[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                 REMITTANCES: REGULATION AND DISCLOSURE
                     IN A NEW ECONOMIC ENVIRONMENT

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

                          AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 3, 2009

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-39







                  U.S. GOVERNMENT PRINTING OFFICE
52-395 PDF                WASHINGTON : 2009
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001








                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             THADDEUS G. McCOTTER, Michigan
RON KLEIN, Florida                   KEVIN McCARTHY, California
CHARLES A. WILSON, Ohio              BILL POSEY, Florida
ED PERLMUTTER, Colorado              LYNN JENKINS, Kansas
JOE DONNELLY, Indiana
BILL FOSTER, Illinois
ANDRE CARSON, Indiana
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
       Subcommittee on Financial Institutions and Consumer Credit

                 LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York         JEB HENSARLING, Texas
MELVIN L. WATT, North Carolina       J. GRESHAM BARRETT, South Carolina
GARY L. ACKERMAN, New York           MICHAEL N. CASTLE, Delaware
BRAD SHERMAN, California             PETER T. KING, New York
DENNIS MOORE, Kansas                 EDWARD R. ROYCE, California
PAUL E. KANJORSKI, Pennsylvania      WALTER B. JONES, Jr., North 
MAXINE WATERS, California                Carolina
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
CAROLYN McCARTHY, New York               Virginia
JOE BACA, California                 SCOTT GARRETT, New Jersey
AL GREEN, Texas                      JIM GERLACH, Pennsylvania
WM. LACY CLAY, Missouri              RANDY NEUGEBAUER, Texas
BRAD MILLER, North Carolina          TOM PRICE, Georgia
DAVID SCOTT, Georgia                 PATRICK T. McHENRY, North Carolina
EMANUEL CLEAVER, Missouri            JOHN CAMPBELL, California
MELISSA L. BEAN, Illinois            KEVIN McCARTHY, California
PAUL W. HODES, New Hampshire         KENNY MARCHANT, Texas
KEITH ELLISON, Minnesota             CHRISTOPHER LEE, New York
RON KLEIN, Florida                   ERIK PAULSEN, Minnesota
CHARLES A. WILSON, Ohio              LEONARD LANCE, New Jersey
GREGORY W. MEEKS, New York
BILL FOSTER, Illinois
ED PERLMUTTER, Colorado
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho









                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 3, 2009.................................................     1
Appendix:
    June 3, 2009.................................................    39

                               WITNESSES
                        Wednesday, June 3, 2009

LoVoi, Annette, Field Director, Appleseed........................     8
McClain, Scott K., Deputy General Counsel, Financial Service 
  Centers of America (FISCA).....................................    11
Orozco, Manuel, Senior Associate and Director of Remittances and 
  Development, Inter-American Dialogue...........................     6
Thompson, Mark A., Associate General Counsel, The Western Union 
  Company........................................................    10

                                APPENDIX

Prepared statements:
    Waters, Hon. Maxine..........................................    40
    LoVoi, Annette...............................................    43
    McClain, Scott K.............................................    53
    Orozco, Manuel...............................................    57
    Thompson, Mark A.............................................    64

              Additional Material Submitted for the Record

Maloney, Hon. Carolyn:
    Written statement of the World Council of Credit Unions 
      (WOCCU) and the Credit Union National Association (CUNA)...    69
    Written statement of the National Association of Federal 
      Credit Unions (NAFCU)......................................    74

 
                      REMITTANCES: REGULATION AND
                          DISCLOSURE IN A NEW
                          ECONOMIC ENVIRONMENT

                              ----------                              


                        Wednesday, June 3, 2009

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Luis Gutierrez 
[chairman of the subcommittee] presiding.
    Members present: Representatives Gutierrez, Maloney, Watt, 
Sherman, Moore of Kansas, Hinojosa, McCarthy, Baca, Green, 
Clay, Scott, Cleaver, Klein, Meeks, Foster, Perlmutter; 
Hensarling, Castle, Lee, and Paulsen.
    Chairman Gutierrez. This hearing of the Subcommittee on 
Financial Institutions and Consumer Credit will come to order. 
Good morning, and thanks to all the witnesses for agreeing to 
appear before the subcommittee today. Today's hearing is 
focused on the current state of the remittance industry in 
today's changing economy. We will examine consumer access to 
remittance transfer outlets, the cost and current levels of 
transparency involved with sending remittances, and the need 
for further regulation of the industry.
    We will be limiting opening statements to 10 minutes per 
side, but without objection, the record will be held open for 
all members' opening statements to be made prior to the public 
record. I yield myself 5 minutes.
    The volume of remittances has grown so dramatically over 
the past decade that these cash flows consistently rival 
combined foreign aid and direct investment in many countries. 
For 2008, the World Bank estimates that migrants sent $305 
billion to developing countries. This is more than twice the 
amount of all foreign aid distributed during the same year. 
Truly, the remittance industry knows no borders.
    In 2007, Indians living abroad transferred an estimated $27 
billion back to India. China and Mexico are close behind at 
$25.7 billion and $25 billion, respectively.
    In nominal dollar terms, more remittances are sent to Latin 
America and the Caribbean than any other region. In 2008 alone, 
more than $69 billion in remittances were sent to Latin 
America. This is more than the combined total of official 
development assistance and foreign direct investment in the 
region. And 66 percent--that's almost $46 billion of the 
remittances--sent to Latin America originated right here in the 
United States.
    To put this in a perspective globally, the United States 
distributed $26 billion in official foreign aid in 2008. This 
is $20 billion less than migrants sent back to their families 
in Latin America. Even with the current reports of a decline in 
the money transfer to Mexico over the first 4 months of 2009, 
migrants still sent $1.8 billion to Mexico in April, alone.
    From a consumer standpoint, one of the major issues of 
remittances has always been transaction costs. But the 
remittance industry has come a long way since the last decade 
in reducing transaction fees. For example, in the mid-1990's, 
the cost of sending $200 to Latin America averaged $30, or 15 
percent. But by 2009, the cost of the same transaction was down 
to about $6.30, or 3 percent.
    The recent decline in fees can largely be attributed to 
increased competition in the remittance industry, especially 
among money transfer operators. For example, today there are 
more than 100 money transfer operators serving Mexico, alone. A 
dozen years ago, there were only five. Technology has also 
accelerated competition. Directo a Mexico, an automatic 
clearinghouse, charges U.S. banks only $.67 per transaction to 
transfer money to Mexican banks.
    Other companies are expanding the use of card-based 
services, ATMs, debit, and prepaid cards as a method for low-
cost money transfers. In addition, some companies are 
experimenting with the use of cell phones to make remittance 
transfers.
    And more can still be done to reduce costs and improve 
price transparency to assist consumers in comparison shopping. 
Many consumer groups support basic pre-transaction disclosures 
regarding exchange rates and fees with a more detailed summary 
of the fees and costs provided in a post-transaction receipt. 
However, the money remitters contend that more disclosure 
requirements will add to their operation cost, and make further 
reduced fees unlikely.
    There is also the issue of who would regulate this 
industry. Currently, most States regulate money transfer 
companies in some capacity, but few States require consumer-
oriented disclosure. Additionally, State regulations for money 
transfer companies do not apply to financial institutions.
    Finally, the State regulatory regime provides a patchwork 
of regulation that increases compliant costs, and has to be 
absorbed by the industry or passed on to the consumer. Today we 
will explore all of these issues, focusing on whether 
additional consumer disclosures should be required by Federal 
law. The subcommittee will also examine whether a Federal 
regulator is needed to oversee the remittance industry. And, if 
so, which entity is best suited to take on the task.
    This hearing is very timely, and this committee will soon 
take up legislation overhauling the Nation's financial 
regulatory structure. It seems logical to me that we extend the 
Federal regulatory regime to the remittances industry. We 
should do so as part of a larger context of regulatory reform.
    To that end, later this month I plan to introduce 
legislation to address some of the disclosure issues 
surrounding remittance transfers and possibly create a Federal 
regulatory regime. I look forward to hearing from our 
witnesses, and yield back the balance of my time.
    The gentleman from Delaware, Mr. Castle, is recognized for 
5 minutes.
    Mr. Castle. Thank you, Mr. Chairman. And let me thank all 
of the witnesses for being here today, and sharing their good 
thoughts with us.
    Much of our focus today will be on the challenges facing 
licensed money remitters and the impact of the global economic 
crisis. Money remittance businesses play a key role in our 
economy, as well as the economies of many developing nations. 
And I applaud the financial institutions subcommittee for 
holding this important hearing.
    I would also like to address some of the risks posed by 
unlicensed remitters, and the impact of new methods for 
transferring money when it comes to our national security. 
Since the terrorist attacks of 2001, this Congress has taken 
significant steps to combat the international financing of 
terrorism. However, recent reports indicate that post-9/11 
terrorist financing has become more decentralized, and that 
those involved are using less sophisticated means to move 
money, and avoid official banking systems.
    These reports also note that terrorist financiers are 
exploiting new technology like Internet message boards, stored 
value cards, and M-payments to transfer money electronically.
    With at least 10 different government departments and 
agencies involved in the effort to combat terrorist financing, 
I believe it is vital that Congress remain vigilant when it 
comes to keeping pace with these evolving trends in terrorist 
financing. Hopefully we will learn more today about the 
effectiveness of our current regulations when it comes to 
addressing these evolving terror financing and money laundering 
trends.
    I also have some concerns that the current hodgepodge of 
State and Federal regulations of money service businesses 
(MSBs) does a poor job of preventing abuse of the remittance 
system. Some States do essentially no regulation, and the IRS, 
which is charged with examining MSBs for compliance with the 
Bank Secrecy Act, could not possibly examine the tens of 
thousands of MSBs known to exist. Many MSBs are not even 
registered, nearly a decade after the passage of the Patriot 
Act. This haphazard regulation hurts MSBs and the senders of 
money, too, because few banks want the liability of offering 
accounts to MSBs.
    This committee has made an effort to address that issue 
with legislation championed by Mr. Gutierrez, Mrs. Maloney, and 
Ranking Member Bachus. But I believe much more needs to be done 
in this area.
    Moving forward, it is my opinion that the Financial 
Services Committee should hold a comprehensive hearing on the 
status of our post-9/11 efforts to combat terrorist financing. 
I recently sent a letter to our committee's leadership 
requesting just such a hearing.
    Thank you, Mr. Chairman, and I yield back the balance of my 
time.
    Chairman Gutierrez. Congressman Hinojosa is recognized for 
3 minutes.
    Mr. Hinojosa. Thank you, Mr. Chairman. Thank you for 
holding this hearing on an issue important to me and my 
constituents, and our Nation's economy.
    Remittances fill an important community need for many of my 
low- and moderate-income constituents who maintain strong ties 
to their families in Latin America and other regions of the 
world, and who have befitted significantly from reduced cost 
and increased disclosure of and from increased competition and 
disclosure of remittances.
    Chairman Gutierrez, I was a proud co-sponsor of your 
legislation, the International Remittances Consumer Protection 
Act of 2005, in the 109th Congress. And I would be honored to 
be an original co-sponsor of similar legislation you plan to 
introduce this Congress.
    I also laud you for your renewed interest in financial 
literacy. Mr. Orozco, I am very pleased that you acknowledge in 
your testimony the importance of financial literacy. I have 
dedicated a considerable part of my time here in Congress to 
finding ways to move my constituents, especially the unbanked, 
away from predatory lenders, payday lenders, and check cashers, 
and into the financial services institutions.
    One of the ways I am seeking to accomplish this goal is by 
increasing the financial literacy rates of all those residing 
in the United States during all stages of their lives. To reach 
this goal, I co-founded and co-chair The Financial and Economic 
Literacy Caucus with my good friend and colleague, 
Congresswoman Judy Biggert of Illinois.
    I am pleased, Mr. Orozco, that you and an ever increasing 
number of people across the United States are adopting the term 
``financial literacy,'' and are striving to improve financial 
literacy rates. I am also pleased that Congress and the public 
have incorporated that phrase in resolutions, legislation, and 
events held here on Capitol Hill and in Members' districts 
throughout the United States.
    I believe that the financial literacy cause that 
Congresswoman Biggert and I have been working on since 2002, as 
well as the founding of the Caucus in 2005, have let the 
financial literacy genie out of the bottle.
    The Caucus has done much to advance financial literacy, but 
we have much more to do to educate our constituents about the 
financial fundamentals of checking accounts, savings accounts, 
budgeting, and preparing for economic decline. I am pleased 
that you and the members of this subcommittee and the full 
committee have embraced the financial literacy cause. Chairman 
Gutierrez, I commend you for including financial literacy 
provisions in your legislation. And with that, I yield back.
    Chairman Gutierrez. The gentleman yields back. Congressman 
Scott, you are recognized for 2 minutes.
    Mr. Scott. Thank you, Mr. Chairman. I want to thank you for 
having this important hearing, because we are indeed in a 
global economy.
    After almost a decade of sustained growth, most developing 
economies are stalling, as a result of the global economic 
crisis, and especially that of Africa. And I would like to 
dwell on Africa, because of the urgency of that situation 
there. Dwindling trade, failing commodity prices, lagging 
foreign investment, and dropping remittances are all 
contributing to the overall deterioration of strides made by 
many developing countries, especially in Africa.
    The International Monetary Fund estimates that the 
continent of Africa is forecast to slip from 5.5 percent last 
year to 1.3 percent, according to the latest numbers. Tens of 
millions of Africans will fall back into poverty. It is 
important that we continue to encourage groups to continue 
their work to ensure African countries continue on the path to 
growth and development, while ensuring respect for the 
environment and natural resources.
    As money sent home by migrants accounts for the second 
largest financial inflow, even over international aid to many 
developing countries, remittances are playing an increasingly 
large role in the economies of many countries.
    Now, Mr. Chairman, when an additional 55 to 90 million 
people will be pushed into extreme poverty in 2009, and the 
number of hungry people is expected to climb past 1 billion, we 
must ensure that programs that deliver adequate resources are 
preserved. And nowhere is this crisis more dramatic than in 
Africa, with hunger and famine and drought rampaging the 
continent, not to mention the incessant and continuous and 
unnecessary civil wars.
    For the first time in over 20 years, a decade or so, 
remittances to Sub-Saharan Africa are set to fall in 2009, 
according to the World Bank. Remittances income is set to 
decline by 1 percent from 2008 to 2009. I am aware of the 
impact remittances have made on many African countries and the 
impressive progress that has been made over the years.
    But I worry, Mr. Chairman, with the global economic crisis, 
that we will lose decades of development and growth. I am 
interested to hear from our distinguished panel on these and 
other issues. I am pleased that the chairman has chosen to hold 
this hearing, and I look forward to the testimony.
    Chairman Gutierrez. Thank you very much. First, we have Dr. 
Manuel Orozco, a senior associate and director of remittances 
and development at the Inter-American Dialogue. He has 
conducted extensive research policy analysis and advocacy on 
issues relating to the global remittances and migration and 
development worldwide. Dr. Orozco is chair of the Central 
America and Caribbean at the U.S. Foreign Service Institute, 
and is also adjunct professor at Georgetown University, where 
he is a senior researcher at the Institute for the Study of 
International Migration.
    Next we have Annette LoVoi, who has been with Appleseed 
since 1997, first serving as founding director of Texas 
Appleseed, and now as national field director, a position she 
has held since 2003. She has a master's degree in public 
affairs from the Lyndon Baines Johnson School of Public 
Affairs, and has held positions in various State agencies in 
Texas.
    Mark Thompson is an associate general counsel for the 
Western Union Company. Mr. Thompson manages the legal 
department for the Americas regions, and advises the company on 
State and Federal regulatory matters, including compliance with 
the Bank Secrecy Act, the USA. Patriot Act, and individual 
State regulatory statutes.
    Scott McClain is a partner at the law firm of--is this 
Winne, Banta? Yes. This is a--wow, and Kahn. Serves as 
general--you know, I get everybody's name, I practice 
everybody's name, because everything else is usually easy. This 
time they got me on the law firm. I am a little embarrassed 
here, but it is a big law firm. We will put it in the record. 
I'm sorry. I didn't practice the law firm's name.
    As deputy general counsel for Financial Service Centers of 
America, he is a graduate of Seton Hall Law School, and 
practices in the fields of anti-money laundering and financial 
services regulatory compliance. You are welcome, also. Please, 
we are happy to have you, Mr. Scott McClain, here.
    We will begin with Dr. Manuel Orozco, and hear from each of 
you for 5 minutes.

