CFPB to Amend, Delay Contentious Remittance Rule

WASHINGTON — The Consumer Financial Protection Bureau said Tuesday it will amend its rule establishing new disclosures for international money transfers in a move designed to ease bankers' fears that the regulation is overburdensome.

The agency also said it would delay, by 90 days, implementation of the rule, which had been scheduled to go into effect Feb. 7.

The changes, to be specified next month, are in response to some financial institutions that raised "practical challenges" in implementing the new rule, the agency said. While it did not detail all of the proposed alterations, the CFPB said one change would ease how banks must disclose certain foreign taxes.

The news comes on the heels of the Federal Home Loan Bank of New York saying last week  that it would stop processing international wire transfers because of the remittance rule. Since the rule was finalized in January, many smaller institutions have argued the increased disclosure requirements would squeeze them out of the business due to higher compliance costs.

"The initial rules were very aggressive," said Isaac Boltansky, a policy analyst at Compass Point Research & Trading. "There were so many layers of disclosures" that "we've seen banks pull back from offering this service."

In August, the CFPB amended its rule to exclude banks that made less than 100 remittances a year. But Boltansky said that was well below what the industry wanted. The second round of proposed amendments relates to three issues: when a consumer gives an incorrect account number for a money transfer; how to disclose certain third-party fees and foreign taxes; and the disclosure of sub-national, foreign taxes.

The amendment gives financial institutions more flexibility in disclosing foreign taxes and fees. For example, providers would have to disclose foreign taxes imposed on remittance transfers only at the national level, not taxes imposed by foreign sub-national jurisdictions. Further details on the amendments will be revealed next month.

While Boltansky said smaller banks will likely continue to back away from providing such transfers, the new amendments show the CFPB is at least listening to banks.

The amendments are "indicative of the CFPB's intent to be open to comment from the industry," he said. Still, "we're talking about changing certain types of disclosures, not getting rid of the disclosures."

At least some industry representatives were pleased, however.

"The Clearing House has been in close communication with the Bureau throughout its rulemaking process and appreciates the bureau's continued evaluation of the remittance transfer market," said Jim Aramanda, president and chief executive officer of The Clearing House.  The CFPB's "decision to reevaluate the error resolution provisions and requirements for foreign tax and third-party fee disclosures demonstrates the bureau's interest in ensuring the availability of safe, fair, and widely available transfer services that are beneficial to both consumers and banks."