January 8, 2013
Authored by: Bryan Cave Leighton Paisner
The CFPB released its proposal to make several amendments to its remittance transfer rules and to briefly extend the effective date of the rule. The bureau’s proposal is “narrow in focus and intended to preserve the new consumer protections while facilitating compliance with the rule.” The proposed changes address:
—-Effective date. The rules are currently slated to become effective on February 7, 2013. The bureau is proposing to temporarily delay the effective date of the rules until it finalizes changes made as a result of the proposal. The new effective date would be 90 days after the bureau finalizes the proposal.
According to the bureau, the extension should be sufficient for remittance transfer providers to implement necessary systems changes. The bureau also indicates that the extension “might also enable providers (and their vendors) to build solutions that cost less than those that might otherwise have been possible.” In addition, the bureau believes that remittance transfer providers “should be working toward implementing those portions of the Final Rule unaffected by this proposal during the interim period, for instance by continuing to research foreign central governments’ taxes.”
On the flip side, the bureau notes that the proposed changes “impose costs on [consumers who are] senders [of remittances] by delaying the time when they would receive the benefits of the Final Rule,” although senders will benefit to the extent the proposal’s changes eliminate disruptions in providing remittance transfer services.
—Errors resulting from incorrect account information provided by consumers sending remittance transfers. One important improvement made in the proposal is the change to the error resolution procedures and liability that apply when a remittance transfer is not delivered to a designated recipient because the sender provided an incorrect account number to the remittance transfer provider, resulting in funds deposited into the wrong account. When a remittance transfer provider can demonstrate that a consumer provided an incorrect account number and the consumer had notice that the transfer amount could be lost if he/she provided an incorrect account number, the provider would be required to promptly use reasonable efforts to recover those misdirected funds but would not be liable for funds it is unable to recover. Although this change requires prior notice to the consumer, that can be provided at the time of the transaction, offering a helpful safeguard to remittance providers.