 STATEMENT OF MANUEL OROZCO, SENIOR ASSOCIATE AND DIRECTOR OF 
      REMITTANCES AND DEVELOPMENT, INTER-AMERICAN DIALOGUE

    Mr. Orozco. Good morning, and thank you very much for 
inviting me to testify. This hearing is a welcome opportunity 
to focus on remittance transfer-related issues, particularly in 
light of the proposed legislation that seeks to address many of 
the areas and policy initiatives.
    I will focus my remarks on three particular issues: the 
current pattern of remittances during the recession period; the 
state of the money transfer market and industry; and the 
disclosure on financial literacy. These two latter solutions, I 
think, present important opportunities for the future.
    When we look at the current market for money transfers in 
light of the current recession, we see that there is a 
significant decline in the amount of money that immigrants are 
sending. We expect a 7 percent decline from $69 billion to 
Latin America to $64 billion. And the decline is going to be 
extensive, also, to other parts of the world, including Africa 
and Asia.
    The main impact to countries will be those that are more 
heavily dependent, countries like Haiti, Honduras, El Salvador, 
and Nicaragua, where at least 50,000 households are still 
receiving remittances. The effect is going to be--it's not 
going to be negligible, and requires some attention with 
regards to the effects on how to mitigate this reality.
    When we look at the issue of the money transfer industry, 
we see that there is continued competition, despite the 
difficulties that the industry is facing today. We actually see 
a decline in the number of money transfer operators in the 
market, partly related to the current recessionary period, but 
also related to problems in the account closing by banks 
because of the issues relating to regulatory elements.
    The industry continues to be competitive also with regards 
to the cost of remitting. The prices have declined 
significantly from 15 percent 10 years ago to about 5 percent 
this year. The decline has remained, however, relatively stable 
over the past 3 years.
    One of the strategies that some people at the industry have 
proposed is to establish a Federal licensing mechanism. And I 
think that's a very welcome and important idea, especially that 
it will promote competition at the national level.
    However, social strategy needs to be accompanied with very 
strict criteria on how to operate nationwide and how to prevent 
financial losses, especially for companies that may overstretch 
themselves in the context of increased competition and 
increased volume of money transfers.
    The third issue that I think is important to look at is the 
proposed discussion on disclosure. The proposed International 
Remittance Disclosure and Expansion Act offers an opportunity 
for a holistic approach to tackle the challenges facing the 
remittance market, including poor financial access for migrants 
and their families, and mechanisms on consumer protection and 
disclosure.
    The provision of disclosures is definitely a most welcome 
strategy, and a most welcome policy change. However, I think 
there must be correspondence between the objectives of 
disclosure and the use of appropriate instruments that make 
disclosure successful and commensurable to what is feasible.
    Demanding disclosure on foreign exchange is important, yet 
cumbersome. Given the nature of the significantly variable 
nature of the foreign currency market, it is very difficult, if 
not impractical and sometimes impossible, to post signs on the 
foreign exchange rate on a regular basis, because the exchange 
rate changes, basically, sometimes by the second.
    There are other difficulties with regards to the signing--
posting the foreign exchange, because of the different 
competitors on the pay-out locations in the developing 
countries. So, I think the key issue is how to identify 
effective mechanisms to develop a good disclosure proposition.
    And in that light, I think, in addition to disclosure, one 
needs to look at the other side of the equation, which is that 
disclosure in itself is not enough to motivate immigrants to 
understand how the system works. And that is where financial 
literacy plays a very important role. It is--it allows for 
people to achieve financial independence. You know the 
significance of financial literacy, in terms of enabling people 
to understand how to budget their money, how to save it, and 
how to invest it and obtain credit.
    The critical issue with regards to financial literacy is 
not only in the role that it informs people, but also in the 
way in which it provides as a mechanism for financial 
counseling, but also as a mechanism to motivate people to 
better invest and manage their money.
    We have learned in developing countries and in the United 
States that when you establish a strategy on financial 
literacy, there is at least a 25 conversion rate of people, 
immigrants or families of migrants, who mobilize their savings 
into a financial institution.
    Therefore, I find this issue of financial literacy 
essential to any strategy that links up to the reality of 
remittance transfers.
    And I will stop my remarks here. Thank you very much.
    [The prepared statement of Dr. Orozco can be found on page 
57 of the appendix.]
    Chairman Gutierrez. Thank you very much.
    Ms. LoVoi?

     STATEMENT OF ANNETTE LoVOI, FIELD DIRECTOR, APPLESEED

    Ms. LoVoi. Thank you, Mr. Chairman. My name is Annette 
LoVoi, and I serve as field director for Appleseed, a national 
legal advocacy organization with 16 public interest law centers 
across North America. On behalf of our board of directors and 
our staff, I thank you for your invitation to testify this 
morning.
    The Appleseed testimony will cover three topics: the 
importance of disclosures to remittance consumers; the level of 
disclosure that Appleseed finds desirable; and designating a 
Federal regulator to oversee the remittance industry.
    Many remittance customers live on the knife's edge, 
literally one step removed from poverty. We find, through our 
research, that they rely on remittances for basic necessities: 
food; medicine; and emergencies.
    Appleseed conducted research in Chicago, Mr. Chairman. Our 
affiliate, the Chicago Appleseed Fund for Justice, partnered 
with the Mexican consulate to study the financial needs of 
Mexican immigrants coming to the consulate. We learned two 
important things for the purposes of this hearing this morning. 
Many consumers do not understand the price of remittances 
before making the transaction. They simply do not know how much 
the transaction is going to cost. And consumers value, above 
all, understanding the amount of money that will be delivered 
to their family member upon pick-up.
    In completing our work in Chicago, we decided that it was 
important to look at the level of disclosure necessary. And we 
embarked on what we call the Appleseed Fair Exchange pilot. We 
worked with five industry partners and considered what sort of 
disclosure would be appropriate in the field. Our mission was 
to design and test a consumer disclosure template. You will see 
the fruits of our work to my right, and I will explain the 
template for you in just a moment.
    Our pilot provides compelling evidence that disclosure 
makes good business sense: 78 percent of those who checked the 
remittance found it helpful; and 84 percent want to see the 
remittance disclosure in all business locations. Based on 
consumer behavior, we believe that this sort of positive 
consumer reaction will only increase.
    We can look at the marketplace and see the implementation 
of food pricing scanners and nutrition labeling, and we believe 
that consumer behavior is such that once remittance customers 
become accustomed to this form of disclosure, the uptake will 
be even greater.
    Businesses also found the disclosures to be a good business 
move. Businesses reported to us that costs are manageable, that 
disclosures build trust among their clientele, and that they, 
in fact, save time at the front counter by reducing consumer 
questions.
    Let me now turn your attention to our proposed disclosure 
template. This is the template that we tested in the field, and 
it contains, Mr. Chairman and committee members, elements that 
we consider to be base-level and essential elements.
    The elements include a fee for sending, the current 
exchange rate, the day and the time available for pick-up of 
the remittance--this is very important to customers who are 
traveling to pick up their remittances--the type of 
transaction, whether it is bank account to bank account, or 
whether it involves cash or cards, and then what sort of pick-
up fee our consumers might expect on the back end.
    There is another element to our disclosure template that we 
believe is terribly important, and that is a sample of 
remittance cost, so that consumers can see the effect of 
seemingly small differences in fees and exchange rates, and 
what that means for the ultimate amount that could be picked up 
upon delivery.
    We think that this technique will address some of Dr. 
Orozco's concerns, in that this would be suitable for 
downloading, and could be delivered to providers, such that 
they could insert their own financial and costing information 
and make the information readily available to their customer 
base.
    In addition to this template, we have five recommendations 
that are corollary to use of the document:
    We believe that disclosure should occur visually before the 
transaction.
    We believe that there should be a mechanism for error 
resolution in those cases when a transaction goes awry.
    We believe that foreign language disclosures are important, 
and that the three markets to which a provider sends most of 
the business should be covered with foreign language 
translation.
    And we recognize, as the chairman did in his opening 
remarks, that there are emerging technologies. We see more use 
of cell phones, Internet transfers, and prepaid cards as 
mechanisms used by this population. And so we recommend that 
those sorts of consumer disclosures that we're talking about 
today extend to these new emerging technologies and techniques.
    Appleseed recommends that Federal regulators be granted 
rule-making authority to delineate posting requirements. We, 
too, recognize the varying and inconsistent standards among 
States, and we believe that developing disclosures under 
regulators' direction should be done in concert with community 
organizations, industry, and other regulatory agencies.
    We recommend that this regulator consider consumer 
protections in emerging technologies, study these for a year, 
and then report back to the public, and that the regulator also 
take in hand the importance of financial literacy, as 
Congressman Hinojosa referenced.
    We believe that the consumer base does not understand--
    Chairman Gutierrez. The time of the lady has expired.
    Ms. LoVoi. --in all cases, the difference between very, 
very small changes in fees and exchange rates. And 
understanding the impact that this can have on the money 
delivered at the back end is very, very important.
    Mr. Chairman, members, thank you again for the opportunity 
to testify this morning. Appleseed stands ready to assist you 
in taking our base-level suggestions to the next level, and the 
12 centers that we have in the United States and Mexico want to 
bring their knowledge to the table to help you in any way we 
can. Thank you very much.
    [The prepared statement of Ms. LoVoi can be found on page 
43 of the appendix.]
    Chairman Gutierrez. Thank you.
    Next, we have Mr. Mark Thompson, please, for 5 minutes.

