[Federal Register Volume 78, Number 99 (Wednesday, May 22, 2013)]
[Rules and Regulations]
[Pages 30662-30721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10604]
[[Page 30661]]
Vol. 78
Wednesday,
No. 99
May 22, 2013
Part III
Bureau of Consumer Financial Protection
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12 CFR Part 1005
Electronic Fund Transfers (Regulation E); Final Rule
Federal Register / Vol. 78 , No. 99 / Wednesday, May 22, 2013 / Rules
and Regulations
[[Page 30662]]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1005
[Docket No. CFPB-2012-0050]
RIN 3170-AA33
Electronic Fund Transfers (Regulation E)
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Final rule; official interpretation.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
amending its regulation which implements the Electronic Fund Transfer
Act, and the official interpretation to the regulation. This final rule
(the 2013 Final Rule) modifies the final rules issued by the Bureau in
February, July, and August 2012 (collectively the 2012 Final Rule) that
implement section 1073 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act regarding remittance transfers. The amendments
address three specific issues. First, the 2013 Final Rule modifies the
2012 Final Rule to make optional, in certain circumstances, the
requirement to disclose fees imposed by a designated recipient's
institution. Second and relatedly, the 2013 Final Rule also makes
optional the requirement to disclose taxes collected by a person other
than the remittance transfer provider. In place of these two former
requirements, the 2013 Final Rule requires disclaimers to be added to
the rule's disclosures indicating that the recipient may receive less
than the disclosed total due to the fees and taxes for which disclosure
is now optional. Finally, the 2013 Final Rule revises the error
resolution provisions that apply when a remittance transfer is not
delivered to a designated recipient because the sender provided
incorrect or insufficient information, and, in particular, when a
sender provides an incorrect account number or recipient institution
identifier that results in the transferred funds being deposited in the
wrong account.
DATES: This rule is effective October 28, 2013. The effective date of
the rules published February 7, 2012 (77 FR 6194), July 10, 2012 (77 FR
40459), and August 20, 2012 (77 FR 50244), which were delayed on
January 29, 2013 (78 FR 6025), is October 28, 2013.
FOR FURTHER INFORMATION CONTACT: Eric Goldberg, Ebunoluwa Taiwo or
Lauren Weldon, Counsels; Division of Research, Markets & Regulations,
Bureau of Consumer Financial Protection, 1700 G Street NW., Washington,
DC 20552, at (202) 435-7700 or [email protected]. Please also visit the following Web
site for additional information: http://www.consumerfinance.gov/regulations/final-remittance-rule-amendment-regulation-e/.
SUPPLEMENTARY INFORMATION:
I. Summary of the Final Rule
This final rule (the 2013 Final Rule) revises the amendments to
Regulation E published on February 7, 2012 (77 FR 6194) (February Final
Rule) \1\ and August 20, 2012 (77 FR 50244) (August Final Rule and
collectively with the February Final Rule, the 2012 Final Rule). The
2012 Final Rule, summarized below, implements section 1073 of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),
which creates a comprehensive new system of consumer protections for
remittance transfers sent by consumers in the United States to
individuals and businesses in foreign countries.
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\1\ The Bureau published a technical correction to the February
Final Rule on July 10, 2012. 77 FR 40459. For simplicity, that
technical correction is incorporated into the term ``February Final
Rule.''
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The 2013 Final Rule amends the 2012 Final Rule by addressing three
specific issues. First, the 2013 Final Rule modifies the 2012 Final
Rule to make optional, in certain circumstances, the requirement to
disclose fees imposed by a designated recipient's institution for
transfers to the designated recipient's account. Second and relatedly,
the 2013 Final Rule also makes optional the requirement to disclose
taxes collected by a person other than the remittance transfer
provider. In place of these two former requirements, the 2013 Final
Rule requires providers to include disclaimers on the disclosure forms
provided to senders of remittance transfers indicating that the
recipient may receive less than the disclosed total due to certain
recipient institution fees and taxes collected by a person other than
the provider. In addition, the 2013 Final Rule permits providers to
disclose these fees and taxes, or a reasonable estimate of these
figures, as part of the new required disclaimer.
The 2013 Final Rule also creates an exception from the 2012 Final
Rule's error provisions for certain situations in which a sender
provides an incorrect account number or recipient institution
identifier and that mistake results in the transfer being deposited in
the account of someone other than the designated recipient. For this
exception to apply, a remittance transfer provider must satisfy a
number of conditions including providing notice to the sender prior to
the transfer that the transfer amount could be lost, implementing
reasonable verification measures to verify the accuracy of a recipient
institution identifier, and making reasonable efforts to retrieve the
mis-deposited funds. The 2013 Final Rule also streamlines error
resolution procedures in other situations where a sender's provision of
incorrect or incomplete information results in an error under the rule.
Finally, the 2013 Final Rule will go into effect on October 28,
2013.
II. Background
A. Section 1073 of the Dodd-Frank Act
Section 1073 of the Dodd-Frank Act amended the Electronic Fund
Transfer Act (EFTA) to create a new comprehensive consumer protection
regime for remittance transfers sent by consumers in the United States
to individuals and businesses in foreign countries. For covered
transactions sent by remittance transfer providers, section 1073
creates a new EFTA section 919, and generally requires: (i) The
provision of disclosures prior to and at the time of payment by the
sender for the transfer; (ii) cancellation and refund rights; (iii) the
investigation and remedy of errors by providers; and (iv) liability
standards for providers for the acts of their agents.
B. Types of Remittance Transfers
As discussed in more detail in the February Final Rule, consumers
can choose among several methods of transferring money to foreign
countries. The various methods of remittance transfers can generally be
categorized as involving either closed network or open network systems,
although hybrids between open and closed networks also exist.
Consistent with EFTA section 919, the 2013 Final Rule generally applies
to all remittance transfer providers, whether transfers are sent
through closed network or open network systems, or some hybrid of the
two.
Closed Networks and Money Transmitters
In a closed network, a principal provider offers a service entirely
through its own operations, or through a network of agents or other
partners that help collect funds in the United States and disburse them
abroad. Through the provider's own contractual arrangements with those
agents or other partners, or through the contractual relationships
owned by the provider's business partner, the principal provider can
exercise some control over the
[[Page 30663]]
transfer from end-to-end, including over fees and other terms of
service.
In general, closed networks can be used to send transfers that can
be received in a variety of forms. But, they are most frequently used
to send transfers that are not received in accounts held by depository
institutions and credit unions. Additionally, closed networks are most
frequently used by non-depository institutions called money
transmitters, though depository institutions and credit unions may also
provide (or operate as part of) closed networks. Similarly, the Bureau
believes that many money transmitters operate exclusively or primarily
through closed network systems.
Open Networks and Wire Transfers
In an open network, no single provider has control over or
relationships with all of the participants that may collect funds in
the United States or disburse funds abroad. Funds may pass from sending
institutions through intermediary institutions to recipient
institutions, any of which may deduct fees from the principal amount or
set the exchange rate that applies to the transfer, depending on the
circumstances. Institutions involved in open network transfers may
learn about each other's practices regarding fees or other matters
through any direct contractual or other relationships that do exist,
through experience in sending wire transfers over time, through
reference materials, or through information provided by the consumer.
However, at least until the time of the February Final Rule, in open
networks, there has not generally been a uniform global method for or
practice of communication by all intermediary and recipient
institutions with originating entities regarding the fees and exchange
rates that intermediary or recipient institutions might apply to
transfers.
Unlike closed networks, open networks are typically used to send
funds to accounts at depository institutions or credit unions. Though
they may be used by money transmitters, open networks are primarily
used by depository institutions, credit unions and broker-dealers for
sending money abroad. The most common form of open network remittance
transfer is a wire transfer, a certain type of electronically
transmitted order that directs a receiving institution to pay an
identified beneficiary. Unlike closed network transactions, which
generally can only be sent to agents or other entities that have signed
on to work with the specific provider in question, wire transfers can
reach most banks (or other institutions) worldwide through national
payment systems that are connected through correspondent and other
intermediary bank relationships.
Information on the volume of remittance transfers sent via certain
methods is very limited. However, the Bureau believes that closed
network transactions by money transmitters and wire transfers sent by
depository institutions and credit unions make up the great majority of
the remittance transfer market. Furthermore, the Bureau believes that,
collectively, money transmitters send far more remittance transfers
each year than depository institutions and credit unions combined.
III. Summary of the Rulemaking Process
The Bureau published three rules in 2012 to implement section 1073
of the Dodd-Frank Act. The Bureau then published a proposal on December
31, 2012, which would have modified those published rules in three
distinct areas. 77 FR 77188 (the December Proposal). These three final
rules and the December Proposal are summarized below.
A. The 2012 Final Rule
On May 31, 2011, the Board of Governors for the Federal Reserve
System (Board) first proposed to amend Regulation E to implement the
remittance transfer provisions in section 1073 of the Dodd-Frank Act.
See 76 FR 29902 (May 23, 2011). Authority to implement the new Dodd-
Frank Act provisions amending the EFTA transferred from the Board to
the Bureau on July 21, 2011. See 12 U.S.C. 5581(a)(1); 12 U.S.C.
5481(12) (defining ``enumerated consumer laws'' to include the EFTA).
On February 7, 2012, the Bureau finalized the Board's proposal in the
February Final Rule. On August 20, 2012, the Bureau published the
August Final Rule adopting a safe harbor for determining which persons
are not remittance transfer providers subject to the February Final
Rule because they do not provide remittance transfers in the normal
course of business, and modifying several aspects of the February Final
Rule regarding remittance transfers that are scheduled before the date
of transfer. The 2012 Final Rule had an effective date of February 7,
2013.\2\
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\2\ On January 29, 2013, the Bureau temporarily delayed the
February 7, 2013 effective date (Temporary Delay Rule).
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The 2012 Final Rule adopts provisions that govern certain
electronic transfers of funds sent by consumers in the United States to
designated recipients in other countries and, for covered transactions,
imposes a number of requirements on remittance transfer providers. In
particular, the 2012 Final Rule implements disclosure requirements in
EFTA sections 919(a)(2)(A) and (B). The 2012 Final Rule includes
provisions that generally require a provider to provide to a sender a
written pre-payment disclosure containing detailed information about
the transfer requested by the sender, specifically including the
exchange rate, applicable fees and taxes, and the amount to be received
by the designated recipient. In addition to the pre-payment disclosure,
pursuant to the 2012 Final Rule, the provider also must furnish to a
sender a written receipt when payment is made for the transfer. The
receipt must include the information provided on the pre-payment
disclosure, as well as additional information such as the date of
availability of the funds, the designated recipient's contact
information, and information regarding the sender's error resolution
and cancellation rights.
