On Jan. 20, 2011, the Consumer Financial Protection Bureau (CFPB or Bureau) released its long-anticipated rules governing certain electronic money transfers or “remittance transfers.” The new “remittance transfer” rules implement provisions of Dodd-Frank by imposing—for the first time—federally mandated disclosure, error resolution and cancellation rights on remittance transfer providers, which can include both financial and non-financial institutions. Non-depository financial institutions such as money transmitters, which have been traditionally governed principally by state law (except for federal Bank Secrecy Act requirements), will now be subject to these new federal rules.
The final rules will be codified as new “subpart B” to Regulation E under the Electronic Fund Transfer Act (EFTA). The new remittance rules are effective one year from publication in the Federal Register. Concurrently with the final rules, the Bureau is also seeking comment on proposed standards for (i) determining whether a person provides remittance transfers “in the normal course of business,” and (ii) applying disclosure and cancellation requirements to scheduled transfers, including recurring transfers.
Required Elements of a “Remittance Transfer”
A remittance transfer involves (i) an “electronic” transfer of funds (ii) delivered by a “remittance transfer provider” (iii) upon request of a “sender” located in the United States (iv) to a “designated recipient” (consumer or business) located in a foreign country. Checks, drafts and other paper (i.e., non-electronic) instruments are not covered; however, open network transactions (e.g., wire transfers, ACH transactions) are covered. A remittance transfer can, but need not, be an “electronic fund transfer” (EFT), which are covered by the legacy Regulation E rules (now codified as new “subpart A”). The elements of a remittance transfer are further explained as follows...
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