 STATEMENT OF MARK A. THOMPSON, ASSOCIATE GENERAL COUNSEL, THE 
                     WESTERN UNION COMPANY

    Mr. Thompson. Thank you, Mr. Chairman. Good morning. My 
name is Mark Thompson, and I am an associate general counsel of 
The Western Union Company. I appreciate the opportunity to 
provide testimony at today's hearing.
    Western Union is a leader in the global remittance market, 
and is the leading non-bank money transfer provider. With over 
365,000 agent locations worldwide, Western Union provides a 
convenient, fast, and reliable way to transfer money in over 
200 countries and territories. Western Union enables millions 
of immigrants to send money back home to their families.
    Competition in the remittance market has increased steadily 
over the last decade. And, as a result, cost of remittances has 
dropped significantly. As Dr. Orozco reported in his May 2006 
paper for the Inter-American Dialogue, the cost of remittances 
has dropped dramatically from above 10 percent of the 
remittance amount to lower than 5 percent.
    The current global recession has resulted in a decrease in 
the amount of remittances. That decline in the amount of 
remittances has further stimulated competition, as participants 
in the market compete to survive in a shrinking market.
    The topic of this hearing includes both consumer 
disclosures and regulation of remittances. The committee staff 
has shared draft legislation regarding disclosure, and I will 
share our thoughts on the proposed language. But first I would 
like to share our thoughts on regulation of money transmitters 
in this new economic environment.
    Money transmitters like Western Union are currently 
licensed by the State. We are subject to Federal laws, such as 
the Bank Secrecy Act, the USA Patriot Act, and other relevant 
statutes, but our licensing and regulatory oversight, such as 
examinations, are done by the States. In most instances, that 
regulation is performed by a State's banking department, in a 
similar fashion to its regulation of State banks.
    Given the growth of the remittance industry over the last 
decade, the increased importance of remittances to the global 
economy, and the increasing number of Federal issues related to 
remittances, such as anti-terrorism, anti-money laundering, and 
border security, we believe the time has come for Congress to 
establish a Federal license and a Federal regulator for money 
transmitters. This would grant the Federal Government greater 
oversight over the industry and its related issues, and would 
provide the industry with more consistent guidance and 
regulation than it currently receives.
    Turning to the issue of consumer disclosures, Western Union 
continues to support transparency with respect to fees and 
foreign exchange rates. We agree that consumers should have 
adequate information to make an informed decision, as they 
choose among providers. And we agree that remittance transfer 
providers should disclose this information to potential 
customers. Several States, including California, Texas, 
Washington, Alaska, and Hawaii mandate specific disclosures 
prior to consummating a transaction. Western Union would 
support similar disclosure requirements under a Federal 
regulatory regime.
    We do have concerns about some of the specific disclosure 
requirements in the draft legislation, which are set forth in 
my written testimony. I would like to note that the current 
draft does address some of the issues we have raised in the 
past, and we appreciate the committee's efforts to balance the 
competing interest related to these issues.
    Thank you again for the opportunity to appear before you 
today on behalf of the Western Union Company. We look forward 
to working with the subcommittee, as you continue to examine 
this issue.
    [The prepared statement of Mr. Thompson can be found on 
page 64 of the appendix.]
    Chairman Gutierrez. Thank you very much, Mr. Thompson.
    And now, Mr. Scott McClain from Winne--I'm sorry? I want to 
get the name into the record: Winne, Banta, Hetherington, 
Basralian & Kahn. Okay.

    STATEMENT OF SCOTT K. McCLAIN, DEPUTY GENERAL COUNSEL, 
          FINANCIAL SERVICE CENTERS OF AMERICA (FISCA)