Though the 2012 Final Rule's provisions permit remittance transfer
providers to provide estimates in three specific circumstances, the
2012 Final Rule generally requires that disclosures state the actual
exchange rate that will apply to a remittance transfer and the actual
amount that will be received by the designated recipient of a
remittance transfer. One of the exceptions permitting estimates
includes a temporary exception for certain transfers provided by
insured institutions. Pursuant to this exception, if the remittance
transfer provider is an insured depository institution or credit union,
the transfer is sent from the sender's account with the institution,
and the provider cannot determine exact amounts for reasons beyond its
control, the provider can estimate the exchange rate, any fees imposed
on the remittance transfer by a person other than the provider, and, in
more limited circumstances, taxes imposed by a person other than the
provider. The 2012 Final Rule also includes two permanent exceptions
permitting estimates, one for transfers to certain countries and the
other for transfers that are scheduled five or more business days
before the date of transfer.
As noted above, the EFTA, as amended by the Dodd-Frank Act,
requires the disclosure of the amount to be received by the designated
recipient. Because fees imposed and taxes collected on a remittance
transfer by persons other than the remittance
[[Page 30664]]
transfer provider can affect the amount received by the designated
recipient, the 2012 Final Rule's provisions require that providers take
such fees and taxes into account when calculating the disclosure of the
amount to be received under Sec. 1005.31(b)(1)(vii), and that such
fees and taxes be disclosed under Sec. 1005.31(b)(1)(vi). Comment
31(b)(1)-ii to the 2012 Final Rule explains that a provider must
disclose any fees and taxes imposed on the remittance transfer by a
person other than the provider that specifically relate to the
remittance transfer, including fees charged by a recipient institution
or agent. Foreign taxes that must be disclosed include regional,
provincial, state, or other local taxes, as well as taxes imposed by a
country's central government.
In the February Final Rule in response to comments received on the
Board's proposal, the Bureau noted that commenters had argued that fees
imposed and taxes collected on the remittance transfer by a person
other than the remittance transfer provider may not be known at the
time the sender authorizes the remittance transfer and that this lack
of knowledge could result in the provider disclosing misleading
information to the sender. The Bureau also acknowledged that smaller
institutions might not have the resources to obtain or monitor
information about foreign tax laws or fees charged by unrelated
financial institutions and that providers might not know whether a
recipient had agreed to pay such fees or how much the recipient may
have agreed to pay. Nevertheless, the Bureau stated that the Dodd-Frank
Act specifically requires providers to disclose the amount to be
received, and that fees imposed and taxes collected on the remittance
transfer by a person other than the provider are a necessary component
of this amount. The Bureau further stated that it was necessary and
proper to exercise its authority under EFTA sections 904(a) and (c) to
adopt Sec. 1005.31(b)(1)(vi) to require the itemized disclosure of
fees and taxes imposed on the remittance transfer by persons other than
the provider to help senders understand the calculation of the amount
received, which would aid comparison shopping and the identification of
errors, and thus effectuate the purposes of the EFTA.
The 2012 Final Rule also implements EFTA sections 919(d) and (f),
which direct the Bureau to promulgate error resolution standards and
rules regarding appropriate cancellation and refund policies, as well
as standards of liability for remittance transfer providers. The 2012
Final Rule thus defines in Sec. 1005.33 what constitutes an error with
respect to a remittance transfer, as well as what remedies are
available when an error occurs. Of relevance to the 2013 Final Rule,
the 2012 Final Rule provides in Sec. Sec. 1005.33(a)(1)(iii) and
(a)(1)(iv) that, subject to specified exceptions, an error includes the
failure to make available to a designated recipient the amount of
currency stated in the disclosure provided to the sender, as well as
the failure to make funds available to a designated recipient by the
date of availability stated in the disclosure. Where the error is the
result of the sender providing insufficient or incorrect information,
Sec. 1005.33(c)(2)(ii) in the 2012 Final Rule specifies the available
remedies: The provider must either refund the funds provided by the
sender in connection with the remittance transfer (or the amount
appropriate to correct the error) or resend the transfer at no cost to
the sender, except that the provider may collect third-party fees
imposed for resending the transfer. If the transfer is resent, comment
33(c)-2 to the 2012 Final Rule explains that a request to resend is a
request for a remittance transfer, and thus the provider must provide
the disclosures required by Sec. 1005.31. Under Sec. 1005.33(c)(2) of
the 2012 Final Rule, even if the provider cannot retrieve the funds
once they are sent, the provider still must provide the stated remedies
if an error occurred.
B. The December Proposal
In the February Final Rule, the Bureau stated that it would
continue to monitor implementation of the new statutory and regulatory
requirements. The Bureau subsequently engaged in dialogue with both
industry and consumer groups regarding implementation efforts and
compliance concerns. Most frequently, industry participants expressed
concern about the costs and compliance challenges to remittance
transfer providers of: (1) The requirement to disclose certain fees
imposed by recipient institutions on remittance transfers; (2) the
requirement to disclose taxes imposed by a person other than the
provider, including taxes charged by foreign regional, provincial,
state, or other local governments; and (3) the requirement to treat as
an error, and thus resend or refund a remittance transfer, where the
failure to deliver a transfer to the designated recipient occurs
because the sender provided an incorrect account number to the
provider. As a result, the Bureau proposed to refine these specific
aspects of the 2012 Final Rule in the December Proposal.
First, the Bureau proposed to exercise its exception authority
under section 904(c) of the EFTA to provide additional flexibility on
how foreign taxes and recipient institution fees may be disclosed. If a
remittance transfer provider did not have specific knowledge regarding
variables that affect the amount of foreign taxes imposed on the
transfer, the December Proposal would have permitted a provider to rely
on a sender's representations regarding these variables, as permitted
under the 2012 Final Rule. However, the December Proposal would have
also permitted providers to estimate foreign taxes by disclosing the
highest possible such tax that could be imposed with respect to any
unknown variable. Similarly, if a provider did not have specific
knowledge regarding variables that affect the amount of fees imposed on
the remittance transfer by a recipient institution for receiving a
remittance transfer in an account, the December Proposal would have
permitted a provider to rely on a sender's representations regarding
these variables. Separately, the December Proposal would have also
permitted the provider to estimate a fee imposed on the remittance
transfer by a recipient institution for receiving a transfer into an
account by disclosing the highest possible fee with respect to any
unknown variable, as determined based on either fee schedules made
available by the recipient institution or information ascertained from
prior transfers to the same recipient institution. If the provider
could not obtain such fee schedules or information from prior
transfers, the December Proposal would have allowed a provider to rely
on other reasonable sources of information.
Second, the Bureau proposed to exercise its exception authority
under section 904(c) of the EFTA to eliminate the requirement to
disclose foreign taxes at the regional, state, provincial and local
level. Thus, under the December Proposal, a remittance transfer
provider's obligation to disclose foreign taxes would have been limited
to taxes imposed on the remittance transfer by a foreign country's
central government. Because the proposed changes regarding recipient
institution fees and taxes, taken together, could have resulted in
inexact disclosures, the December Proposal also solicited comment on
whether the existing requirement in the 2012 Final Rule to state that a
disclosure is ``Estimated'' when estimates are provided under Sec.
1005.32 should be extended to scenarios where disclosures
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are not exact due to the proposed revisions.
Third, the December Proposal would have revised the error
resolution provisions that apply when a sender provides incorrect or
insufficient information to the remittance transfer provider, and, in
particular, when a remittance transfer is not delivered to a designated
recipient because the sender provided an incorrect account number to
the provider and the incorrect account number results in the funds
being deposited in the wrong account. Under the December Proposal, in
these circumstances, where the provider could demonstrate that the
sender provided the incorrect account number and the sender had notice
that the sender could lose the transfer amount, the provider would not
have been required to return or refund mis-deposited funds that could
not be recovered, provided that the provider had made reasonable
efforts to attempt to recover the funds.
The December Proposal also would have revised the existing remedy
procedures in situations where a sender provided incorrect or
insufficient information, other than an incorrect account number, to
allow remittance transfer providers additional flexibility when
resending funds at a new exchange rate. Under proposed Sec.
1005.33(c)(3), providers would have been able to provide oral,
streamlined disclosures and would not have been required to treat
resends as entirely new remittance transfers. The Bureau also proposed
to make conforming revisions in light of the proposed revisions
regarding recipient institution fees and foreign taxes.
Finally, the Bureau proposed to temporarily delay the effective
date of the final rule and to extend the final rule's effective date
until 90 days after this final rule is published.\3\
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\3\ As noted above, the Bureau published the Temporary Delay
Rule on January 29, 2013, which temporarily delayed the February 7,
2013 effective date of the 2012 Final Rule.
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C. Overview of Comments and Outreach
The Bureau received more than 100 comments on the December
Proposal. The majority of comments were submitted by industry
commenters, including depository institutions and money transmitters
that provide remittance transfers, and industry trade associations. In
addition, the Bureau received comment letters from consumer groups and
several individuals.\4\
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\4\ Comments that solely addressed whether the Bureau should
have delayed the February 7, 2013 effective date were addressed in
the Temporary Delay Rule and are not separately addressed herein.
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Most industry commenters supported, or did not oppose, the proposed
additional flexibility regarding the disclosure of recipient
institution fees. However, many of these commenters further urged the
Bureau to eliminate altogether the requirement that remittance transfer
providers disclose recipient institution fees for remittance transfers
to an account. These commenters largely reemphasized and expanded upon
arguments that commenters had asserted prior to the publication of the
February Final Rule. Primarily, that for remittance transfers sent
through open networks it is very difficult, and in some cases
impossible, for providers to know or even to estimate--with any degree
of accuracy--the fees imposed on remittance transfers by recipient
institutions. Commenters also argued that for wire transfers sent over
the open network, the number of recipient institutions that might
receive transfers, and thus assess fees, posed a challenge for any one
U.S. institution, even a large correspondent bank, attempting to learn
and accurately disclose these fees. Relatedly, commenters noted that
existing systems for sending wire transfers in open networks generally
do not provide a sending institution any insight into the fees charged
by the recipient institution. Some of these commenters contended that
Congress did not intend to require the disclosure of recipient
institution fees.
