Senator Jeff Merkley (D-Ore) is concerned that the Consumer Financial Protection Bureau’s proposed regulations implementing the foreign remittance transfer provisions of the Dodd-Frank Act present challenges for community banks and credit unions. In a letter to Raj Date, CFPB Acting Director, Senator Merkley, a key member of the Banking Committee, said that compliance with in-advance disclosure requirements may be challenging for foreign remittance transfers involving open networks where transactions are conducted through a series of independent correspondent entities. Community banks and credit unions will need time to develop the systems needed to provide the full disclosure that Section 1703 promises.
Authored by Senator Daniel Akaka (D-Haw), Section 1703 provides certainty to consumers making foreign remittance transfers by requiring full disclosure of exchange rates and transaction fees prior to the transaction.
Senator Merkley is also concerned that the draft regulations contain a permanent exemption for countries where exchange rates are not legally knowable. In his view, this could be a troubling loophole that, if needed at all, should only be used in the narrowest of circumstances with additional safeguards.
The Senator also urged the CFPB to clarify the distinctions between consumer transactions covered by the implementing regulations and business transactions. The intent of Section 1073 is to protect retail consumers from undisclosed fees and problems concerning error resolution, said the Senator, adding that the statute was not intended to cover commercial or business transactions. Thus, final regulations should exclude commercial transactions, he said, in order to avoid any confusion under the definition of consumer in the statute, including both incorporated and unincorporated businesses
Finally, the Senator urged the CFPB to consider if requiring the open network institution to provide consumers with a clear and understandable summary or average of recent comparable transactions to the same destination country would be helpful. In his view, this would assist the consumer in making an informed decision, and also assist the marketplace in transitioning to the new system.