    Mr. McClain. Thank you very much, Mr. Chairman. Chairman 
Gutierrez, Ranking Member Hensarling, and esteemed members of 
the subcommittee, I am Scott McClain. I serve as deputy general 
counsel to Financial Service Centers of America, also known as 
FISCA. I am grateful for the opportunity to appear here today 
to discuss issues affecting the industry, including the need 
for appropriate regulation to ensure the continued availability 
of affordable remittance services.
    FISCA is the trade association representing nearly 7,000 
neighborhood financial service providers in the United States. 
Our membership is comprised of community-based financial 
service providers, which serve customers from all walks of 
life, including those with bank accounts, as well as the 
unbanked.
    Our members, which we call financial service centers, or 
FSCs, provide a wide range of services, including check 
cashing, remittances, money order sales, and utility bill 
payments. The FSC industry conducts more than 350 million 
transactions each year, providing over $100 billion in services 
to over 30 million customers.
    FSCs act as agents of licensed money transmitters. We are 
involved in the delivery of remittances with customers at the 
point of sale. Although remittances are also provided by banks 
and other financial institutions, due to our convenient 
locations, extended hours, and competitive pricing, the great 
majority of transactions are generated at agent locations.
    FISCA advocates transparency in consumer transactions. We 
understand that low- and moderate-income consumers need to 
manage tight budgets, and should not be hit with surprise fees 
and incomprehensible charges. In sharp contrast with credit 
card providers and other financial institutions, our members 
post fees on easy-to-understand signs, so that customers can 
know how much a transaction will cost before it begins.
    We agree that consumers should have access to pricing and 
exchange rate information to help them make informed decisions 
on remittances. The majority of FISCA's membership act as 
agents for either Western Union or MoneyGram, who make 
transaction fees and conversion rate information--which 
fluctuates daily--available through--including toll free 
numbers and the Internet.
    We applaud the subcommittee's goal in ensuring that 
remittances remain accessible and affordable. In ensuring 
access, however, it is critical that the regulatory environment 
also allow those who provide remittances to remain in business.
    Our members are dependent on access to depository and 
banking service for their very survival. It is well known that 
over the last several years, our industry has experienced an 
epidemic of bank account closures. Banks that service our 
industry are faced with significant regulatory burdens, and are 
required to expend ever-greater resources in maintaining our 
accounts.
    As a result, a growing number of banks are terminating 
their FSCs, or refusing new accounts, which is placing onerous 
requirements on the accounts they maintain. Banks refer to 
regulatory pressure as the primary reason driving these 
actions. The pool of banks that service FSCs is growing 
dangerously small.
    Turning to the northeast regional market, in the past FISCA 
warned Congress that 90 percent of the New York industry was 
served by only 2 major banks. Two weeks ago, one of those 
banks, Banco Popular, announced that it, too, was terminating 
FSC accounts, due to regulatory concerns. Businesses in that 
area are now scrambling to find new banks. Other regions are 
affected, as well.
    It seems almost absurd that the licensed regulated business 
that serves an important need to its community would be driven 
out of business because no bank could serve it. That, however, 
is the current situation. This trend imperils a regulated 
industry and its ability to deliver remittances and other basic 
financial services. It also threatens to drive remittances 
underground to unregulated, illegal channels, including cash 
smuggling.
    It is critical to the interests of national security and 
consumer protection that transparency of transactions be 
maintained, and that our institutions have access to depository 
services.
    FISCA supports the introduction of a legislative solution 
designed to relieve banks of excess regulatory burdens in 
serving our industry. On July 22, 2008, the Money Service 
Businesses Act of 2008, H.R. 4049, sponsored by Representative 
Carolyn Maloney, Chairman Barney Frank, Ranking Member Spencer 
Bachus, and Representative Judy Biggert, was passed in the 
House of Representatives.
    While the financial crisis last fall prevented the Senate 
from taking up that bill, the legislation had broad bipartisan 
support and the support of the banking industry. It is critical 
that consumer protections remain in place for the millions who 
send money to their home countries. Ensuring affordable access 
to remittances, it is also critical that businesses that 
provide remittances have access to banking services to ensure 
their survival.
    We ask that the members of the subcommittee support our 
efforts to protect remittance customers, and the businesses 
that serve them.
    Again, we thank you for the opportunity to present these 
views. Thank you.
    [The prepared statement of Mr. McClain can be found on page 
53 of the appendix.]
    Chairman Gutierrez. Thank you, Mr. McClain. Dr. Orozco, in 
your testimony, you touched on some of your concerns about a 
Federal licensing regime for money remitters. Can you please 
expand on these comments?
    What specific problems do you see associated with such a 
system, in terms of safety and soundness and consumer 
protections?
    Mr. Orozco. Thank you. I think the main problem that a 
Federal license mechanism poses is when a small money 
transmitter thinks that it can operate nationwide, but it 
doesn't have the sufficient cash flow liquidity to do so. And 
on a--especially when we see today where there are lots of 
agents that are facing problems with their debts, they are 
using often remittances to pay off the debts and they delay the 
payment of the transaction.
    The money transfer operator has to cover those costs, and 
if it happens on a nationwide context, they are going to suffer 
a lot of losses, and they are going to go into default.
    So, the main problem is that there is a danger of financial 
default if you allow for a Federal license mechanism if there 
are not specific criteria on how to control the potential for 
financial default. And it is very likely to happen. A small 
money transmitter may feel that he may be able to compete 
nationwide, and he will try to apply contracts in different 
States. And when he operates, but doesn't have enough capital 
to back up transactions, he is going to face financial default.
    So, that is, to me, the critical issue.
    Chairman Gutierrez. Ms. LoVoi, as an alternative to 
displaying exchange rates in each location, Western Union 
suggests providing the fee and exchange rate information to 
consumers prior to the consummation of the transaction.
    In your view, would this be an acceptable compromise? Ms. 
LoVoi?
    Ms. LoVoi. Mr. Chairman, let me answer that question in 
general terms.
    We find that there are times when the fee is 
understandable, but the exchange rate is not understandable. 
And as all of us who deal with financial transactions that have 
two moving parts understand, a change in a fee can have an 
effect on the ultimate amount of money transmitted, as can a 
change in the exchange rate.
    We would like to see both disclosed in advance of a 
transaction, which I believe is your position. And then we 
would like the consumer to have some understanding of the 
interaction of the two.
    And I would say that's a point that I would like to make 
clearly this morning. They can be disclosed separately, but 
what's missing sometimes for the consumer is an understanding 
of the interplay of those two items. That is why we suggested 
sample transactions in our disclosure format. And that would be 
our preference, Mr. Chairman.
    Chairman Gutierrez. Thank you. I want to go to Mr. Thompson 
next.
    In your testimony, you expressed concern about the 
provision in my draft legislation that would require remitters 
to display the daily exchange rates for the five highest volume 
countries for that location. In her testimony, Ms. LoVoi 
suggested each location should post the exchange rates for the 
top three volume countries.
    Would this be preferable to Western Union, or do you just 
oppose the idea of displaying exchange rates?
    Mr. Thompson. Our main concern is the practical difficulty 
of having an employee at each of the agent locations post a 
rate poster like this, or a rate sheet.
    Western Union changes the rates 3 times a day, potentially, 
and we have 40,000 locations. So, if we have a posting 
requirement, what that means is somehow we have to coordinate 
120,000 changes of posters every single day. That is 40 million 
posters every year. And we need to do it in a way that ensures 
that what is posted is what is given to the consumer. And, 
practically, we just don't think we presently have the ability 
to do that.
    We are fine with handing a receipt to the customer prior to 
finishing the transaction that shows all the information on it. 
And you know, in addition to giving the fee and the exchange 
rate, it shows the total amount that the customer has to 
provide us in dollars, and then it shows the total amount that 
will be paid out in the foreign currency.
    And with those elements there, we think that is an adequate 
way for the consumer to make their choices. And I think that, 
you know, the studies that have occurred on prices indicate 
that there is a robust competition on prices. And--
    Chairman Gutierrez. Thank you.
    Mr. Thompson. --this is getting to consumers.
    Chairman Gutierrez. I agree, it is getting better. Mr. 
Castle, you are recognized for 5 minutes.
    Mr. Castle. Thank you, Mr. Chairman. And let me just 
preface my comments by saying a couple of things. One is I want 
to talk about what I spoke of in my opening, which is the 
funding of terrorism, to a degree. And, secondly, I basically 
have not used these different remittance methods, either to 
remit money or to receive money. I can barely operate an ATM 
machine, much less do some of this. So if I misstate the 
question, please straighten that out.
    But let me just start with this. The U.S. State Department 
recently issued a report warning that terrorist financiers 
could use mobile payments, or M-payments, to move money 
electronically through a cell phone account and avoid 
regulation. Do you share the State Department's concerns about 
M-payments being abused by terror financiers?
    McClain, do you--can you answer that?
    Mr. McClain. Thank you, Mr. Congressman. Yes, we are 
certainly concerned about any potential avenue of terrorist 
financing. Our industry is on heightened alert with respect to 
this area, and we make every effort to ensure that our members 
have access to the information that allows them to be able to 
spot these transactions, prevent them, and certainly report 
them via suspicious activity reports.
    With respect to mobile payment devices, we haven't seen 
that product being offered at any level through our locations. 
So I can't speak to that issue directly, as we have not seen it 
yet. As I understand, it is an emerging technology, it is 
something we are certainly keeping an eye on. But at this 
point, it does not seem to be a significant issue, again, just 
because the product is not out there, in terms of our specific 
membership location.
    Mr. Castle. Thank you. A report by the Treasury Department 
warned that the increased use of stored value cards like 
remittance cards and gift cards could be used to anonymously 
smuggle cash. Is there currently adequate regulation of stored 
value cards to regulate the amounts that could be put on these 
cards and taken out of the country?
    [no response]
    Mr. Castle. Anybody? Mr. Thompson?
    Mr. Thompson. We have been piloting a couple of programs 
involving stored value cards. When we have rolled out those 
programs, we have done some pretty intensive screening with our 
anti-money laundering folks to make sure that the kinds of 
limits that we place on card balances and card loans and card 
transactions are ones that we feel comfortable with.
    And, you know, it's regulation that we are imposing on 
ourselves in order to comply with what we think are the 
requirements of the Bank Secrecy Act.
    I do support consideration of regulation of stored value 
providers, as part of our proposed Federal regulatory scheme 
over money transmitters. There are a number of States who have 
adopted the model act. The model act includes stored value as 
one of the items that is regulated at the State level. And I 
think it would be appropriate to look at including that in the 
new Federal licensing bill.
    Mr. Castle. Any other comments on that? Dr. Orozco?
    Mr. Orozco. Yes. Any technology base, a stored value 
instrument, payment instrument, is actually more secure than 
the current mechanism or cash transfers, because it has a much 
more flexible space to introduce differing alternatives to 
increase security, especially to prevent financial crimes. You 
actually have more room through a software platform to 
introduce different mechanisms to prevent financial crimes than 
using cash-to-cash transfer. So, a mobile phone or a stored 
value card will be actually more secure.
    The critical issue is that you don't start backwards from 
the prevailing standards that exist today on financial crime 
prevention. The first one is know your customer. If you can 
validate the customer who sends and receives, then you can 
introduce other failsafe mechanisms and ensure that the 
transfer is secure. So I actually disagree with the State 
Department's statement.
    Mr. Castle. My time is almost up. Let me quickly ask 
another question. Saudi Arabia, obviously, has been very 
involved in terror financing, at least allegedly so.
    Does Saudi Arabia, to your knowledge, have in place 
adequate safeguards to prevent remittances from being used to 
finance terrorism, or is this beyond the knowledge of any of 
you?
    Mr. Orozco. Not Saudi Arabia. I know of companies--what are 
called third countries companies--that basically have 
implemented stored value cards that do not require 
identification. They are the perfect instrument for money 
laundering and financial crimes, terrorism, you name it. And if 
it arrives into the United States, you can, within 10 seconds, 
be able to perform any financial transaction, and immediately 
cause any damage.
    But I don't think the issue is in the country itself, but 
where the company is trying to operate this type of instrument. 
And it is not identified by the regulators in a given place.
    Chairman Gutierrez. Your time has expired.
    Mr. Castle. Thank you.
    Chairman Gutierrez. Mr. Moore, you are recognized for 5 
minutes.
    Mr. Moore of Kansas. Thank you, Mr. Chairman. Ms. LoVoi, I 
appreciate your testimony on the importance of consumer 
disclosure. Something I do worry about, though, is when we 
discuss the need for greater disclosures, that we might be 
going too far and create so many disclosure requirements that 
we actually end up confusing consumers.
    So, I wanted to ask you and any other witnesses who might 
have a comment on that, do you have suggestions as to how we 
can make sure the consumer is fully aware of the--what the fees 
and exchange rates are, but will not serve to confuse them? And 
that is--I know you have addressed some of that, but I hope you 
understand--I practiced law for 28 years before I came here, 
and I don't read the disclosure agreements I get from my credit 
card, you know, because they're so long.
    And I am just wondering if we can simplify that in some 
way, to make sure that people have the information they need 
without this horribly long disclosure form.
    Ms. LoVoi. Well, let me assure you, Congressman, I 
understand your perspective. We are looking for simplicity and 
plain language in all financial disclosures. And I am willing 
to make that general statement about the moment in which we 
find ourselves. I think that fair and understandable disclosure 
is important.
    Let me speak specifically to remittance disclosure. What we 
found in the four major bodies of research that Appleseed has 
conducted is that remittance disclosure is an outlier, and that 
when compared to other commonly used forms of financial 
transactions, less information was being provided about these 
transactions than many other transactions used by similar 
customers.
