disclosures must be provided both before and after the consumer pays for a remittance transfer. Consumers will receive these disclosures in English and sometimes in other languages. We think the clarity that can come from these disclosures will inform consumer decisions and instill confidence.
Option to Cancel: Typically, consumers will have at least 30 minutes after payment to cancel a remittance. If they cancel within the 30 minute window, they will get their money back, whether they make a mistake, change their minds, or feel something isn’t right.
Correction of Errors: With this rule, money transfer providers will generally be held accountable for errors. If a remittance sender reports a problem with a transfer within 180 days, the provider must generally investigate and correct any errors. Companies that provide remittance transfers may also be responsible for mistakes made by their agents. We believe this will encourage remittance transfer providers to only use reliable agents and partners in the U.S. and abroad, weeding out the bad actors.
I am proud that the remittances rule is the first substantive rulemaking adopted on my watch as the CFPB’s Director. I also know where much of the credit is due: the efforts of consumers and their advocates, including the farmworker attorneys who doggedly advocated more than 15 years ago for basic consumer protections for their clients; and members of Congress who saw fit to include these protections in the Dodd-Frank Act. I am pleased with the part the CFPB has been able to play in bringing new protections to consumers who send money to family members, loved ones, and other recipients abroad.
Richard Cordray is the Director of the United States Consumer Financial Protection Bureau.