In addition, industry commenters argued that the fees charged by
recipient institutions for remittance transfers to an account are
already transparent to the recipient (because the recipient typically
has a preexisting relationship with the recipient institution), do not
add transparency that benefits senders in any meaningful way, and may
result in overpayment by the sender (particularly to the extent that
the December Proposal permits estimates of the highest possible fee).
These commenters also expressed concern that the additional flexibility
proposed by the Bureau would not substantially reduce the burdens of
compliance with the fee disclosure provisions because it would be
difficult for remittance transfer providers to locate the materials
needed--such as data from prior transactions, fee schedules, or
industry surveys--to provide estimates of recipient institution fees
under the proposed provisions. Relatedly, many industry commenters
argued that the effort needed to compile this information would be of
relatively little value to senders of remittance transfers when
contrasted with the increased cost of providing the disclosures.
Consumer groups expressed differing views regarding the Bureau's
proposal with respect to the disclosure of recipient institution fees.
Some argued that senders of remittance transfers would be better served
by disclosures that inform them only that recipient institutions may
charge fees rather than with disclosures containing estimates of the
fees. Others argued that Congress had intended for remittance transfer
providers to arrange with recipient institutions to secure the
information necessary to disclosure the relevant fee information and
therefore maintained that the Bureau should make the proposed
estimation provisions temporary in nature to allow and encourage
providers to develop databases containing information that would
eventually permit accurate disclosures of all fees imposed on
remittance transfers, including recipient institutions fees.
Comments received regarding the proposed adjustments to the
disclosure of foreign taxes generally mirrored the comments received
regarding recipient institution fees. Again, while industry commenters
generally stated that they appreciated the Bureau's proposal to
eliminate the requirement to disclose subnational taxes as well as
increase remittance transfer providers' flexibility to estimate other
applicable foreign taxes, most industry commenters also urged the
Bureau to eliminate altogether the requirement to disclose taxes
collected by a person other than the provider. Consumer groups
expressed differing views as to whether the Bureau should adopt the
proposed revisions. Based on the perceived difficulty of knowing
foreign taxes, some consumer group commenters supported the proposed
flexibility with respect to the disclosure of foreign taxes in general
and the elimination of the requirement to disclose subnational taxes in
particular and they also emphasized the difficulty of providing tax
disclosures. Others commenters urged that the Bureau should maintain
the requirement that providers disclose all taxes imposed on a
remittance transfer by a person other than the provider because doing
so is the only way for senders to know precisely the amount that
designated recipients will receive.
With respect to the Bureau's proposal to create an exception to the
definition of error in the 2012 Final Rule, industry commenters
uniformly supported the proposed change. Commenters repeated much of
the reasoning put forth by the Bureau in the December Proposal--that
[[Page 30666]]
in many instances remittance transfer providers are unable to verify
the accuracy of account numbers and that providers should not have to
bear the cost of a lost transfer. Commenters reiterated the fear that
unscrupulous senders would abuse the 2012 Final Rule's remedy
provisions for their own benefit, and that the attendant risk of loss
could be significant enough that many providers might either exit the
remittance transfer business or severely curtail their offerings. In
addition, many industry commenters requested that the Bureau expand the
proposed exception to the definition of the term error to include all
mistakes in information provided by senders that could lead to an error
under the rule, rather than just incorrect account numbers.
Consumer group commenters were divided on whether the Bureau should
adopt the proposed exception to the definition of error. Two consumer
groups argued that the proposed exception would properly calibrate the
incentives for remittance transfer providers to prevent errors. These
groups also agreed that remittance transfer providers should not have
to bear the loss of a missing transfer when funds cannot be retrieved
due to an error by the sender. Other consumer group commenters urged
the Bureau not to adopt the proposed changes to the definition of the
term error on the grounds that they are unnecessary because of existing
error resolution procedures in subpart A of Regulation E, harmful to
consumers who can ill afford to bear the loss of a missing transfer,
and contrary to the intent of Congress.
In addition to the comments received on the December Proposal, the
Bureau staff conducted outreach with various parties about the issues
raised by the December Proposal or raised in comments. Records of these
outreach conversations are reflected in ex parte submissions included
in the rulemaking record (accessible by searching by the docket number
associated with this final rule at www.regulations.gov).
IV. Legal Authority
Section 1073 of the Dodd-Frank Act created a new section 919 of the
EFTA that requires remittance transfer providers to provide disclosures
to senders of remittance transfers, pursuant to rules prescribed by the
Bureau. In particular, providers must give a sender a written pre-
payment disclosure containing specified information applicable to the
sender's remittance transfer, including the amount to be received by
the designated recipient. The provider must also provide to the sender
a written receipt that includes the information provided on the pre-
payment disclosure, as well as additional specified information. EFTA
section 919(a).
In addition, EFTA section 919(d) provides for specific error
resolution procedures and directs the Bureau to promulgate rules
regarding appropriate cancellation and refund policies. Except as
described below, the final rule is issued under the authority provided
to the Bureau in EFTA section 919, and as more specifically described
in this SUPPLEMENTARY INFORMATION.
In addition to the Dodd-Frank Act's statutory mandates, EFTA
section 904(a) authorizes the Bureau to prescribe regulations necessary
to carry out the purposes of the title. The express purposes of the
EFTA, as amended by the Dodd-Frank Act, are to establish ``the rights,
liabilities, and responsibilities of participants in electronic fund
and remittance transfer systems'' and to provide ``individual consumer
rights.'' EFTA section 902(b). EFTA section 904(c) further provides
that regulations prescribed by the Bureau may contain any
classifications, differentiations, or other provisions, and may provide
for such adjustments or exceptions for any class of electronic fund
transfers or remittance transfers that the Bureau deems necessary or
proper to effectuate the purposes of the title, to prevent
circumvention or evasion, or to facilitate compliance. As described in
more detail below, certain provisions of the 2013 Final Rule are
adopted pursuant to the Bureau's authority under EFTA sections 904 (a)
and (c).
V. Section-by-Section Analysis of the Final Rule
Section 1005.30 Remittance Transfer Definitions
Section 1005.30 incorporates certain definitions applicable to the
remittance transfer provisions in subpart B of Regulation E. Under the
2012 Final Rule, the introductory language in Sec. 1005.30 states that
``for purposes of this subpart, the following definitions apply.'' The
Bureau is revising in the 2013 Final Rule this introductory language to
clarify that, except as otherwise provided, for purposes of subpart B
of Regulation E, the definitions in Sec. 1005.30 apply.
30(c) Designated Recipient
Under the 2012 Final Rule, the term ``designated recipient'' is
defined to mean any person specified by the sender as the authorized
recipient of a remittance transfer to be received at a location in a
foreign country. Section 1005.30(c). Comment 30(c)-1 further clarifies
that a designated recipient can be either a natural person or an
organization, such as a corporation. See Sec. 1005.2(j) (definition of
person). Relatedly, Sec. 1005.31(b)(2)(iii) requires a remittance
transfer provider to disclose to a sender the name of the designated
recipient. Thus, the provider must ascertain this name from the sender
at or before the receipt or combined disclosure is provided to the
sender.
As discussed below in the section-by-section analysis of Sec.
1005.33(a)(1)(iv), the Bureau is adopting certain revisions to 2012
Final Rule's error resolution provisions in Sec. 1005.33 where a
transfer is delivered to someone other than the designated recipient.
In particular, Sec. 1005.33(a)(1)(iv)(D) creates a new exception to
the definition of error in Sec. 1005.33(a)(1)(iv) that applies when a
sender provides an incorrect account number or recipient institution
identifier, and the conditions in Sec. 1005.33(h) are met. Based on
comments received regarding these proposed changes, and, in particular,
concerning the specific mistakes by a sender that might result in an
error under the 2012 Final Rule, the Bureau believes that it would be
useful to provide further clarity on how the designated recipient is
determined for purposes of determining whether an error has occurred or
the new exception under Sec. 1005.33(a)(1)(iv) applies. In particular,
the Bureau believes it necessary to address situations in which the
transfer is delivered to someone other than the designated recipient
named by the sender at the time of the transfer. Therefore, the Bureau
is clarifying in comment 30(c)-1 that the designated recipient is
identified by the name of the person stated on the disclosure provided
pursuant to Sec. 1005.31(b)(1)(iii).
30(h) Third-Party Fees
As discussed in detail below in the section-by-section analysis of
Sec. 1005.31, the Bureau is eliminating the requirement to disclose
certain recipient institution fees and to include such fees in the
calculation of the disclosed amount to be received by the designated
recipient. In order to differentiate between fees that must be
disclosed and included in the calculation of the amount to be received
and those that are no longer required to be disclosed and included in
such calculation, the Bureau is adopting definitions under Sec.
1005.30(h) for covered third-party fees, required to be calculated and
disclosed under subpart B of Regulation E, and non-covered third-party
fees, which are not required to be calculated and
[[Page 30667]]
disclosed. Section 1005.30(h)(1) defines the term ``covered third-party
fees'' to mean any fee that is imposed on the remittance transfer by a
person other than the remittance transfer provider, except for non-
covered third-party fees as described in Sec. 1005.30(h)(2). Section
1005.30(h)(2) defines the term ``non-covered third-party fees'' to mean
any fees imposed by the designated recipient's institution for
receiving a transfer into an account, except if the institution acts as
an agent of the remittance transfer provider. The rationale underlying
the distinctions made in these definitions is discussed further below
in the discussion of Sec. 1005.31(b)(1)(vi).
The 2013 Final Rule adds new commentary to 30(h) to explain the
scope of these fees. Drawing from applicable examples of fees imposed
by a person other than the remittance transfer provider that were in
comment 31(b)(1)-1.ii in the 2012 Final Rule, as well as proposed
comments 31(b)(1)-iii and -iv which would have provided additional
clarification on how to disclose recipient institution fees, comment
30(h)-1 explains that fees imposed on the remittance transfer by a
person other than the provider include only those fees that are charged
to the designated recipient and are specifically related to the
remittance transfer.