    And so, we find ourselves needing to gain ground here, and 
needing to come up to par, you might say. We are not looking 
for anything that is cumbersome, which is why we recommended 
that the new regulator work with the parties involved: the 
communities; industry; and other regulatory agencies with a 
great deal of knowledge in this arena. We are looking for 
something that is workable, something that is practical, and, 
most important, something that occurs pre-transaction.
    We have tried to help you by laying out what we consider to 
be the essential elements.
    Mr. Moore of Kansas. Right.
    Ms. LoVoi. And the elements that we have laid out are not 
what I would call esoteric, or terribly complicated. We 
understand the points being raised about numbers of outlets and 
these sorts of things. And both Dr. Orozco and we have 
considered how technology can be used to make this easier.
    We are at a moment in time when use of technology can 
simplify these disclosures, whether it's the sort of 
switchboard that Dr. Orozco has recommended, or the sort of 
downloadable technology that we recommended in our testimony 
this morning.
    We believe the answer is there, and we believe that, with a 
new regulator as the focal point, we can produce something that 
is what I might call elegantly simple, something that is 
useful, straightforward, and helpful to both businesses and 
consumers. And thank you for your questions.
    Mr. Moore of Kansas. Thank you. Do any other witnesses have 
comments? Mr. Thompson?
    Mr. Thompson. At Western Union, we try to provide the 
consumer with a number of ways to get the information. We 
continually update our Web site. And on that Web site are 
calculators that will show how much it costs to send to a 
particular location at a certain amount, and what the exchange 
rate would be.
    We also provide a 24-hour 800 number that consumers can 
call to obtain that same type of information. And then, at the 
agent locations themselves, the agent has the capability to 
look up any fee or rate for the consumer, as they are inquiring 
about the transaction.
    So--and then, as I said before, we do provide this written 
statement prior to the consummation of the transaction to each 
consumer who is doing a transaction with us.
    Mr. Moore of Kansas. Thank you, Mr. Chairman. I see my time 
is up, so I yield back. Thank you.
    Chairman Gutierrez. The gentleman yields back. Mr. Paulsen, 
you are recognized for 5 minutes.
    Mr. Paulsen. Thank you, Mr. Chairman. Mr. Thompson, I heard 
in the past that the OCC has been pressuring small and regional 
banks to basically act as a de facto regulator regarding anti-
money laundering regulations for small money service outlets 
and small local stores. Is this still an issue that we need to 
be concerned about, or aware about, or watching for?
    Mr. Thompson. Yes, it is still an issue. I think Mr. 
McClain has focused quite a bit of attention on that. But we 
have found that it's still very much an issue. I think the last 
number that I received from our financial folks showed that we 
were providing approximately 4,000 local bank accounts to our 
agents, who were unable to obtain their own accounts in their 
own local regions to use in the conduct of our business. So, it 
is--yes, it is still very much a problem.
    Mr. Paulsen. Mr. McClain, do you have any comments on that?
    Mr. McClain. Just briefly. Thank you, Congressman Paulsen.
    It does continue to be a problem. And it--there has been an 
atmosphere created over the last several years. And I don't 
want to pin it on any particular one bank regulatory agency, 
but it is a pervasive atmosphere that somehow these accounts 
are high risk. And I think, if you look at the statistics and 
the numbers and the frequency of regulatory actions against 
MSBs, you will actually find them very low. So we don't think 
that high-risk moniker is justified.
    As I had pointed out earlier in my testimony, it continues 
to be a significant, and a serious, and, unfortunately, as a 
result, I think, of some of the recent focus on banks, a 
growing problem. Thank you.
    Mr. Paulsen. Okay, Mr. Chairman, I yield back.
    Chairman Gutierrez. The gentleman yields back. Mr. Hinojosa 
is recognized for 5 minutes.
    Mr. Hinojosa. Thank you, Mr. Chairman. I am very interested 
in posing a question to Mr. Mark Thompson.
    You spoke about Western Union having to post 3 times a day 
the exchange rate. And what I have found, in talking to people 
who are in the remittance business, and those individuals who 
send money to their families, is that oftentimes they feel--the 
senders of the money to the families--that they are being 
gouged by some of the companies that they have used.
    So, I would ask you this question. As a businessman, I went 
to the bank to borrow money. And oftentimes, I could borrow it 
at Wall Street-printed prime rate plus one percent. You 
negotiate that. It could be 2 percent, it could be at New York 
prime less one. The point is this. They make money lending us 
money in business. And you make money, as being number one in 
the remittance business.
    Why couldn't you set the rate printed the previous day, 
appearing in today's Wall Street Journal, and let that be 
fixed? That is the exchange rate that is going to be applied on 
money being sent to a family abroad. Could you live with that?
    Mr. Thompson. In our industry, the traditional transaction 
consists of two different components. One is the actual 
transfer of the money, and the other one is conducting a 
currency exchange.
    Now, not all transactions that we do involve that second 
component. But when we're dealing with international 
transactions, most of them do. And as a profit-making business, 
we do earn money on both components, and we think it is fair--
    Mr. Hinojosa. Excuse me for interrupting you, because my 
time is going to run out.
    Fees and lowest exchange rate are the two things that have 
been discussed here, and, of course, disclosure. So I want to 
ask Dr. Orozco, being that you seem to be very knowledgeable of 
the different nationalities and folks sending money to their 
families, do you think that Congress setting that as the 
exchange rate of the previous day that appears in--will be 
printed in today's--it closes yesterday, and is printed in 
today's Wall Street exchange rate.
    Could they live with that exchange rate fixed for the whole 
day, business day?
    Mr. Orozco. It's a question that I can answer, depending on 
the company we talk about.
    Mr. Hinojosa. No. Congress would set it. We would say, 
``This is the way that it is going to be done.''
    Mr. Orozco. I think many companies will struggle with that.
    Mr. Hinojosa. Companies would struggle.
    Mr. Orozco. Yes, because the exchange rate may be favorable 
one day but not the other for the company. So, at the end of 
the month, for example, they may have an actual loss of money 
from the buying of foreign currency. Because, basically, that's 
how they make their money. They are constantly buying foreign 
currency on a daily basis.
    Mr. Hinojosa. Ms. LoVoi?
    Ms. LoVoi. Yes.
    Mr. Hinojosa. How do you feel about having a fixed rate?
    Ms. LoVoi. We haven't studied your particular proposal, and 
I would want to study it. As I mentioned in my testimony, our 
approach has been disclosure just immediately prior to the 
transaction. And what you're presenting, Congressman, would be 
a disclosure that would be, you might say, a 24-hour window, 
such that the fee would be static for a certain period of time.
    It's something I would like to think about. I don't have 
comments for you on that today, but I will think about that.
    Mr. Hinojosa. Thank you. Then the last question that I 
would have--and I am running out of time--is I am interested in 
the proposal to transmit remittances via cell phone. How could 
that be done?
    Mr. Thompson. We have a couple of pilots currently running 
in that area. I think the most active one is in the 
Philippines. And what we have done there is worked with the 
financial regulator in the Philippines and a local mobile 
operator to come up with a cooperative agreement on, 
essentially, creating a stored value account on the mobile 
phone, itself.
    And then, presently, the involvement of Western Union is 
from a location in Hawaii. We enable people to go into a 
Western Union agent location and send money to that mobile 
operator's account for the consumer. And then the holder--
    Mr. Hinojosa. Time has run out, and I just want to say that 
I would also be interested in seeing the success of Finland, 
because they have been using this system now for 10 years. And 
you are talking about the Philippines as a demonstration 
project. I would rather see actual proof of how they have 
worked it on the cell phone.
    And with that, I yield back, Mr. Chairman.
    Chairman Gutierrez. The gentleman yields back. Mr. Lee is 
recognized for 5 minutes.
    Mr. Lee. Thank you, Mr. Chairman. Not to pick on Mr. 
Thompson, but I am trying to get a little more educated on the 
fee structure here. And maybe it would help shed some light if 
you can give me an example.
    On a $100 transaction, what would be the base fee cost? And 
then, from a percentage on the currency, you're saying that you 
make a profit, both off of the fee structure, which I 
understand, but what--off the currency do you make one percent, 
2 percent? What is the--is there a set formula, in terms of 
what you make from the currency?
    Mr. Thompson. I didn't come today prepared with those kind 
of numbers. I can speak generally to it.
    Mr. Lee. Sure.
    Mr. Thompson. You know, in Mexico transactions, U.S.-to-
Mexico, to send up to $300 in what we call our Money in Minutes 
service, which is available almost immediately, I think the 
current transfer fee is $15, $14.99 probably.
    And then I think what you're after is kind of the margin 
that we build into on--
    Mr. Lee. On the currency.
    Mr. Thompson. --the foreign exchange rate.
    Mr. Lee. Correct.
    Mr. Thompson. And I am not sure exactly what today's margin 
is, but I think it's around one percent. So that would be, on a 
$300 transaction, $3.
    Mr. Lee. That is--
    Mr. Thompson. That would be the margin on that.
    Mr. Lee. That is typically one percent of what that--
whatever the--
    Mr. Thompson. I think the margins, you know, a decade ago, 
were much, much larger. And competition has really pushed those 
margins to a much smaller range. And Dr. Orozco maybe has 
better numbers than I do, but it is--I think that, you know, 
below 2 percent is probably where most people are today.
    Mr. Lee. I mean, from a clarity standpoint, when you are--
as a consumer, you are now having to weigh two different 
numbers, not only the fee structure, but then you're also going 
to have to calculate what the--depending on how many dollars 
and what that margin rate is.
    It seems if you are--I'm assuming the majority of the 
people who are involved in these transactions are probably 
working class, they may not be as educated on some of these 
issues.
    Do any of these firms just do a flat fee, and they do not 
also take a cut on the currency? Is there anybody who does that 
in the industry?
    Mr. Thompson. I think that the common practice is to have 
both. And I mean, from the standpoint of a consumer comparing, 
the easiest way to do it is to--if the consumer says, ``I want 
to send $300, how much is my relative in Mexico going to get in 
Mexican pesos,'' and just compare those numbers. And we tell 
them that.
    Mr. Lee. I understand. But wouldn't the simplest form just 
be to have a flat rate, regardless of whatever the actual 
currency rate is at that time that is transferred, but 
regardless, you just have a flat fee based on the number--if 
it's $100, it's $15 or $20, and if it's $200--you have some--
I'm just trying to understand.
    Is there a simpler way to enact a fee, versus doing these 
two--where you're charging off of two different venues?
    Mr. Thompson. Well, I mean, one of the problems with having 
everybody have the same exchange rate is that not all companies 
can acquire the currency at the same exchange rate.
    So Western Union, being one of the largest, is probably the 
most likely to be able to meet, like, a Wall Street rate. But 
the little company that may only have five locations, they may 
not be able to acquire currency at that rate. And is the 
expectation that they then lose money on the currency 
conversion? I don't think they want to do that.
    Mr. Lee. Just one other question. Again, just trying to 
understand.
    In terms of the margin, is there any limit, in terms of 
what margin you can charge off--on the currency? Can you charge 
3 percent? Four percent? Five percent? Six percent?
    Mr. Thompson. None of the regulators that we have today 
have capped prices or spreads. And we certainly hope that we 
don't get to that point. I think competition has addressed the 
issue adequately.
    Mr. Lee. Good. Thank you. I yield back.
    Chairman Gutierrez. Thank you. And I think that's an area 
that we want to make sure, as we look--both Mr. Hinojosa and 
yourself are looking at what the exchange rate--but it used to 
be sometimes 2 or 3 times higher. They would make 2 or 3 times 
more money on the exchange rate than they did on the actual 
fee.
    So, when a company said, ``Send money for free,'' and you 
said, ``What? They're not going to charge me $14.99? It's for 
free?'' It wasn't free, because it was actually--and that's the 
way we really got involved in this, because somebody, a 
husband, called his wife and said, ``I need this amount of 
money.'' He was in the country, and he had seen the exchange 
rate at the hotel. So he called his wife and said, ``What's 
wrong? Don't you have the money? I told you to send me this 
amount of money.'' And she said, ``I did.''
    Well, it got gobbled up in the exchange rate. It wasn't 
that the husband and the wife had a problem communicating, it 
was a whole other system. And, anyway, long story short, we 
have improved since then, but we have much further to go.
    Mr. Sherman, you are recognized for 5 minutes.
    Mr. Sherman. Thank you. Before I focus on consumer 
protection, let me focus on something that will be useful to 
policy makers, and that is statistics on how much money is 
being sent where.
    I wonder whether Mr. Orozco or anyone else can comment on 
whether we are getting all the statistics that the industry 
could generate, and what additional statistics we would ask 
them to provide, or reports.
    Mr. Orozco. Statistics is always an issue when it comes for 
money transfers. The main reason is that you don't know how 
many immigrants are in the country. So the main sources that 
you use to identify the flow of money comes from central banks 
on the receiving side. In the United States, there is still no 
centralized unit that actually collects information on outbound 
money transfers.
    Mr. Sherman. Why don't I ask Mr. Thompson? How difficult 
would it be for the industry if we required statistical reports 
so that we would be getting this information on the sending 
side, and not just from the central banks?
    And sometimes these remittances are even going to countries 
where we don't particularly get along well with the government, 
and we would like statistics on those transactions, too. How 
difficult would it be?
    Mr. Thompson. A number of our State regulators are 
collecting the information on the volumes of transactions that 
we are doing. And then I know California, in particular, has--
    Mr. Sherman. Are they focusing on which countries the money 
is going to, or just the volume of transactions?
    Mr. Thompson. California, in the last year or so, has 
required us to report on, like, the top 20 or 25 countries that 
we are sending to.
    Mr. Sherman. So, if you can do it for California, you could 
do it nationwide, and in addition to the top 20 countries, if 
we identified 5 or 10 countries of concern--I doubt you are 
sending a whole lot of money to North Korea, but if you ever 
did, we would sure like to know about it.
    Mr. Thompson. We don't do North Korean transactions.
    Mr. Sherman. I suspected that. Now, let me focus on 
consumer protection.
    It is my understanding, Mr. Thompson, from your testimony--
and perhaps Mr. McClain can comment on this, as well--that if I 
show up at the window and say, ``Here is my $300, I know how 
many pesos my relative is going to get,'' is that clearly 
disclosed to me before you touch my $300?
    Mr. Thompson. It is discussed, or it is disclosed, before 
the transaction is finalized. We do require payment before we 
provide the receipt that the disclosure is on. But the actual 
transaction--
