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Federal Remittance Transfer Rules

Updated on February 10, 2020 04:16 pm
Federal Remittance Rules

If you are sending money from the United States, or are receiving money while you are in the United States from India or anywhere else in the world, you must know the law.

"Ignorantia legis neminem excusat," Latin for "Ignorance of law excuses no one."

Under the Federal law, Consumer Financial Protection Bureau (CFPB) was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The two main objectives of the CFPB are:

  • To empower consumers by offering transparency whereby they can see the risks and costs upfront. CompareRemit is one such platform that works with the commitment to serve the objective by allowing remitters to compare different money transfer service providers side by side on their portal for free.
  • To protect the American economy, industry, and consumers from unfair, deceptive and abusive business practices.

CFPB announces temporary relaxation on remittance transfers requirements during COVID-19 pandemic

Many households rely on remittances sent by their families and friends from the United States. The pandemic has put a strain on the lives and finances of the people. In order to ease the lives of the customers, CFPB issued a statement that will enable insured remittance service providers to continue providing the immediate needs of their customers.

The key takeaways from the announcement:

  • Amendments to Electronic Fund Transfer Act (EFTA) of Remittance Rule that requires a remittance transfer provider to disclose certain information to consumers who send remittances, including information related to the exact costs of a transfer. The amendment provides remittance service providers a temporary exception to that requirement, which allows them to disclose estimated exchange rates and certain third-party fees, instead of exact amounts.
  • Amendments to the Remittance Rule to address the effects of the expiration of that temporary exception. Remittance service providers may have challenges disclosing actual costs, particularly for transactions to countries with less developed banking systems. The Bureau will neither cite supervisory violations nor initiate enforcement actions against certain remittance transfer providers in connection with an exception to that rule that is expiring in July of 2020.

The Dodd-Frank Remittance Rule of $15

The Federal law defines remittance as the transfer of money from the United States to other countries through different channels including electronic money transfers through "remittance service providers." The transfer, however, must be for more than $15 as per the Federal Rule. The federal law does not apply to companies that consistently provide 100 or fewer remittance transfers each year.

Regulation E is the framework that establishes the rights, liabilities, and responsibilities of participants in the "Electronic Fund Transfer" (EFT) industry as defined by the Dodd-Frank Wall Street Reform and Consumer Protection Act. It covers every transaction initiated through an electronic terminal, telephone, computer, or magnetic tape that instructs a financial institution either to credit or to debit a consumer's asset account with
funds.
The federal protection rule includes the following:

Money Transfer Disclosures:

The Dodd-Frank Remittance rules require companies to give accurate information to their customers before they pay for money transfers. The disclosures must contain:

  • The exchange rate
  • Fees and taxes collected by the companies
  • Fees charged by the companies' agents abroad and intermediary institutions.
  • The amount of money expected to be delivered abroad, not including certain fees charged to the recipient or foreign taxes.
  • If appropriate, a disclaimer that additional fees and foreign taxes may apply.

Providing appropriate Receipts:

The money transfer companies are required to provide customers with a receipt for the money transfer transaction that matches

  • The amount sent
  • When the money will be available with the recipient
  • Customers rights
  • Cancellation process
  • What to do in case of any errors
  • Where to submit complaints

Full Disclosures of Privacy Policies & Deductions:

Remittance transfer providers must disclose all the information about the exchange rates, fees & taxes payable for the transfer amount to be transferred. The provider must also notify the consumer of the net money that will be available upon transfer along with the expected transfer date. Companies must fully disclose and let consumers peruse the privacy policy. The disclosure can be in other languages than English if required. The company must also provide information on how to file complaints in case of any error on part of the provider or otherwise.

Disclosure Information

Right to Cancel Money Transfer Transaction:

The consumer will have 30 minutes to cancel the money transfer transaction. Under these circumstances, Money transfer service provider will refund the transfer amount back to the customer, regardless of the cancellation reason.

Accountable for Errors:

Remittance transfer providers will be held accountable for errors made on their part. If the consumer reports a complaint within 180 days of the transfer, the providers have to investigate, report & rectify the errors. Providers will also be held responsible for the mistakes made by their agents.

Error Resolution

 

Costs of international money transfers are now easier to see and understand

To get a detailed copy of the new remittance transfer rule: New Remittance Federal Regulation. To compare various money transfer companies and find the best way to send money to India, visit our Comparison Tool.

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