Comment 30(h)-1 additionally provides examples of fees that are or
are not specifically related to the remittance transfer. For example,
overdraft fees that are imposed by a recipient's bank or funds that are
garnished from the proceeds of a remittance transfer to satisfy an
unrelated debt are not fees imposed on the remittance transfer because
these charges are not specifically related to the remittance transfer.
Comment 30(h)-1 further states that account fees are also not
specifically related to a remittance transfer if such fees are merely
assessed based on general account activity and not for receiving
transfers. Comment 30(h)-1 additionally clarifies that fees that banks
charge one another for handling a remittance transfer or other fees
that do not affect the total amount that will be received by the
designated recipient are not fees imposed on the remittance transfer.
Comment 30(h)-1 also clarifies that fees that specifically relate to a
remittance transfer may be structured on a flat per-transaction basis,
or may be conditioned on other factors (such as account status or the
quantity of remittance transfers received) in addition to the
remittance transfer itself.
In addition, the 2013 Final Rule adds new commentary to explain the
difference between covered and non-covered third-party fees. Comment
30(h)-2.i explains that under Sec. 1005.30(h)(1), a covered third-
party fee means any fee that is imposed on the remittance transfer by a
person other than the remittance transfer provider including fees
imposed by a designated recipient's institution for receiving a
transfer into an account where such institution acts as an agent of the
provider for the remittance transfer. As noted above, the rationale for
this distinction is discussed further below in the section-by-section
analysis of Sec. 1005.31(b)(1)(vi). Comment 30(h)-2.ii provides
examples of covered third-party fees including fees imposed on a
remittance transfer by intermediary institutions in connection with a
wire transfer and fees imposed on a remittance transfer by an agent of
the provider at pick-up for receiving the transfer.
With respect to non-covered third-party fees, comment 30(h)-3
explains that a non-covered third-party fee means any fee imposed by
the designated recipient's institution for receiving a transfer into an
account, unless the institution is acting as an agent of the remittance
transfer provider. It further provides as an example that a fee imposed
by the designated recipient's institution for receiving an incoming
transfer could be a non-covered third-party fee provided such
institution is not acting as the agent of the provider. In addition,
comment 30(h)-3 explains that designated recipient's account in Sec.
1005.30(h)(2) refers only to an asset account, regardless of whether it
is a consumer asset account, established for any purpose and held by a
bank, savings association, credit union, or equivalent institution. It
does not, however, include a credit card, prepaid card, or a virtual
account held by an Internet-based or mobile telephone company that is
not a bank, savings association, credit union or equivalent
institution. The rationale for this interpretation is also discussed
further below in the section-by-section analysis of Sec.
1005.31(b)(1)(vi).
Section 1005.31 Disclosures
EFTA sections 919(a)(2)(A) and (B) require a remittance transfer
provider to disclose, among other things, the amount to be received by
the designated recipient in the currency in which it will be received.
In the 2012 Final Rule under Sec. 1005.31, the Bureau set forth the
disclosure requirements for providers, including that providers
disclose fees and taxes imposed by a person other than the provider.
Pursuant to EFTA section 919(a)(4)(A), the Bureau adopted an exception
in Sec. 1005.32(a) to provide that for certain disclosures by insured
depository institutions or credit unions regarding the amount of
currency that will be received by the designated recipient will be
deemed to be accurate in certain circumstances so long as the
disclosure provides a reasonably accurate estimate of the amount of
currency to be received.
As noted in the December Proposal, after the Bureau issued the
February Final Rule, industry participants continued to express
concerns previously raised in response to the Board's proposed rule to
implement EFTA section 919. The concerns regarded the feasibility of
disclosing fees imposed by a designated recipient's institution.
For the subset of transfers sent over the open network, industry
participants stated that where a designated recipient's institution
charges that recipient fees for receiving a transfer into an account,
the remittance transfer provider would not typically know whether the
recipient had agreed to pay such fees or how much the recipient had
agreed to pay. Some industry participants also requested guidance on
whether and how to disclose recipient institution fees that can vary
based on the recipient's status with the institution, quantity of
transfers received, or other variables that are not easily knowable by
the sender or the provider.
Separately, after the release of the February 2012 Rule, industry
expressed concern about the disclosure of foreign taxes. Industry
participants argued first that it is significantly more burdensome to
research and disclose subnational taxes, i.e., taxes imposed by
regional, provincial, state, and other local governments than it is to
research and disclose those taxes imposed by a country's central
government because there are substantially more jurisdictions that
could impose these subnational taxes. Second, industry participants
suggested that the guidance in the 2012 Final Rule under comment
31(b)(1)(vi)-2, which would allow remittance transfer providers to rely
on senders' representations regarding variables that affect the amount
of taxes imposed by a person other than the provider is insufficient
where variables that influence the amount of taxes imposed by a person
other than the provider are not easily knowable by the sender or the
provider.
With respect to both recipient institution fees and foreign taxes,
industry stated that, to make the appropriate calculations and
disclosures, remittance transfer
[[Page 30668]]
providers might need to ask numerous questions of senders that senders
might not understand or might not be able to answer. With respect to
fees, industry also stated that the calculations required to determine
and disclose fees might vary with respect to each recipient institution
because each of these institutions might have unique fee schedules that
applied to particular accounts or different ways of imposing fees on
remittance transfers.
In response to these comments, in the December Proposal, the Bureau
proposed to provide additional flexibility and guidance regarding the
calculation and disclosure of fees imposed by a designated recipient's
institution for receiving a transfer into an account and taxes imposed
by a person other than the remittance transfer provider. The Bureau
also proposed to eliminate the requirement to disclose regional,
provincial, state, and other local foreign taxes and to include this
amount in the disclosed amount received by the designated recipient.
The Bureau sought comment on whether these proposed changes achieved
the goals stated in the December Proposal, or whether the existing
rules or another alternative were preferable.
The majority of comments on the proposed changes regarding
recipient institution fee and tax disclosures came from industry
participants, including large banks, community banks, credit unions,
non-depository institutions, and trade associations. These commenters
stated that they appreciated the Bureau's attempts to facilitate
compliance, particularly with respect to the proposal to eliminate the
required disclosure of subnational taxes. However, many industry
commenters argued that the proposed changes did not go far enough to
ease compliance burden. These industry commenters asserted that the
proposed flexibility would not effectively mitigate the difficulty of
researching the information needed to provide the recipient institution
fee and foreign tax disclosures to senders. Further, these industry
commenters also expressed concern that the proposed estimation methods
could increase consumer confusion due to discrepancies in the estimated
amounts disclosed. Moreover, industry commenters expressed concern
that, under the estimation methods described in the December Proposal,
the sender would usually receive a disclosure that showed the highest
possible fee or tax that could apply. As a result of this proposed
highest estimation method, commenters stated that the disclosure could
result in senders increasing the amount of money transferred more than
was necessary to insure that a recipient received the expected amount.
Some consumer groups also expressed skepticism about the proposed
estimation methods for a different reason: they believed that any
additional estimation, beyond that permitted in the 2012 Final Rule,
would be detrimental to senders because they would not know the precise
amount of the transfer that would be received. In contrast, other
consumer groups supported the December Proposal and stated that it
struck the proper balance of facilitating compliance, while also
providing meaningful information to senders.
The Bureau has carefully weighed these concerns and, for the
reasons explained in detail below, the Bureau believes that it is
appropriate to exercise its exception authority under EFTA section
904(c) to eliminate the requirement to include certain recipient
institution fees and taxes collected by a person other than the
remittance transfer provider in the calculation of the amount to be
received by the designated recipient pursuant to Sec.
1005.31(b)(1)(vii). For the same reasons, the Bureau is eliminating the
requirement to disclose these amounts under Sec. 1005.31(b)(1)(vi).
However, as noted above, the Bureau believes that a majority of
remittance transfers are sent through closed networks whereby the
recipient picks up the transfer from an agent. In these cases, all fees
imposed on the remittance transfer would continue to be required to be
disclosed. See Sec. 1005.30(h)(1).
For those minority of transfers where there may be non-covered
third-party fees, the 2013 Final Rule requires that remittance transfer
providers include, as applicable, a disclaimer on the pre-payment
disclosure and receipt, or combined disclosure, indicating that the
recipient may receive less due to fees charged by the recipient's bank.
See Sec. 1005.31(b)(1)(viii). Similarly, if there may be taxes
collected on the remittance transfer by a person other than the
provider, the 2013 Final Rule requires that providers include a
disclaimer indicating that the recipient may receive less due to
foreign taxes. As part of these disclaimers, providers may choose to
disclose an exact or estimated amount of these fees or taxes. See Sec.
1005.32(b)(3).
As described in detail below, the 2013 Final Rule's Appendix and
Model Forms have been amended to include samples of the new disclosures
and disclaimers. The Bureau is also making conforming edits in several
other provisions in Sec. 1005.31 to reflect the changes in the
required disclosures. These changes are described below.
31(a) General Form of Disclosures
31(a)(1) Clear and Conspicuous
In the 2013 Final Rule, Sec. 1005.31(a)(1) provides that
disclosures required by subpart B of Regulation E must be clear and
conspicuous. It also states that disclosures required by this subpart
may contain commonly accepted or readily understandable abbreviations
or symbols.
As is explained in detail below, as part of the changes adopted in
the 2013 Final Rule, the Bureau is adding two optional disclosures.
First, the Bureau is making optional the requirement to disclose non-
covered third-party fees and taxes collected on the remittance transfer
by a person other than the remittance transfer provider. See Sec.
1005.33(b)(1)(viii). Second, the Bureau is creating an exception to the
definition of error for certain mistakes made by senders. See Sec.
1005.33(a)(1)(iv)(D). If a provider wants to take advantage of this
exception, it must provide a notice before the sender authorizes the
remittance transfer consistent with Sec. 1005.33(h)(3). While these
two disclosures are optional, the Bureau believes it is important to
ensure that they are made in a manner that is clear and conspicuous.
Thus, the Bureau is amending Sec. 1005.31(a)(1) to state that
disclosures required by subpart B of Regulation E or permitted by Sec.