    Mr. Sherman. If I just show up at your office and say, ``I 
am thinking of sending $300 to my uncle, how many pesos will he 
get,'' will you tell me?
    Mr. Thompson. Oh, for sure. And, as I said, the agent will 
tell you, or you can call us and we will tell you, or you can 
look it up on the Internet.
    Mr. Sherman. So I can do it before I show up at your 
office? Because once I show up at your office, if you're going 
to charge me $4 more than anybody else, I am still going to 
give you the business.
    So, Mr. Moore was talking about how you needed something 
understandable, and the one thing that is understandable is I 
put in $300, this is how many pesos my relative gets.
    Mr. Thompson. No, we will tell you ahead of time.
    Mr. Sherman. And the other thing that is understandable is 
I can see you charge $14.95 for up to $300. What is less 
understandable is the exchange rate.
    And what would be the advantage or disadvantage if Congress 
were to let you charge your own fee, because that's something 
understandable, but impose a requirement that you never have an 
exchange rate that is more than 2 percent worse than the Wall 
Street rate? How would that affect you? And perhaps Mr. McClain 
could comment on behalf of the industry, as well.
    Mr. Thompson. Well, we are strong believers in a free 
market. And we don't think, historically, price controls have 
worked very well.
    Mr. Sherman. But this wouldn't be real price controls, 
because you could charge whatever fee you wanted. It's just the 
part of your price that is least understandable would be 
controlled, and then you would set your own price for the stuff 
that--for the fee that is understandable by your consumers.
    Mr. Thompson. Yes, I mean, that would limit competition in 
exchange rates.
    Mr. Sherman. Limit in the sense that if somebody wanted to 
charge a really high exchange rate and hope the consumer didn't 
know about it, they couldn't get away with it.
    Mr. McClain, where would you be on regulation as to the 
amount of fee, but a requirement that the exchange rate be 
within 2 percent of what Wall Street is providing?
    Mr. McClain. Thank you, Congressman. Our members act as 
agents of Western Union, and Moneygram, and the other 
remitters. We--our agents, as agents, they are simply third-
party processors. They don't make anything on the spread. They 
charge a rather, you know, modest transaction fee--
    Mr. Sherman. So your people don't benefit from the exchange 
rate piece of the profit. Would it hurt your--do you think it 
would hurt the industry if we regulated that?
    Mr. McClain. I think we would have to defer to our money 
transmitter processors. But again, we just receive a nominal--
or marginal, small processing fee. So that issue really doesn't 
affect us, individually.
    Mr. Sherman. Do any of the other witnesses have a comment 
on some maximum amount that could be charge on the exchange 
rate?
    [no response]
    Mr. Sherman. I see no other witnesses; my time has expired. 
I yield back.
    Mr. Scott. [presiding] Thank you very much. The Chair will 
now recognize the gentleman from Texas, Mr. Hensarling, for 5 
minutes.
    Mr. Hensarling. Thank you, Mr. Chairman. First, my apology 
to the panel. I missed your earlier testimony. So this may be 
covering some other ground, as I try to split myself between a 
budget hearing and this hearing.
    But I am a firm believer that the best consumer protection 
is a competitive marketplace, an educated consumer, and 
effective disclosure. Certainly, I think there have been at 
least 200 years, if not several thousand years in world 
history, that price controls do not work for the consumer, and 
ultimately leads to rationing.
    But I haven't looked at this market recently. So for 
those--and I believe, Mr. Thompson, you were certainly pushing 
back on the idea of some type of price control--what would you 
point to as evidence that there is a robust, competitive market 
in remittances?
    Mr. Thompson. Well, there are a number of studies that Dr. 
Orozco has done that indicate that it's an extremely 
competitive market, and the competition has resulted in a 
significant decrease in fees and more favorable exchange rates 
over the last decade.
    Mr. Hensarling. Well, and in fact, I recall attending 
several of these hearings over the years. I believe the first 
one I might have attended was in 2003, and I think I have seen 
data come across my desk showing that fees have dropped 
considerably--I don't know what magnitude that would be--over 
the course of the last 5 or 6 years.
    Dr. Orozco, since Mr. Thompson mentioned your name, do you 
care to comment on this question?
    Mr. Orozco. Yes. The cost has dropped significantly. In 
2001, it was 9 percent, and now it's about 5 percent. So it's a 
drop of about 50 percent in relationship to 8 years ago. It 
hasn't changed very much, but that's one measure of 
competition.
    Another measure is the number of players in the market, and 
another measure is the interest in the investor community to 
put money into this industry. And in the three cases you see 
that there is significant dynamism.
    Mr. Hensarling. I know that Chairman Gutierrez has been 
quite passionate about this issue over the years, and I have 
heard him speak before of consumer-oriented disclosure. And 
again, you may have testified about this previously, forgive 
me, but I just arrived.
    Could you comment on what--Mr. Thompson, you in 
particular--what do you believe that Western Union could do, or 
other industry participants, to make disclosure more consumer-
oriented?
    Mr. Thompson. Well, as I mentioned in my earlier testimony, 
you know, there are a number of States that currently mandate 
disclosures. And, essentially, what you do is you provide a 
written disclosure to the consumer of the principal amount they 
have given you, what the amount of the fee will be, the total 
amount that they need to pay you in cash, what the exchange 
rate is, and then what the pay-out in the foreign currency is.
    Those disclosures are required prior to consummation of the 
transactions. We comply with that, and we think those are 
adequate disclosures.
    I also mentioned that the fees and the exchange rates are 
available from a number of sources. They--we have a Web site 
that has a price calculator on it, that people can look it up 
on. We have 24-hour toll-free telephone operators who can be 
called. They can provide that same information. And then the 
agents are able, through our system, to look up a rate, an 
exchange rate, for any particular transfer for any customer who 
makes an inquiry.
    Mr. Hensarling. Do any other panel members wish to comment 
upon this question of things that might be done to make 
disclosure more effective for the consumer? Ms. LoVoi?
    Ms. LoVoi. Yes, Congressman Hensarling. Thank you very 
much. I bring you greetings from the great State.
    Mr. Hensarling. How wonderful.
    Ms. LoVoi. I will not repeat my testimony this morning, but 
I would like to give you an excerpt or two.
    Just a moment ago, Congressman Lee asked a question that I 
believe gets to the heart of our testimony, which is that the 
interplay between fees and exchange rates is very, very 
complicated. I believe it would be complicated not only for the 
users of the services, but for all of us in this room, and I 
would include myself in that category. That is what makes this 
pricing particularly difficult, that we are dealing with two 
variables, the fee and the exchange rate.
    We presented today a proposed disclosure template, which is 
the final page in my testimony on your desk this morning. And 
we believe that that presents what we would consider to be 
baseline disclosures that ought to be made.
    One of the problems in the marketplace today is that 
sometimes the disclosures are made verbally, and sometimes they 
are in writing. Sometimes they are pre-transaction, sometimes 
they are post-transaction. It depends upon the marketplace 
player, how these are delivered.
    And what we are looking for is bringing what you might call 
rationality to the system, such that there are consistent 
disclosures across businesses that a consumer can learn about 
and can come to understand. We made the comparison this morning 
in our testimony to price scanners in grocery stores and to 
nutrition labeling. We are looking for something that is 
simple, elegant, consistent, and understandable. And we believe 
that would be the best form of consumer literacy.
    Mr. Hensarling. Thank you. I see my time has expired.
    Mr. Scott. Thank you. The Chair now recognizes the 
gentleman from California, Mr. Baca, for 5 minutes.
    Mr. Baca. Thank you, Mr. Chairman. Dr. Orozco, I have a 
question for you. I am curious as to what your thoughts are of 
the practices of the institutions like Bank of America, Wells 
Fargo, Citibank, and their use of credit card and debt card for 
low-cost money transfers.
    And do you know of any current problems, or can you foresee 
any problems that may arise with these practices, as it relates 
to the industry, transparency, or possible industry abuse?
    Mr. Orozco. Thank you. What we have seen is actually that 
the banking industry is becoming increasingly a matter of 
choice by migrants, because it offers them greater value added 
in the use of different financial services offered by the bank.
    So, using a card, for example, is increasingly being 
adopted. It has more failsafe mechanisms for the consumers, as 
well as for regulation, and it allows migrants, basically, to 
use the card at different locations. Also, the recipient can 
take advantage of a card, if possible. We haven't found any 
problems of abuse, of misuse of the card, especially in these 
particular banks. In fact, there has been greater popularity 
among them.
    Mr. Baca. Okay. And this one is for Annette LoVoi. In your 
testimony, you talked about the need to make the market more 
predictable and more secure, in order to better service the 
customers. You go over the results of the pilot program that 
you organized and engaged in, and you emphasize the increased 
disclosure in the market.
    I am curious, though, of all the suggestions you mentioned, 
which do you think meets the most resistance by the industry's 
participant, and why? And what can be done to overcome this 
resistance?
    Ms. LoVoi. I think that's a very, very interesting 
question.
    I would like to refer back to a recommendation in our 
testimony, and that is that a new regulatory body would be in 
an excellent position to work with various elements of the 
industry and understand what legitimate concerns might be set 
forward, and how these concerns could be dealt with.
    We think that perhaps some focus groups of industry and 
consumers could shed some light on this subject because, again, 
the industry is not a monolith. It is bifurcated in many ways. 
There are many different sorts of players, large and small 
players that work in certain corridors and players that work in 
all corridors. And so I think your question is interesting 
because it goes to the heart of what individual businesses 
would need to contend with.
    I would hearken back to a comment that we made earlier. 
What matters here is the ability for the consumer to have pre-
transaction information for the consumer to be able to walk 
away from a transaction if it's too costly, or doesn't do what 
the consumer wants, and then an ability to compare costs among 
providers.
    Our template is workable. We tested it with five different 
market players, very, very large to very, very small. And we 
were extremely gratified to find that there were positive 
results across the network of five testers. So that may go to 
the heart of your question, which is could this be workable 
among different types of players, and we believe the answer is 
yes.
    Mr. Baca. Okay. Thank you. Mr. Thompson, in your testimony 
you state while you are in favor of increased disclosure on 
Federal regulations, you do not favor the proposed requirement 
to display the daily exchange rate.
    In Dr. Orozco's testimony, he offered an alternative that 
would alleviate the administrative headaches that you believe 
the proposal creates. He suggests that the institutions may 
want to utilize some sort of switchboard telecommunications 
device that would allow for real-time update exchange rates. 
This proposal seems like it would take away the responsibility 
from individual franchise managers to provide updates 
throughout the day.
    How do you feel about this proposal, and do you think it is 
a viable solution or a compromise, in light of your concerns? 
Or, do you think it would be a waste of multiple updates that 
are not needed throughout the day?
    Mr. Thompson. I am not sure I am totally familiar with his 
proposal. But at our agent locations, the vast majority of them 
are hooked into our central computer system, so that the agent 
can do a real-time inquiry to find out what the present fees 
and rates are. And for those that don't have that ability, they 
call into our customer service center.
    Mr. Baca. Okay. I am going to cut you short on here, 
because my time has expired, but I want to ask the final 
question to get that in.
    What impact, if we do not allow the 12 million to 14 
million immigrants right now--because we're trying to deal with 
comprehensive immigration--what impact would it have on the 
industry if they were not allowed to have remittals or 
transfers, the 12 million to 14 million undocumented? And that 
is a variety of different people. What impact would it have on 
the industry?
    [no response]
    Mr. Baca. Any one of you can answer this.
    Mr. Orozco. Well, the impact will be many-fold. The first 
one is that you will have increased informality. That is, money 
will go underground. And that will have severe implications, in 
terms of security.
    The other one is that any decline in flows going to 
developing countries will have also an economic impact on these 
countries and, in turn, create a vicious cycle of more 
migration.
    Ms. LoVoi. I would like to answer the question as well. 
When we began our work 6 years ago, we studied the markets and 
we found that money was going through many informal channels, 
as well as formal channels. We believe, Congressman, the money 
will continue to move. It might not move in the volume in which 
it is moving today, but immigrants will continue to find ways 
to send money home.
    Mr. Baca. So we wouldn't have the accountability, the 
oversight that would be there to regulate that process, so it 
would be more or less through a black market than it would 
done--right?
    Ms. LoVoi. That's right. And let me mention there are 
ancillary consumer dangers in that kind of system. There are 
different consumer dangers. Individuals are subject to personal 
threats if they are carrying large sums of cash. So I just want 
to point out that there would be many threats in that system, 
as well.
    Mr. Baca. Does anybody else want to answer that? If not, I 
know that my time has run out.
    [no response]
    Mr. Baca. If not, I guess what you are all saying is that 
we need comprehensive immigration. Thank you.
    Mr. Scott. Thank you, Mr. Baca. The gentleman from Texas, 
Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. And I thank the 
witnesses for appearing today. I would like to ask you to 
kindly look through the vista of time, and tell me if you 
envision a world wherein, in the not too distant future, we 
will have international transfers from computer to computer, 
cell phone to computer, computer to cell phone, cell phone to 
cell phone, literally without going into any office, without 
leaving your home, or wherever you happen to be.
    Will we have transfers that can take place instantly by way 
of cell phones and computers on an international basis? 
Assuming that the technology currently exists--the necessary 
agreements and accords may not be in place, but is that a world 
that we will have in the immediate future, or is that world 
already here? Yes, sir?
    Mr. Orozco. In the immediate future, no. Unfortunately, the 
technology is not the challenge, it's the financial payment 
infrastructure that is missing in many developing countries. 
The technology may enable you to use a device of any sort, 
whether it is a mobile phone or a card. But if you don't have a 
location where that can be honored, that transaction can be 
honored through electronic financial transfers, it's not going 
to happen.
    And in order to build that financial transferring 
structure, you have to focus on developing countries. If you 
look at Africa, for example, you have many--
    Mr. Green. Well, excuse me for interceding. I want to 
follow up on this.
    Mr. Orozco. Yes.
