The U.S. Consumer Financial Protection Bureau said it will revise rules for international money transfers after banks complained that the agency’s current plan could push some of them out of the business.
The bureau, which had said final regulations governing so- called remittances would take effect on Feb. 7, now plans to issue a revision in December for a comment period, according to a statement released today. The changes will address what should happen if a consumer provides an incorrect account number for a transfer and how remittance providers must disclose third-party fees and foreign taxes, the bureau said.
“We think these changes will make the rule workable, and make it possible for them to keep offering the product,” said Janis Bowdler of the National Council of La Raza, who was briefed on the changes by bureau Director Richard Cordray. “We don’t want to see a mass exodus from the product, but we do want to see industry be responsible,” said Bowdler, who is director of La Raza’s wealth-building project.
Cordray had rebuffed bank lobbyists’ request for a delay in the effective date during an Aug. 10 meeting to discuss the rule. Industry groups then outlined what they saw as problems with the rule in an Oct. 17 letter.
The change announced today may have been prompted by the Federal Home Loan Bank of New York saying it would stop processing international wire transfers for members as a result of the rule, according to Robert Rowe, vice president and chief counsel of the Washington-based American Bankers Association.
The question is whether the changes come in time to keep other banks from exiting the business, Rowe said.
“The sooner they get something out the better,” he said. “We are starting to get to the point where banks have to fish or cut bait.”
Cordray’s reversal “is a prime example of industry, consumer groups and government coming together to find a positive solution,” Richard Hunt, president of the Consumer Bankers Association, said in an interview.
The remittance rule, required under the Dodd-Frank Act, is designed to improve consumer understanding of costs. It affects banks that make international transfers, as well as non-bank firms such as Western Union Co. (WU) and MoneyGram International Inc. (MGI)
Since the final rule was issued early this year, banks have complained that it requires them to inform customers of costs that they can’t know, such as local taxes imposed where the money is picked up.
The CFPB issued a revision on Aug. 7, to exempt companies that handle 100 or fewer remittances per year.
The new effective date will be some time in the spring of 2013, according to the bureau’s statement.
To contact the reporter on this story: Carter Dougherty in Washington at email@example.com