1005.31(b)(1)(viii) or Sec. 1005.33(h)(3) must be clear and
conspicuous. Disclosures required by subpart B of Regulation E or
permitted by Sec. 1005.31(b)(1)(viii) or Sec. 1005.33(h)(3) may
contain commonly accepted or readily understandable abbreviations or
symbols.
31(b) Disclosure Requirements
Comment 31(b)-1 Disclosures Provided as Applicable
Comment 31(b)-1 to the 2012 Final Rule provides examples of when
certain disclosures may not be applicable and therefore need not be
disclosed. Because of the changes that the Bureau is making with
respect to the disclosure of non-covered third-party fees and taxes
collected on a remittance transfer by a person other than the
remittance transfer provider, the 2013 Final Rule makes certain
revisions to the commentary in the 2012 Final Rule for consistency and
clarification. Comment 31(b)-1 clarifies that for disclosures required
by Sec. 1005.31(b)(1)(i) through (vii), a provider may disclose a term
and state that an amount or item is ``not
[[Page 30669]]
applicable,'' ``N/A,'' or ``None.'' Consistent with the changes made in
the 2013 Final Rule regarding the disclosure of non-covered third-party
fees and taxes collected on a remittance transfer by a person other
than the provider, comment 31(b)-1 is revised to state that if fees are
not imposed or taxes are not collected in connection with a particular
transaction the provider need not provide the disclosures about fees
and taxes generally required by Sec. 1005.31(b)(1)(ii), the
disclosures about covered third-party fees generally required by Sec.
1005.31(b)(1)(vi), or the disclaimers about non-covered third-party
fees and taxes collected on a remittance transfer by a person other
than the provider generally required by Sec. 1005.31(b)(1)(viii).
Comment 31(b)-2 Substantially Similar Terms, Language, and Notices
As adopted by the 2012 Final Rule, comment 31(b)-2 states that
terms used on the disclosures under Sec. Sec. 1005.31(b)(1) and (2)
may be more specific than the terms provided and notes, as an example,
that a remittance transfer provider sending funds to Colombia may
describe a tax disclosed under Sec. 1005.31(b)(1)(vi) as a ``Colombian
Tax'' in lieu of describing it as ``Other Taxes.'' In light of the
changes discussed below regarding the disclosure of foreign taxes, the
2013 Final Rule eliminates as an example the disclosure of a Colombian
tax. Instead, the 2013 Final Rule provides as an example that a
provider sending funds may describe fees imposed by an agent at pick-up
as ``Pick-up Fees'' in lieu of describing them as ``Other Fees.'' In
addition, in light of the new disclosures permitted by Sec.
1005.31(b)(1)(viii) and Sec. 1005.33(h)(3), the comment makes
conforming changes to note that the foreign language disclosures
required under Sec. 1005.31(g) must contain accurate translations of
the terms, language, and notices required by Sec. 1005.31(b) or
permitted by Sec. 1005.31(b)(1)(viii) and Sec. 1005.33(h)(3).
31(b)(1) Pre-Payment Disclosures
31(b)(1)(ii) Fees Imposed and Taxes Collected by the Provider
Section 1005.31(b)(1)(ii) of the 2012 Final Rule states that a
remittance transfer provider must disclose any fees and taxes imposed
on the remittance transfer by the provider, in the currency in which
the remittance transfer is funded, using the terms ``Transfer Fees''
for fees and ``Transfer Taxes'' for taxes or substantially similar
terms. Since the Board's initial proposal, commenters have argued that
because a tax is imposed by a government, and not by the provider, this
provision may be confusing. The Bureau agrees that the original
formulation may be inexact insofar as taxes are typically imposed by
governments, even though they may be collected by providers. As a
result, for clarity, the Bureau is revising this language to refer to
taxes ``collected'' by the provider. This change is for clarification
only and is not intended to change the meaning of the provision in the
2012 Final Rule. Consequently, Sec. 1005.31(b)(1)(ii) of the 2013
Final Rule is revised to state, more precisely, that a provider must
disclose any fees imposed and any taxes collected on the remittance
transfer by the provider.\5\
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\5\ The Bureau has made conforming changes throughout the 2013
Final Rule.
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Comment 31(b)(1)-1 Fees and Taxes
Comment 31(b)(1)-1 to the 2012 Final Rule provides general guidance
on the disclosure of fees and taxes. Comment 31(b)(1)-1.i explains that
taxes imposed on the remittance transfer by the remittance transfer
provider, which are required to be disclosed under Sec.
1005.31(b)(1)(ii), include taxes imposed on the remittance transfer by
a State or other governmental body, and comment 31(b)(1)-1.ii focuses
more specifically on how to disclose fees and taxes imposed on the
remittance transfer by a person other than the provider as required by
Sec. 1005.31(b)(1)(vi).
In the December Proposal, the Bureau proposed additional
clarification on other types of recipient institution fees that are, or
are not, specifically related to a remittance transfer. For
organizational purposes, the December Proposal divided comment
31(b)(1)-1.ii into new proposed comment 31(b)(1)-1.ii through -1.v.
Specifically, proposed comment 31(b)(1)-1.ii would have contrasted the
fees and taxes required to be disclosed by Sec. 1005.31(b)(1)(ii) and
the fees and taxes required to be disclosed by Sec. 1005.31(b)(1)(vi).
Proposed comment 31(b)(1)-1.iii would have revised the reference to
taxes imposed by a foreign government to taxes imposed by a foreign
country's central government, and the proposed commentary would have
built on the existing guidance regarding applicable recipient
institution fees to clarify that account fees are not specifically
related to a remittance transfer if such fees are merely assessed based
on general account activity and not for receiving transfers. Proposed
comment 31(b)(1)-1.iv additionally would have explained that a fee that
specifically relates to a remittance transfer may be structured on a
flat per-transaction basis, or may be conditioned on other factors
(such as account status or the quantity of remittance transfers
received) in addition to on the remittance transfer itself. Proposed
31(b)(1)-1.v would have provided that the terms used to describe the
fees and taxes imposed on the remittance transfer by the provider in
Sec. 1005.31(b)(1)(ii) and imposed on the remittance transfer by a
person other than the provider in Sec. 1005.31(b)(1)(vi) must
differentiate between such fees and taxes.
Insofar as the Bureau is eliminating the requirement to disclose
non-covered third-party fees and taxes collected on the remittance
transfer by a person other than the provider, the Bureau is not
adopting the proposed revisions to comments 31(b)(1)-1.ii. Instead,
applicable examples concerning the types of fees related to a
remittance transfer that must be disclosed have been moved to the
commentary to Sec. 1005.30(h), as discussed above. See comment 30(h)-
1. The Bureau is, however, modifying certain aspects of the remaining
commentary in light of the new definitions and the elimination of the
requirement to disclose taxes collected on the remittance transfer by a
person other than the provider. In comment 31(b)(1)-1.i of the 2013
Final Rule, the reference to Sec. 1005.31(b)(1)(vi) is removed to
focus on the scope of fees imposed or taxes collected on the remittance
transfer by the provider that are required to be disclosed under Sec.
1005.31(b)(1)(ii). The Bureau is also revising comments 31(b)(1)-1.ii,
31(b)(1)-2, and 31(b)(1)-3 of the 2013 Final Rule commentary consistent
with new scope of the required disclosures and the movement of certain
commentary to 30(h). In addition, the 2013 Final Rule divides existing
commentary in 31(b)(1)-1.ii to create a new comment 31(b)(1)-1.iii for
clarity.
31(b)(1)(v) Transfer Amount
Section 1005.31(b)(1)(v) of the 2012 Final Rule requires remittance
transfer providers to disclose the transfer amount in the currency in
which the funds will be received by the designated recipient. Under
Sec. 1005.31(b)(1)(v) of the 2012 Final Rule, providers are required
to disclose the transfer amount only if applicable fees and taxes are
imposed by persons other than the provider under Sec.
1005.31(b)(1)(vi), in order to demonstrate to the sender how such fees
reduce the amount received by the designated recipient. Insofar as
Sec. 1005.31(b)(1)(vi) in the 2013 Final Rule will now only require
disclosure of covered third-party fees, the Bureau has made conforming
changes to the appropriate reference in
[[Page 30670]]
Sec. 1005.31(b)(1)(v) to clarify that the section implicates covered
third-party fees only rather than all fees and taxes imposed on the
remittance transfer by a person other than the provider.
31(b)(1)(vi) Covered Third-Party Fees
Section 1005.31(b)(1)(vi) of the 2012 Final Rule requires
remittance transfer providers to disclose any fees and taxes imposed on
the remittance transfer by a person other than the provider, in the
currency in which the funds will be received by the designated
recipient. As discussed above, the Bureau is refining the 2012 Final
Rule with respect to the disclosure of certain recipient institution
fees and foreign taxes. The rationale for these changes is discussed
below.
Disclosure of Recipient Institution Fees
Since the Board first proposed to amend Regulation E to implement
the Dodd-Frank Act's remittance transfer provisions, industry
participants and representatives have argued that particularly for
remittance transfers that take place over an open network, the
requirement to disclose third-party fees is unduly burdensome, if not
impossible, given the potential number of institutions involved in any
one transfer and the fact that remittance transfer providers typically
have no direct relationships with recipient institutions. In issuing
the February Final Rule, the Bureau recognized the challenges for
providers in disclosing fees imposed by third parties, but determined
that the disclosure of third-party fees would provide senders with
greater transparency regarding the cost of a remittance transfer
consistent with the purposes of the EFTA.
Consequently, Sec. 1005.31(b)(1)(vi) of the 2012 Final Rule
required providers to disclose fees imposed by persons other than the
provider (including fees imposed by the designated recipient's
institution) and required that such fees be taken into account when
calculating the disclosure of the amount to be received under Sec.
1005.31(b)(1)(vii). In view of Congress' recognition that these
determinations would be difficult in the context of open network
transactions by financial institutions, see EFTA section 919(a)(4),
Sec. 1005.32(a) permitted insured institutions to estimate the amounts
required to be disclosed pursuant to Sec. Sec. 1005.31(b)(1)(vi) and
(vii) for an interim period when such transfers are sent from a
sender's account with the institution and the remittance transfer
cannot determine the exact amounts for reasons beyond its control.