    Mr. Green. The technology does exist. Is that what I heard 
you say? So it now is a matter of infrastructure with the 
technology. Assuming we accomplish technological 
infrastructure, is the next question do we have any agreements 
and accords that have to be developed between nations so that 
this transfer can take place? Anyone? Yes, sir?
    Mr. Thompson. When we have looked into this, the main issue 
that you have to deal with in the developed country is what 
entity is going to hold the money that is on the account that 
is having transfers made in and out of on the--
    Mr. Green. Did you--if I may interrupt for just a moment, 
did you say in a developing country?
    Mr. Thompson. In the developing country--
    Mr. Green. Okay, let me intercede for just a moment.
    Mr. Thompson. Yes, yes.
    Mr. Green. Let's remove developing countries from the 
paradigm, and let's just talk about developed countries now. 
From one developed country to another developed country, does 
the paradigm currently exist?
    Mr. Thompson. It is a regulatory regime that is so rigid in 
that generally you have to have a bank-to-bank transfers, that 
the dollar cost of the transfer isn't one that--
    Mr. Green. Permit me to ask this question.
    Mr. Thompson. --is currently usable for mobile phones.
    Mr. Green. Are we moving in that direction?
    Mr. Thompson. It is moving very slowly. People, there are a 
lot of people--
    Mr. Green. Regardless as to the rate of speed--
    Mr. Thompson. --around the world working on it.
    Mr. Green. --are we moving in that direction?
    [no response]
    Mr. Green. I see others nodding yes. I see you are a bit 
reluctant. So, let me go to someone nodding yes. Mr. Orozco?
    Mr. Orozco. Well, the technology exists, and I can, for 
example, make a transaction right now with my cell phone to a 
bank in the UK. That is feasible. And we are going in that 
direction. The process is very slow, however, and uneven, 
depending on the countries that you are looking into, the 
corridors where the transaction is going to take--
    Mr. Green. Well, permit me to ask this. We currently have 
laws that circumvent the transfer of dollars if I am moving 
from one country to another. I think our standard is $10,000, 
is that correct, when I have to account for the money as I am 
taking it out of the country or bringing it into the country?
    Mr. Orozco. Yes. But for banking--for wire transfers, 
actually, sometimes the transaction is limited to $1,000.
    Mr. Green. Okay. Then my question is, will this new 
technology allow this to be circumvented, and do we need to 
regulate some regulation, so as not to permit persons who want 
to do dastardly things, engage in money laundering, move money 
for criminal activity purposes?
    Are we--do we have the regulations in place to deal with 
this? And I will allow--I think Mr. McClain, I have noticed 
that you seem to want to have a response, and then others who 
may want to respond. Yes, sir?
    Mr. McClain. Thank you, Congressman. I am not really 
entirely studied on the question of the mobile payment system. 
I am familiar with it. But as I understand it, there, you know, 
obviously would need to be a regulatory structure in place to 
ensure that the system would not create a conduit for those 
types of transfers.
    It is my understanding that in other countries, they have 
addressed this. But again, this is not something I am entirely 
studied in. So it is an emerging technology, companies are 
looking at it, but I don't think we are there yet, in terms 
of--
    Mr. Green. Ms. LoVoi?
    Ms. LoVoi. Yes. Mr. McClain is not the only one who is not 
studied on the subject. I think, in general, this arena is 
understudied. It is coming. I think it is a debatable question 
how quickly it is coming, and even the panelists might disagree 
about that.
    But I think the point is that under the regulatory 
framework that we seem to be agreeing to this morning, this 
would be a priority for a remittance regulator, to look at the 
emerging technologies, to understand them, and to understand 
the conflicts in jurisdictional laws that might govern these 
sorts of transactions.
    And we testified this morning that these new emerging 
technologies ought to be held to the same standard of 
disclosure as that we laid out in our testimony. So that would 
be our number one concern, that as there are emerging 
technologies, that they not be a way to skirt the standards, 
and they not be a way to avoid consumer disclosure.
    Mr. Green. Thank you. My time is up. Thank you, Mr. 
Chairman.
    Mr. Scott. Let me have my time at the horn for a few 
questions before we move to Mr. Cleaver. Very briefly, let me 
ask, first, Dr. Orozco.
    In your testimony, you brought up the idea of a remittance 
clearinghouse switchboard that would provide fee and exchange 
rate information to the consumers. What I want to ask you is 
what you didn't mention. Who would pay for this? Who would pay 
to set it up? Who would operate the clearinghouse? And where 
would the clearinghouse get the information?
    Mr. Orozco. Thank you. The industry will pay for it. 
Basically, right now, the large majority of the money transfer 
operators have their call centers operational. And they service 
the customers, they provide information about the fee and the 
exchange rate.
    What I am proposing is that, for the benefit of the 
consumer, that you centralize all those call centers through a 
software platform that allows people to dial a number, and they 
can check and compare different transactions from different 
companies at the same time. So, the cost is very effective, 
because you have to basically have a couple of people just 
directing and redirecting the lines and controlling the flow of 
the traffic of the calls.
    But the calls go directly to the existing money transfer 
company, and you can go on the spot to an agent location and 
call the company and say, ``How much does it cost to send `X' 
to this country, to this location,'' and they give you the 
amount right on the spot. And if the agent doesn't comply with 
that information, then there is a problem. Or, if it does, then 
you are confirming your transaction.
    Mr. Scott. So, quickly, the answer to that question, who 
pays for it, is who, again? The remitter? Who pays for it?
    Mr. Orozco. Yes, the remitter, or the industry. I mean, 
whichever way you want to look at it. It is already--the 
infrastructure exists already there. Every company already has 
the 800 line where you can call. So what I am suggesting is 
that you get a switchboard that picks up on those lines, and 
then the consumer can call this number, and then it directs you 
and redirects you to the different existing lines that are 
already paid for by the companies.
    Mr. Scott. Right. Let me ask this. Ten years ago, the 
average cost for sending $200 to Latin America was $3, which is 
15 percent. What is it today?
    Mr. Orozco. To Latin America, it is 5 percent. To Africa, 
it is still higher, it is about 8 percent.
    Mr. Scott. And why is that? That was my next question. The 
major areas are India and China, Africa, Latin America, and the 
Carribean. What is it about the different--is there something 
about the different areas, geographical areas, as to why that 
price differential and the cost differential is taken into 
consideration? What are those considerations? Why is one cost 
higher than the other?
    Mr. Orozco. There are at least five reasons. One is volume. 
A country that has a larger market is going to have economies 
of scales. So the prices are likely to be lower.
    The second one is in formality. If you are competing with 
informal networks, usually the cost of remitting is higher. And 
informality is often informed by poor regulation in developing 
countries.
    The third one has to do with competition. There is very 
limited competition, for example, in the African continent. So 
when there are only two competitors in the market, your costs 
remain high.
    Mr. Scott. Okay. Thank you very much. As we move forward 
with some of the regulations that we would be offering, in 
terms of legislation--dealing with pricing, dealing with costs, 
transparency, disclosure, all of the things we have gone over--
is there a legitimate argument from the industry standpoint 
that these costs will be overly burdensome to them?
    Is there a legitimate--we have some of the industry here. 
Is that a concern?
    Mr. Thompson. Our concern about a posting requirement is 
the practical implementation of that kind of proposal, and 
the--
    Mr. Scott. Excuse me a minute. The what concern? The 
posting?
    Mr. Thompson. The posting requirement in the--as I said 
earlier, we would have to produce and post approximately 40 
million of those posters, and ensure that they are kept up-to-
date at each of our 40,000 locations on a daily basis. That is 
a very great burden, and would be quite costly.
    Mr. Scott. Okay. What would the estimate cost on that be?
    Mr. Thompson. I haven't done an estimate on the cost, sir.
    Mr. Scott. All right. My time has expired. Let me turn to 
my colleague from Missouri, Mr. Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman. I am one of the seven 
individuals who became a Communist by visiting Cuba about 7 
weeks ago in a United States Air Force jet with the approval of 
the State Department, the Speaker of the House, and the 
Administration.
    So, I realize that the remittances is a big issue with 
Cuba. And, frankly, I guess it's a big issue everywhere. But 
one of the questions that I want to raise is--well, two 
questions that may be political, but they're still in the realm 
of what the four of you have talked about.
    One, do you believe that this should be a foreign policy 
tool? Should this be one of the tools in our foreign policy 
tool box that we use? For example, Daniel Ortega, the 
Sandinistas elect someone or put someone in office, and then we 
respond to that with a hold on remittances, or we do the same 
thing with Kim Jong Il in North Korea. I am interested in your 
feelings or position, maybe, about remittances as a foreign 
policy tool. Anyone?
    Mr. Thompson. Well, we have been providing remittances to 
Cuba for a number of years, under an OFAC license. It has been 
a very limited program, and some steps that the Cuban 
government took to restrict the use of the U.S. dollar in Cuba 
really caused a negative impact to our customer transaction 
volumes, etc.
    But we have certainly favored opening up Cuba to more and 
more remittances for a very long time. And right now we are 
asking that we be able to do pay-out in the Cuban peso, for 
example, because the government there charges 10 percent--
    Mr. Cleaver. Right.
    Mr. Thompson. --to convert the U.S. dollars that we pay out 
into Cuban pesos, and that's a problem.
    And, you know, we also would like the dollar limits that 
have been set on remittances to be raised.
    So our customers are sending money to their families. And 
using that as a foreign policy tool has an adverse effect on 
real people.
    Mr. Cleaver. Of course a positive effect might be that, in 
Cuba in particular, even with the high remittance fee, that it 
would cause people there to depend less on the government for 
daily survival, if their family members were able to get money 
to them.
    Is that--the other kind of foreign policy question on this 
is we have the purchasing power of immigrants in the United 
States, around $200 billion or so. Is that about right?
    Mr. Orozco. I think it's about $600 billion.
    Mr. Cleaver. Six hundred? Oh, my goodness. Then that makes 
this even more important.
    Would it be of some value to U.S. banks if they had the 
opportunity to enter into this largely untapped market? Because 
many of the immigrants are unbanked for a lot of reasons, 
cultural reasons and so forth. Do you think that would be a 
positive benefit to the banking industry in the United States? 
Both you and McClain, both.
    Mr. Orozco. It would be significantly beneficial. Let me 
put it this way. Immigrants not only are unbanked, but have a 
higher capacity to save than the average American population. 
The average amount that an immigrant has saved under conditions 
of normalcy--that is, no recession--is $4,500. The average 
amount saved by an American, an average American, is $200.
    But the 60 percent of immigrants are not banked. So the 
revenue proposition for a financial institution to attract 
immigrants is quite profitable, more profitable than offering 
money transfers, for example.
    Mr. Cleaver. Mr. McClain?
    Mr. McClain. Just briefly, I just want to point out that we 
view our industry as a stepping stone for immigrants. You know, 
there isn't a shortage of account availability. But all too 
often, people who are living paycheck-to-paycheck don't have 
the ability to maintain the levels of minimum deposit 
requirements to have banking relationships.
    So, we don't think it is necessarily a question of access. 
We think it is a question of perhaps ability. And, again, our 
membership provides a stepping stone for those individuals. We 
provide a conduit into the legitimate and regulated financial 
system.
    FISCA itself, for example, has created a stored value card 
with a deposit function, whereby an individual can cash a check 
and place a portion of their earnings onto a deposit stored 
value card with a depository account, whereby they earn 
interest on that account.
    So, again, I don't think it's a question of necessarily 
access to accounts. I think it is a question of our membership 
providing another alternative, a more realistic alternative, I 
think, for many individuals who are living paycheck-to-
paycheck.
    Mr. Cleaver. My time is probably running out. But, Ms. 
LoVoi, you were going to respond?
    Ms. LoVoi. Yes. I will be brief. Appleseed has worked with 
banks and financial institutions over the last 6 years to help 
modify products and services such that they are more attractive 
to immigrants. And we agree with Dr. Orozco, that this is a 
tremendously unbanked population who could do asset building if 
admitted into the formal banking system. Thank you for your 
question.
    Mr. Cleaver. Thank you. I yield back the balance of my 
time.
    Mrs. Maloney. [presiding] The gentleman's time has expired, 
and the Chair recognizes Congressman Meeks from the great City 
of New York, and applauds his outstanding leadership in this 
committee, and for our City and State, and the Chair grants him 
5 minutes. And thank you for being here.
    Mr. Meeks. Thank you, Madam Chairwoman. Let me tell my 
brother reverend, ``You are not a Communist.''
    Let me ask a question of somewhat of a different sort. The 
world is so interconnected today, and to a large degree 
dependent upon credit. And we know that many of these 
developing countries are working to implement credit bureaus to 
bring greater transparency to local credit markets.
    So, I was wondering if remittances data could be 
incorporated into these systems to strengthen the credit 
worthiness of local borrowers, particularly in the area of 
microfinancing. And, similarly, can the sender's remittances 
data be incorporated into domestic credit bureaus to strengthen 
their credit information?
    You know, because today's world credit is everything, and 
so this is--income can--any one of you. Yes?
    Ms. LoVoi. I will take that one. Thank you for your 
question. We are extremely interested in recognizing that the 
roughly average $200 per month that might be sent from a family 
in this country to a family member abroad represents a form of 
savings and represents the sort of savings potential that Dr. 
Orozco mentioned a moment ago.
    We are very interested in seeing this information used for 
credit building purposes, perhaps for the sender in this 
country, and perhaps for the recipient in another country. We 
also recognize that this money is a great source of income for 
other countries, and can be used to leverage economic 
development activities in those countries.
    So, the short answer to your question is yes, yes, and yes. 
There is potential on all of the fronts that you mentioned.
    Mr. Meeks. Yes?
    Mr. McClain. If I may just add quickly, these individuals, 
the customers that we serve, they are responsible, bill-paying 
individuals. They are paying rent, they are paying credit card 
balances, they are paying everything else that normal people 
do. However, they have not yet established credit, and they are 
not able to reflect that on credit reports.
    FISCA is looking for a partner at this point, with respect 
to a credit agency, whereby our members would be able to report 
those types of credit events and bill payments, etc. So we are 
actively looking for a partner, and we have been. Thus far we 
haven't been successful in finding a credit reporting bureau 
that would work with us.
    Mr. Meeks. Now, that's something that maybe we should 
follow up on, then, because I think that helps get individuals 
into a working class or middle class, and in a lot of these 
developing countries, that's what they need. They need to have 
the opportunity, especially when you deal with the areas of 
microfinancing.
    Further, you know, when you talk about developing 
countries, we look at--I was wondering whether the transparency 
issues in remittances can be used to leverage--you know, 
especially internationally--development initiatives, because 
that is one of the big problems. You know, these countries need 
to be developed.
    And, in particular, how can we change the dynamics so that 
a greater share of remittances received are used to invest in a 
productive capacity, as opposed to just an immediate 
consumption capacity, which then leaves these undeveloped 
countries undeveloped. The ideas begin to move, and I think 
that would be better for all. Is there a way that we can do 
that? Doctor?
    Mr. Orozco. Basically, what we have proposed is to link 
remittances through financial access. And one of the steps that 
has been done is to increase the capacity of microfinance 
institutions to be payers of remittances in developing 
countries and, in doing so, provide financial services. And it 
has been very successful. Once you motivate people to mobilize 
their resources into savings at the financial institution, 
there is an increased impact in their quality of life.
    And so, in different countries, in Africa, in Latin 
America, and Asia, we have had different experiments. Now it is 
more than experimentation. There is a strategy, a development 
strategy linking remittances through microfinance and through 
banking access, in order to precisely increase the savings 
mobility into the formal financial system, which, in turn, has 
an effect on development.
    Just to give you an illustration, a poor country, for 
example, like Cape Verde, where it has basically 50 percent of 
the population is abroad, the average amount saved by a 
remittance received is about $1,000. Mobilizing those by 30,000 
people in a very poor country like that will have a significant 
impact in increasing the opportunities to mobilize savings for 
investment.
    Mr. Meeks. I am just about out of time. I just want to say 
how important--I just came back from Colombia, and I have seen 
communities there where if, in fact--and a lot of remittances 
are coming in--but if some of those could be utilized, it could 
change--for development--it can change the living conditions, 
because many of those are horrible, especially in those areas 
where African Colombians are living. It could change their 
living conditions overnight almost, if we could move in that 
direction.
    And I see that I am out of time. I have one more question, 
Madam Chairwoman. It is a quick question.
    Mrs. Maloney. The Chair yields to the gentleman as much 
time as he may consume.
    Mr. Meeks. I just wanted to note that in communities where 
formal banking has gotten involved, has that changed savings in 
investment behavior at all in some of these developing--you 
know, I don't know whether--but has it changed? Could you just 
give me a quick response to that? And I thank the chairwoman.
    Mr. Orozco. Yes, yes. We have cases of Mexico, Colombia, El 
Salvador--just the case of Bank Colombia, for example. It's a 
bank that introduced a strategy to bring remittance receiving 
into the banking system. Their conversion is about 40 percent. 
For every person receiving remittances, they have been able to 
capture the deposit of 40 percent of these people. And that is 
a significant impact.
    Mr. Meeks. Thank you, Madam Chairwoman. Thank you very 
much.
    Mrs. Maloney. Thank you. The Chair recognizes herself for 5 
minutes. And I would like to ask Mr. McClain and Mr. Thompson 
to respond to a bill that I have put forward called the Money 
Services Business Act. This piece of legislation passed 
unanimously out of this committee last year, moved to the Floor 
of Congress, and, in a strong bipartisan vote, passed. My 
question is really in relationship to the testimony of Mr. 
Thompson.
    In your testimony you assert that a Federal licensing and 
regulatory regime would help the money remitter industry deal 
with the BSA compliance issue. And I--after going through the 
aspects of the bill, I want to know, would you think that this 
licensing system would be in addition to the MSB legislation 
that I have put forward, an alternative, or should it be put 
together?
    But I would like--the MSB--meaning the Money Servicing 
Business Act--really addresses a critical industry for the 
unbanked. It addresses a critical problem of the money services 
business that are called MSBs. Many of them are denied access 
to the banking system. Many money service businesses have 
experienced--and I think in a very unfair way--blanket 
terminations of their commercial accounts over the past several 
years, due in part to banks responding to unclear guidance from 
regulators.
    Now, I tried to get clear guidance from the regulators 
unsuccessfully, so I put forward a bill which establishes a 
mechanism that would allow MSBs to self-certify their 
compliance with the Bank Secrecy Act, and anti-money laundering 
requirements, while allowing banks to make risk-based decisions 
about banking particular MSBs.
    MSBs include check cashers, money transmitters, money order 
issuers, and these services have really served our Nation's 
communities for, literally, years. If this issue is left 
unaddressed, the viability of MSBs will be compromised, 
potentially pushing many of their transactions underground, and 
potentially untraceable to law enforcement, which was the whole 
reason for all of this oversight. But if they can't have access 
to the institutions, they have no other way but to go 
underground.
    And many banks, reacting to regulatory fears, have 
terminated MSB accounts in a blanket fashion. I am most 
concerned about the steps that have been taken by Banco 
Popular, who was processing this business, but they have now 
indicated they no longer will be. It appears to be an attempt 
to minimize exposure to high-risk businesses by these banks.
    But without a banking relationship, MSBs are unable to 
provide financial services to communities, making it difficult 
for millions of Americans to pay their bills, send money, or 
cash checks. And Federal regulatory agencies, recognizing the 
problem facing MSBs, have sought to address this issue through 
agency guidance and regulatory changes, but they haven't really 
had any success.
    This legislation that I put forward addresses this problem 
by enabling the MSBs to self-certify their compliance with the 
Bank Secrecy Act, and anti-money laundering requirements. This 
approach is not novel. We basically built it on another project 
or proposal that is similar to that used for international 
correspondent banking. It would not relieve banks of their due 
diligence responsibilities with regard to their MSB customers. 
Rather, it would permit appropriate reliance on self-
certification to relieve banks of being the de facto regulators 
only of MSBs, Bank Secrecy Act, and anti-money laundering 
compliance.
    The mechanics of this self-certification will be handled by 
regulations set forth by the Secretary of the Treasury, and the 
certification will be filed with the financial institutions 
where the MSBs have a commercial account.
    To ensure there is appropriate access to these self-
certifications, it has been requested--and we implemented this 
in the bill--that the Secretary of the Treasury, while coming 
forward with these regulations, would require a duplicate copy 
of the self-certification to be filed with the Financial Crimes 
Enforcement Network, FinCEN, and the Department of Justice have 
access to these files.
    And I am fully in support of the suggestion--in fact, we 
incorporated it in our legislation--and it would allow even 
greater transparency.
    The Chair recognizes additional--as much time as she may 
consume.
    And I do want to mention that even with the implementation 
of the self-certification, MSBs would continue to be 
responsible for complying with all other existing provisions of 
the Bank Secrecy Act, and will continue to be the subject of 
rigorous on-site examinations of the IRS. And MSBs are also 
State-regulated in many jurisdictions. In fact, 28 States and 
the District of Columbia require MSBs now to be licensed, and 
are regulated by State banking agencies.
    So, there is a lot of regulation on them already. And both 
MSBs and the financial institutions banking them will still be 
required to fully comply with all aspects of the Bank Secrecy 
Act, including the filing of suspicious activity reports and 
the currency transaction reports. And any violation of their 
certification would render the same civil and criminal 
penalties provided for by the Bank Secrecy Act and the Anti-
Money Laundering Act.
    So, I feel that this is a well-crafted bill that has passed 
not only the subcommittee, but the full committee, passed the 
full House. The House voted for it in the last Congress.
    And my first question, really to Mr. Thompson and Mr. 
McCain, is, given the fact that we have the regulation on the 
State level, and that 28 States have licensing, do you still 
believe that we should have a Federal licensing component for 
the BSA issue?
    I would like to begin first with Mr. McClain, and then go 
to Mr. Thompson.
    Mr. McClain. Thank you, Madam Chairwoman. I want to also 
thank you immensely for your work on the MSB--Money Service 
Businesses Act. You certainly are very, very well versed on the 
issue, and the critical nature of the problem.
    And you were right to point out that the problem has 
gained, at least in the northeast and in some other regions, a 
higher level of importance, as a result of recent termination 
by Banco Popular. It is immensely frustrating for me, as a 
practitioner, and as a representative of FISCA, to speak with 
many, many of our membership who are wonderful people who have 
legitimate regulated businesses, who are being threatened with 
going out of business, literally, because they cannot find a 
bank that will service them.
    With respect to the question of a Federal regulator for the 
money transmitter industry, we certainly support consistency 
throughout. We are aware of certain problems that have arisen 
because of inconsistent State regulation of money transmitters, 
and, to a lesser degree, check cashers.
    We feel, however, that to tie that provision into the MSB 
bill may complicate the issue. Again, we support a Federal 
regulator for money transmitters, but money transmitters are 
only one piece of the MSB pie. There are check cashers, money 
order remitters, there is a stored value industry.
    So, I think we are very far along with the BSA issue, and 
the question of a Federal regulator, I think, is something that 
obviously needs to be addressed. We support it, but I don't 
think it would be advantageous to link it with this particular 
issue.
    Mrs. Maloney. Thank you. Mr. Thompson?
    Mr. Thompson. We certainly thank you for your help in 
dealing with the bank account closure issue. And your bill is 
extremely helpful in that regard.
    The concept of a Federal regulator, I think, goes beyond 
what you are trying to accomplish with that particular bill. We 
are presently regulated by--it's 48 States plus the District 
and a couple of the territories. I am told that in the last 18 
months, we had 30 examinations--
    Mrs. Maloney. When you say ``we,'' are you talking about--
    Mr. Thompson. Western Union.
    Mrs. Maloney. So you are regulated in 48 States?
    Mr. Thompson. Yes. And we had 30 exams over the last 18 
months. And we think that, given the global importance of 
remittances, and the issues related to anti-terrorist 
activities, and anti-money laundering activities, that it's 
time for there to be a central consistent Federal regulatory 
scheme to not only regulate activities under the Bank Secrecy 
Act, but also regulate the safety and soundness of the 
industry, and also regulate consumer disclosures.
    Mrs. Maloney. Well, do you think a Federal regulator would 
then be of such a nature that banks such as Banco Popular would 
not be closing access to BSAs?
    Mr. Thompson. We are hoping that the Federal regulator 
would be one of the current Federal banking agencies. So we 
think it would go a long way in convincing that banking agency, 
anyway--
    Mrs. Maloney. Oh, I see.
    Mr. Thompson. --we are adequately regulated.
    Mrs. Maloney. So where would you put it? Would you put it 
in the OCC? Or where would you put this regulation?
    Mr. Thompson. It's being debated. I think in our small 
industry group, we favor the Federal Reserve. But we can see 
benefits to having the OCC to do it, or even the OTS, as things 
develop.
    With the Federal Reserve, the Fed is currently active in 
the regulation of electronic transfers. The Fed acts as a 
clearing vehicle for our hundreds of millions of dollars of 
money orders. They act as a settlement vehicle for the wire 
transfers that we do through the banking system to settle with 
our agents. They act as an ACH clearinghouse for some of our 
domestic activities. So they are already active in our 
industry.
    Mrs. Maloney. Well, there has been sort of a feeling that 
you want a lot of regulators involved. And, in fact, in this 
regulation that we are moving forward with, in the future there 
is a feeling of a council of regulators. I don't know if you 
have read about that idea that is out there, that there would 
be at a table a council of regulators who would look at 
systemic risk.
    And you would favor it under one regulator, as opposed to 
putting it in a council of regulators, is that correct?
    Mr. Thompson. Well, I mean, the Federal scheme, obviously, 
is currently in flux. What we are looking for, at least, is 
that the Federal--whatever Federal scheme is developed replaces 
this State regulatory scheme.
    Mrs. Maloney. Okay. And would you--would this licensing 
system be in addition to the MSB legislation that I outlined 
that self-certifies, or would it be in addition to it, or build 
on top of it, or should it be separate, or how do you feel 
about it?
    Mr. Thompson. I think you're--it is important to move your 
bill ahead separately from the Federal licensing issue, because 
I think it's a problem that we currently face and don't have 
another solution to. And the other one, I think, will take a 
lot longer to solve.
    Mrs. Maloney. Okay. Well, I am pleased to report that 
Chairman Gutierrez and I will be sending a letter to Chairman 
Frank to move forward and mark-up the MSB legislation, and try 
to get that forward so that that banking service can continue 
to operate and help my constituents and others.
    But I would be willing to work with you on this idea of a 
Federal regulator down the street at another time, and will 
certainly commit to writing the Federal Reserve and asking for 
their input on how we should move forward.
    But I see this as a separate issue, and it's--it should not 
in any way impede the MSB fix that we have been talking about. 
It's not an alternative; it's an additional challenge that we 
have.
    Mr. Thompson. I agree with that, and I thank you for your 
efforts.
    Mrs. Maloney. I think it is all very important. We really 
need to help the unbanked in many ways. The way we help them is 
by having other services there for them. And the MSBs are 
there, the remittances, there are many, many different services 
that we need to work on to keep our financial system moving 
forward.
    I want to thank all the panelists for their testimony 
today. And I would like to ask unanimous consent that a letter 
from the National Association of Federal Credit Unions, and a 
statement from the Credit Union National Association regarding 
the issue of regulation of remittances, be entered into the 
record. Without objection, it is so ordered.
    The Chair notes that some members may have additional 
questions for the witnesses, which they may wish to submit in 
writing. Therefore, without objection, the hearing record will 
remain open for 30 days for members to submit written questions 
to the witnesses, and to place their responses in the record.
    This hearing is now adjourned.
    [Whereupon, at 12:13 p.m., the hearing was adjourned.]
                            A P P E N D I X



                              June 3, 2009

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