As noted above, after the Bureau published the February Final Rule,
industry participants and representatives continued to express concern
through comment letters and other fora that, where a designated
recipient's institution charges the recipient fees for receiving a
transfer in an account, the remittance transfer provider would not
reasonably know, or be able to estimate, the amount of fees that might
apply because fees might vary based on agreements between the recipient
and the recipient institution. Relatedly, industry participants and
representatives requested clarification on whether and how to disclose
recipient institution fees that can vary based on the recipient's
status with the institution, the account type, the quantity of
transfers received, or other variables that are not easily knowable by
the sender or the provider.
In response to these concerns, in the December Proposal, the Bureau
proposed to provide clarification relating to which recipient
institution fees remittance transfer providers were required to
disclose and additional flexibility and guidance on how recipient
institution fees could be disclosed. Proposed comment 31(b)(1)-1.ii
would have provided additional examples to distinguish between fees
that are specifically related to the remittance transfer and therefore
required to be disclosed under Sec. 1005.31(b)(1)(vi), including fees
that are imposed by a recipient's institution for receiving a wire
transfer, and other types of recipient institution fees that are not
specifically related to a remittance transfer, such as a monthly
maintenance fee, and therefore not required to be disclosed. For
example, the proposed comment would have noted that fees that
specifically relate to a remittance transfer may be structured on a
flat per-transaction basis, or may be conditioned on other factors
(such as account status or the quantity of remittance transfers
received) in addition to the remittance transfer itself. Moreover,
similar to the treatment of taxes imposed by a person other than the
remittance transfer provider under the 2012 Final Rule, the Bureau
proposed to add comment 31(b)(1)(vi)-4 to clarify that a provider could
rely on a sender's representation regarding variables that affect the
amount of fees imposed by the recipient's institution for receiving a
transfer in an account where the provider did not have specific
knowledge regarding such variables.
Additionally, the December Proposal proposed to allow all
remittance transfer providers, not just insured institutions covered by
the temporary exception, the flexibility to estimate on a permanent
basis certain fees imposed by a designated recipient's institution for
receiving a transfer into an account. Specially, where a provider did
not have specific knowledge regarding variables that affect the amount
of fees imposed by a designated recipient's institution for receiving a
transfer in an account, proposed Sec. 1005.32(b)(4)(i) would have
permitted a provider to disclose the highest possible recipient
institution fees that could be imposed on the remittance transfer with
respect to any unknown variable, as determined based on either the
recipient institution's fee schedules or information ascertained from
prior transfers to that same institution.
The December Proposal additionally provided in proposed Sec.
1005.32(b)(4)(ii) and its accompanying commentary that, if the
remittance transfer provider could not obtain such fee schedules or did
not have such information, the provider could rely on other reasonable
sources of information, including fee schedules published by competitor
institutions, surveys of financial institution fees, or information
provided by the recipient institution's regulator or central bank as
long as the provider disclosed the highest fees identified through the
relied-upon source. The Bureau sought comment on all aspects of this
proposal.
Although most industry commenters stated that they supported the
Bureau's efforts to provide additional flexibility to remittance
transfer providers to determine applicable recipient institution fees,
many industry commenters argued that the December Proposal would not
significantly reduce the burden of disclosing recipient institution
fees that are not already known. Describing providers' efforts to come
into compliance with the 2012 Final Rule, industry commenters stated
that efforts to obtain fee information had largely been hampered by the
difficulty of obtaining information from recipient institutions with
whom providers had no direct relationship, particularly in cases in
which fees were governed by contracts between recipient institutions
and recipients, i.e., those institutions' customers. In additional
outreach by the Bureau, one large bank provider and correspondent
reported that it had attempted to survey recipient institutions with
which it had regular contact, but that the vast majority of
institutions had either not provided the requested fee information or
failed to respond altogether. In comment letters, as well as outreach
both before and after the publication of the December Proposal,
industry participants stated that they had difficulty explaining to
foreign institutions what was being requested and why the foreign
[[Page 30671]]
institutions should provide that information. Industry participants
further stated that recipient institutions declined to provide the
requested fee information, citing proprietary, competitive, and privacy
concerns associated with releasing information about their fee
schedules and their contractual relationships with their customers.
Some industry participants stated that as a result of the
difficulty in obtaining fee information from individual institutions,
even with the flexibility that the December Proposal would have
allowed, they anticipated that the challenges associated with obtaining
fee schedules or conducting fee surveys might force them to limit
services to countries where fee information was more readily obtainable
or where the transfer volume was significant enough to warrant
additional efforts to obtain fee information. Though the pertinent
comment letters focused on the December Proposal, the arguments echoed
concerns that industry participants had previously expressed prior to
the 2012 Final Rule with regard to any requirement to disclose fees
imposed by persons other than the remittance transfer provider.
Industry commenters further opined more generally, as they had prior to
the 2012 Final Rule, that a significant number of providers might
choose to exit the market altogether, even if the Bureau were to adopt
the December Proposal, due to the difficulty of disclosing recipient
institution fees.
In addition, several industry commenters stated that compared to
the 2012 Final Rule, the proposed estimation methodologies would not
improve and instead could diminish the quality of the disclosures
received by senders or senders' ability to comparison shop. With
respect to the Bureau's proposal to add commentary clarifying that
remittance transfer providers could rely in certain circumstances on
senders' representations regarding the variables that affect the amount
of fees to be imposed by a recipient's financial institution (see
proposed Sec. 1005.32(b)(4)), several industry commenters argued that
if the sender knew the fees that applied to the recipient's account,
then it is likely the sender was getting such information from the
recipient, and in such cases the disclosure of recipient institution
fees would not provide additional transparency to the sender. By
contrast, to the extent that the sender had not received information on
the variables that affect fees from the designated recipient, industry
commenters argued that relying on a sender's representation would be
unlikely to provide reliable information. Industry commenters repeated
industry's longstanding assertion that recipients are in the best
position to know what fees their institutions impose on receiving
transfers, and suggested that the Bureau reconsider its decision to
mandate disclosure of such fees or provide a database of fees upon
which providers could rely.
Many industry commenters also expressed concern with respect to the
Bureau's proposal to allow remittance transfer providers to disclose an
estimate of the highest possible recipient institution fee that could
be imposed on the remittance transfer with respect to any unknown
variable (see proposed Sec. 1005.32(b)(4)), as determined based on
either fee schedules made available by the recipient institution or
information ascertained from prior transfers to the same recipient
institution. Commenters stated that if each provider employed its own
methodology based on its own research, the highest possible fee
estimates would vary, sometimes widely, across institutions. Commenters
argued that this could cause consumer confusion and undermine
comparison shopping, as senders would have little insight into which
estimation model was accurate. Although certain limited estimation is
permitted under the 2012 Final Rule for some transfers sent by insured
institutions, see Sec. 1005.32(a) and (b), commenters argued that
using the additional estimation methodologies permitted under the
December Proposal would lead to greater degrees of inaccuracy because
of the requirement to disclose the highest estimate possible with
respect to certain recipient institution fees where such fees might be
unlikely apply. Furthermore, the proposed estimation methodology would
have differed from the bases for estimates described in existing Sec.
1005.32(c), which permit a provider to base an estimate on an approach
not listed in subpart B of Regulation E so long as the designated
recipient receives the same, or greater, amount of funds than the
provider disclosed pursuant to Sec. 1005.31(b)(1)(vii).
Commenters also suggested that under either the 2012 Final Rule or
the December Proposal, smaller institutions would be at a disadvantage,
compared to their larger competitors, because they would have fewer
resources to collect and maintain extensive data sets regarding account
fees for every location to which they did or could send a remittance
transfer. Several industry commenters further opined that remittance
transfer providers that could provide lower estimates could have a
competitive advantage over providers that provided higher (but
potentially more accurate) estimates because the providers with lower
estimates would appear to be providing designated recipients with more
funds, even though the actual fee imposed by the recipient institution
for the same designated recipient should generally be the same for
transfers sent by the same sender to the same recipient institution.
Finally, some industry commenters argued there was a significant
risk that if the highest possible fee a recipient institution could
impose on receiving a remittance transfer was disclosed, a sender might
unnecessarily overfund a remittance transfer to ensure that the
designated recipient received a certain amount. For example, a
commenter explained, that a sender might want to send a remittance
transfer to a merchant to pay for a purchase. The merchant, per its
agreement with the receiving institution, might be charged an incoming
wire transfer fee. Although the merchant would not expect the sender to
pay this fee, as the merchant had incorporated such cost into its
overhead, the sender might believe that he or she is responsible for
covering this fee and might increase the amount transferred by the
amount of the disclosed fee.
Because of the limitations they perceived with estimates disclosed
under the Bureau's methodology described in the December Proposal, the
majority of industry commenters requested that the Bureau eliminate the
required disclosure of recipient institution fees altogether. Several
of these industry commenters argued, as commenters had argued as part
of the 2012 rulemakings, that section 1073 of the Dodd-Frank Act did
not expressly require disclosure of recipient institution fees and
urged the Bureau to eliminate the required disclosure of recipient
institution fees. A few commenters went further and suggested that the
Bureau should eliminate the required disclosure of intermediary fees as
well. Alternatively, industry commenters suggested that the Bureau
delay the implementation date for the disclosure of recipient
institution fees until resources for ascertaining such fees could be
developed, although such commenters did not indicate that such
resources were being developed or that they would soon be available.
Consumer group commenters were divided in their reactions to the
December Proposal's provisions regarding the disclosure of recipient
institution fees. Although some
[[Page 30672]]
consumer group commenters favored the Bureau's approach in providing
increased flexibility and guidance with respect to the disclosure of
recipient institution fees, other consumer group commenters believed
that the methods of estimation proposed by the Bureau would prove to be
problematic for senders and suggested either that the allowance for
such estimation be made temporary or that the required disclosure of
recipient institution fees be eliminated.
Among consumer group commenters who favored the disclosure of
recipient institution fees, some opined that recipient institution fee
information could become readily available given current technology,
and they encouraged the Bureau to, at the very least, make any
additional estimate provisions temporary in nature. This would, these
commenters argued, provide strong incentives to industry to create
databases with the necessary information for compliance. In addition,
one comment letter argued that permitting ``estimated'' price
disclosures essentially permits a continuation of the status quo that
Congress intended to change by adopting section 1073 of the Dodd-Frank
Act. The commenter further suggested that although a permanent
exemption from any disclosure requirements would be premature, a delay
in requiring disclosure of recipient institution fees may be needed to
provide enough time and the proper incentives for some providers to
update their information systems in order to capture this information.
By contrast, other consumer group commenters maintained that it was
appropriate to eliminate the obligation to disclose recipient
institution fees given the difficulty remittance transfer providers (or
their partners) face in determining these fees. These commenters argued
that, given the inaccuracies inherent in estimating the applicable fees
to be applied, senders would be better served by an alternative generic
disclosure noting that recipient institutions may charge account fees,
rather than requiring the specific disclosure of such fees.
In light of information received through comment letters,
additional outreach, and the Bureau's independent monitoring of efforts
to implement the 2012 Final Rule, the Bureau believes that it is
necessary and proper both to effectuate the purposes of the EFTA and to
facilitate compliance to exercise its authority under EFTA section
904(c) to eliminate the requirement to disclose recipient institution
fees for transfers into an account, except where the recipient
institution is acting as an agent of the provider.
As stated in the February Final Rule, the Bureau believes that
disclosures regarding the fees imposed by persons other than the
remittance transfer provider can benefit senders by making them aware
of the impact of these fees, helping to decide how much money to send,
facilitating comparison shopping, and aiding in error resolution. As
described in the February Final Rule, in recent years, a number of
concerns with regard to the clarity and reliability of information
provided to consumers sending remittance transfers have been
identified. Congressional hearings prior to enactment of the Dodd-Frank
Act focused on the need for standardized and reliable pre-payment
disclosures, suggesting that disclosure of the amount of money to be
received by the designated recipient is particularly critical. Research
suggests that consumers place a high value on reliability to ensure
that the promised amount is made available to recipients. See 77 FR
6199 (and sources cited therein).
Despite the public interest in the disclosure of recipient interest
fees, however, the Bureau believes that requiring disclosure of such
fees in cases in which the recipient institution is not an agent of the
provider would at this time either require a substantial delay in
implementation of the overall Dodd-Frank Act regime for remittance
transfers or produce a significant contraction in access to remittance
transfers, particularly for less popular corridors. The Bureau believes
that both of these results would substantially harm consumers and
undermine the broader purposes of the statutory scheme. Accordingly,
the Bureau has constructed the exception to relieve the obligation to
disclose recipient institution fees absent an agency relationship
between the remittance transfer provider and the recipient institution.
The Bureau believes that, in practice, this adjustment of the 2012
Final Rule will affect a minority of remittance transfers. While
information on the volume of open-network transfers is limited, the
Bureau believes that closed network transfers sent through agents--
i.e., transfers for which remittance transfer providers must continue
to disclose all third-party fees in accordance with the 2012 Final
Rule--account for the majority of remittance transfers.
For the minority of transfers where the exception applies because
there is no agency relationship between the remittance transfer
provider and the recipient institution, the Bureau has concluded that
finalizing the proposed exception in Sec. 1005.32(b)(4) (which would
have permitted estimates in certain circumstances) would have
significant risks and disadvantages to senders of remittance transfers.
First, despite the greater flexibility that the December Proposal would
have provided concerning estimation methodologies, the Bureau is
concerned that many remittance transfer providers still would have
curtailed services particularly outside of heavily used corridors.
Second, the Bureau is concerned that the resulting estimates would have
varied so widely that their use to consumers in calibrating transfer
amounts and comparison shopping would have been limited.
The Bureau believes that given current limitations, it is
appropriate to require use of a more generic disclaimer to warn
consumers where recipient institution fees may apply and to change the
model forms in a way that will reduce the risk of consumer confusion in
attempting to make comparisons where estimates are provided. The Bureau
also believes that it is important to encourage estimates and
increasingly reliable methodologies over time, and will continue
dialogue with interested stakeholders about how best to make progress
toward this goal.
The Bureau's conclusion rests in large part on its understanding of
the open network systems for sending remittance transfers. As described
above, these networks allow remittance transfer providers to send to
accounts at banks worldwide. However, providers have limited authority
or ability to monitor or control the recipient institutions in such
networks. Although the Bureau had expected that industry's
implementation efforts would result in the development of the
compilation of reliable and current information concerning fees imposed
by many recipient institutions for most corridors, the process has been
slower and harder than expected and the lack of comprehensive
information could lead providers to limit their offerings. Given the
current environment, the Bureau believes that estimating, or in some
cases, determining the actual recipient institution fees for transfers
to accounts consistent with the 2012 Final Rule would be difficult or
impracticable given the myriad institutions to which such remittance
transfers may be sent and the myriad fee schedules that may apply
across these institutions.
Even under the Bureau's proposal to provide additional flexibility
for remittance transfer providers in estimating certain recipient
institution
[[Page 30673]]
fees for transfers to accounts, the comment letters and the Bureau's
outreach suggest that the burden of obtaining and maintaining
applicable fee information sufficient to provide the permitted
estimates in all cases would still be substantial. The Bureau is
concerned that even if it adopted the December Proposal, the
requirements to disclose recipient institution fees might cause a
number of providers to raise their prices, significantly reduce their
offerings, or exit the market due to the requirements related to the
disclosure of recipient institution fees. If any price increase were
similar to the size of a recipient institution fee, that alone might
offset the benefit of improved information about the size of such fees.
Furthermore, as the Bureau stated in the December Proposal, the Bureau
believes that the loss of market participants would be detrimental to
senders by decreasing market competition and the convenient
availability of remittance transfer services.
Moreover, the Bureau is concerned that the estimate methodologies
proposed in the December Proposal would have produced disclosures that
varied so widely that their use to senders in calibrating transfer
amounts and comparison shopping would have been limited. In many cases,
the December Proposal would have required the remittance transfer
provider to over-estimate recipient institution fees, by disclosing the
highest possible fee that could be imposed on the remittance transfer
with respect to any unknown variable. To the extent providers used
differing methodologies upon which to base their estimates, the
disclosed fees could vary significantly across institutions, making it
difficult for senders to decide how much money to transmit.
In addition, because these fees would be separately disclosed and
included within the total to recipient on the disclosure forms,
differences in amounts disclosed among remittance transfer providers
could lead senders to mistakenly focus on discrepancies within these
fees when comparison shopping, even though the actual fee would likely
be the same regardless of the provider so long as the sender
transmitted the same amount to the same designated recipient at the
same institution using the same transfer method. While the Bureau
believes that it is important to encourage estimates and increasingly
reliable methodologies over time, the Bureau has concluded that given
current limitations it is appropriate to require use of a more generic
disclaimer to alert senders where recipient institution fees may apply
and to change the model forms in a way that will reduce the risk of
consumer confusion in attempting to make comparisons where estimates
are provided. By providing the disclaimer, senders themselves can
investigate such fees. In addition, as discussed in the section-by-
section analysis of Sec. 1005.31(b)(1)(viii), providers may be
incentivized to seek such information to better compete with providers
providing more detailed price information. The Bureau believes this
amendment to the disclosure requirements will best preserve senders'
access to competitive remittance transfer markets, while facilitating
continued information-gathering about such fees both by senders and
providers.
Alternatively, the Bureau considered further delaying
implementation of the section 1073 protections, to allow remittance
transfer providers to continue to seek more reliable fee information in
order to reduce implementation burdens and make fee-related disclosures
more accurate and thus more useful for senders. However, the Bureau
believes that it is critical to provide senders timely access to the
important new consumer protection benefits of the 2012 Final Rule
including rights to cancellation and error resolution.
Accordingly, the Bureau has tailored its amendments to Sec.
1005.31(b)(1)(vi), and as discussed below, Sec. 1005.31(b)(1)(vii), to
focus on the third-party fees that the Bureau believes are most
difficult for remittance transfer providers to disclose. Based on the
Bureau's outreach, it appears that providers sending transfers through
open network systems have had considerably more success in obtaining
information needed to estimate or disclose accurately fees imposed by
intermediary institutions, as compared to recipient institutions that
maintain ongoing customer relationships with individual designated
recipients. Some providers (or business partners) have changed or
contemplated changing the methods they use to send transfers between
bank accounts, in order to avoid the imposition of any intermediary
fees. In addition, some providers have worked with correspondents to
understand such intermediary fees. Thus, the Bureau is not eliminating
the requirement to disclose pursuant to Sec. 1005.31(b)(1)(vi)
intermediary bank fees or to include such amount in the calculation of
the amount required to be disclosed under Sec. 1005.31(b)(1)(vii).
Similarly, although the Bureau is making an adjustment for
recipient institution fees that it believes industry cannot reasonably
disclose, it is not adjusting the required disclosures for transfers
that a recipient picks up at a paying agent. As noted above, the
additional guidance included in the December Proposal targeted
situations in which providers did not have specific knowledge regarding
variables that affect the amount imposed by the recipient's institution
for receiving a transfer in an account. By contrast, where the
designated recipient's institution is an agent of the remittance
transfer provider, the Bureau believes the provider should have access
to or be able to contract concerning the disclosure of any fees imposed
by such institution. Consequently, the Bureau is maintaining the
provider's obligation under the 2012 Final Rule to disclose a
designated recipient institution's fees where such recipient
institution is acting as an agent of the provider in the remittance
transfer. Through a provider's contractual arrangements with its
agents, the Bureau believes that such information should be readily
available to or obtainable by a provider or that the provider can
control such fees, based on the terms of the contract between the
provider and such agent.
For similar reasons, the Bureau is maintaining the requirement to
disclose fees assessed for remittance transfers to credit cards,
prepaid cards, or virtual accounts held by an Internet-based or mobile
phone company that is not a bank, credit union, or equivalent
institution. See comment 30(h)-3. In the December Proposal, the Bureau
did not specifically propose to allow estimation of these amounts.
Although a few comment letters suggested that the proposed estimates
exception should be expanded to cover more than depository institution
accounts, such as general purpose reloadable (or prepaid) cards, mobile
phones, or mobile or electronic wallets, no commenters suggested that
obtaining this information would be as burdensome as the disclosure of
depository institution fees. Indeed, upon further outreach, industry
participants largely confirmed that currently the majority of such
transactions currently take place within a single network whereby such
fees are a matter of contract. The Bureau believes that the systems for
offering such transfers are still nascent and that currently most of
these transfers are provided through systems in which remittance
transfer providers have contractual arrangements with the recipient
institutions, or the providers and the recipient institutions operate
within one single network. The Bureau further believes that these
arrangements
[[Page 30674]]
will likely permit providers to exercise some control over, or learn
about, fees charged by recipient institutions. As these systems grow,
the Bureau expects that providers, and any associated networks, can
design systems so that any associated fees with respect to such
transfers are transparent to providers and senders alike.
The Bureau does not believe that the same sort of evolution can
happen as quickly or easily in existing open network systems, and in
particular for the interbank wire transfer system. These systems use
communication and settlement protocols that have been developed over
decades (or longer) and assume that participating institutions will
exercise little control over each other.\6\ Furthermore, these systems
depend on the participation of many foreign entities that have no duty
or incentive to comply with subpart B of Regulation E. Consequently,
for purposes of determining the fees imposed on the remittance transfer
by the designated recipient's institution for receiving a remittance
transfer into an account under Sec. 1005.30(h)(2), the Bureau includes
transfers into an asset account, regardless of whether or not it is a
consumer asset account, established for any purpose and held by a bank,
savings association, credit union, or equivalent institution. See
comment 30(h)-3. The Bureau believes that these institutions are likely
subject to legacy systems that cannot easily be modified to capture fee
information.
---------------------------------------------------------------------------
\6\The modern open network banking system evolved slowly over
the seventeenth and eighteenth centuries and did not become
electronic and automated until the 1970s. The earliest banks did not
transfer money between themselves. Over time, however, smaller or
more remote banks began to rely on larger mutual or central banks
that they all trusted to facilitate transfers of funds although the
remote banks had no relationship with one another. Into the mid-
Twentieth Century, this system became computerized and banks could
electronically message one another. See Ben Norman, et al., The
History of Interbank Settlement Arrangements: Exploring Central
Banks' Role in the Payment System (June 2011), available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1863929.
---------------------------------------------------------------------------
In light of these conclusions, to effectuate the purposes of the
EFTA, the Bureau is exercising its authority under EFTA sections 904(a)
and (c) to maintain in Sec. 1005.31(b)(1)(vi) the remittance transfer
provider's obligation to disclose covered third-party fees and that
such fees be included in the amount disclosed pursuant to Sec.
1005.31(b)(1)(vi), discussed further below. The Bureau believes that
providing a total to recipient that reflects the impact of such fees,
and separately disclosing these fees, will provide senders with a
greater transparency regarding the cost of a remittance transfer.
Insofar as the Bureau is eliminating the required disclosure of
non-covered third-party fees, the Bureau is also not adopting the
suggestion of several industry and consumer group commenters that to
facilitate compliance, the Bureau help develop and maintain a database
of recipient institution fees that could be accessed by remittance
transfer providers. The Bureau continues to believe that because
providers are engaged in the business of sending remittance transfers
and likely will develop relationships with recipient institutions over
time, providers are in a better position than the Bureau is to
determine applicable fee information. The Bureau will continue to
monitor implementation of this rule and market developments, including
whether better information about recipient institution fees becomes
more readily available over time. The Bureau will also engage in
stakeholder dialogue about methods to encourage improvements in
communications methodologies and data gathering so as to promote the
provision of increasingly accurate estimates and disclosures of actual
fees over time.
Disclosure of Foreign Taxes
Commenters' arguments regarding the disclosure of foreign taxes
have largely paralleled their arguments regarding the disclosure of
recipient institution fees. Notably, since the Board's proposal,
industry has argued that the requirement to disclose foreign taxes is
unduly burdensome given the number of jurisdictions that may impose
taxes and the challenges of determining whether or how various tax
exceptions or exclusions may apply. Although the Bureau recognized the
challenges for remittance transfer providers in disclosing foreign
taxes, the Bureau also believed that this disclosure would provide
senders with greater transparency regarding the cost of a remittance
transfer, which the Bureau believed was consistent with the purposes of
the EFTA. Consequently, Sec. 1005.31(b)(1)(vi) of the 2012 Final Rule
generally would have required that providers disclose foreign taxes and
take such taxes into account when calculating the disclosure of the
amount to be received under Sec. 1005.31(b)(1)(vii). This disclosure
of taxes would have included foreign taxes imposed by a country's
central government, as well as taxes imposed by regional, provincial,
state, or other local governments.
After the Bureau published the 2012 Final Rule, industry continued
to express concern about the ability of remittance transfer providers
to disclose these foreign taxes in two respects. First, industry argued
that it is significantly more burdensome to research and disclose
subnational taxes than to research and disclose only foreign taxes
imposed by a country's central government, with little commensurate
benefit to consumers. Second, industry suggested that the existing
guidance on the disclosure of foreign taxes is insufficient where
variables that influence the applicability of foreign taxes are not
easily knowable by the sender or the provider.
In light of these comments, in its December Proposal, the Bureau
proposed two revisions to the 2012 Final Rule regarding foreign tax
disclosures. First, the proposal would have revised Sec.
1005.31(b)(1)(vi) to state that only foreign taxes imposed by a
country's central government on the remittance transfer need to be
disclosed. Proposed comment 31(b)(1)(vi)-3 would have further clarified
that regional, provincial, state, or other local foreign taxes do not
need to be disclosed, although the remittance transfer provider could
choose to disclose them. In the event that the subnational taxes were
not disclosed, the proposal would have required that a provider state
that a disclosure is ``Estimated.'' Consistent with this amendment,
regional, provincial, state, or other local foreign taxes would not
have needed to be taken into account when calculating the disclosure of
the amount to be received under Sec. 1005.31(b)(1)(vii).
Second, the December Proposal also would have provided additional
flexibility regarding the determination of foreign taxes imposed by a
country's central government. Under Sec. 1005.31(b)(1)(vi), if a
remittance transfer provider did not have specific knowledge regarding
variables that affect the amount of these taxes imposed by a person
other than the provider, the provider could disclose the highest
possible tax that could be imposed on the remittance transfer with
respect to any unknown variable. Where a provider relied on this
estimation method, the proposal would have required that a provider
state that related disclosures are ``Estimated.''
The Bureau sought comment on both aspects of these proposed
changes, including whether the proposed revisions would facilitate
compliance and how the revisions would impact senders. Similar to
comments about the proposed revisions to the disclosure of recipient
institution fees, the Bureau received numerous comments from industry
and consumer groups on its proposed elimination of the subnational
[[Page 30675]]
tax disclosure and also its proposed methods for the estimation of
taxes imposed by a foreign country's central government.
With respect to the proposed change related to the elimination of
the requirement to disclose subnational taxes and to include such taxes
in the calculation of the amount to be received, there was uniform
support from industry commenters. Nearly all industry commenters
expressed concern that it was infeasible to attempt to research all
potential jurisdictions that might impose a subnational tax. Further,
industry commenters noted that there would be an ongoing and
potentially significant cost required to maintain information related
to all subnational tax laws throughout the world given the number of
potential jurisdictions that could impose a tax. Additionally, in terms
of the feasibility of the disclosure of subnational taxes, one money
transmitter also stated that it would be difficult for it to disclose
subnational taxes given that its customers were not required, when
sending a transfer, to specify a sub-region within a country where the
transfer would be picked up.
Another money transmitter also stated that, in its experience, it
believed that subnational taxes were rare. Although this commenter did
not cite any examples of tax practice in specific jurisdictions, this
commenter argued that many localities wanted to encourage the inflow of
transfers, and therefore, would be unlikely to impose subnational
taxes. This commenter and others stated that the cost to determine, in
every case, whether subnational taxes applied, a cost that might be
passed on to all senders, would outweigh the benefits given that it
appeared that such taxes rarely applied in practice.
In contrast to the uniform support by industry commenters for the
elimination of the requirement to disclose subnational taxes, consumer
group commenters were divided regarding their views about the proposed
elimination of the requirement to disclose subnational taxes. Some
consumer group commenters opposed the proposed change and stated that
full disclosure of the exact amount of foreign taxes was critical in
order for senders to be aware of exactly how much money would be
received. They stated that elimination of the requirement to disclose
subnational taxes would harm senders because they would not know with
certainty how much money would ultimately be received. Other consumer
group commenters, however, stated that the burden of researching and
disclosing subnational taxes outweighed the relative benefit to
senders. These consumer group commenters noted that some remittance
transfer providers could withdraw from the market or increase prices if
required to research and disclose subnational taxes.
With respect to the Bureau's proposal to allow remittance transfer
providers increased flexibility to estimate the taxes imposed by a
country's central government, many industry commenters expressed
concern that the December Proposal did not sufficiently ease the burden
of researching foreign taxes. These industry commenters raised several
concerns with respect to the proposed estimated disclosure of taxes
imposed by a foreign country's central government. Some industry
participants commented that they did not have the capability to
research the relevant tax laws in the first place because they did not
have foreign contacts, or, alternatively, that they did not have the
resources to expend to determine the applicable foreign tax laws. Thus,
they asserted that an ability to estimate would not facilitate
compliance since such estimation would require an underlying knowledge
of the foreign tax laws.
Industry commenters, particularly smaller banks and credit unions,
also noted that remittance transfer providers were reluctant to rely on
information from third-party service providers (such as larger
correspondent institutions) because they would have no means to verify
the accuracy of the information provided by the third-parties. Further,
even where the tax information was accurate, some industry commenters
stated that there could be a high cost associated with relying on a
third-party provider to obtain that foreign tax information. Similar to
industry comments about the disclosure of subnational taxes, commenters
stated that these costs not only included the upfront costs of
acquiring the tax information but also ongoing costs required to
maintain and update tax information. For example, commenters expressed
concern that, even if a provider (or a third-party selling the tax
information) determined that a particular country did not tax
remittance transfers, the provider would need to continue to monitor
that country's tax law to know whether any new tax laws were enacted in
the future.
Industry commenters (as well as some consumer group commenters)
stated that some of the burden resulting from the disclosure of foreign
taxes imposed by a country's central government could be solved if the
Bureau itself developed a tax database that was made available to
remittance transfer providers. Industry commenters noted that a Bureau-
provided database would eliminate the cost and potential inaccuracy
that could result from each provider's individual attempts to determine
the applicable foreign taxes.
Along similar lines, the Bureau learned through outreach that at
least one trade association is developing a database containing
information about foreign taxes imposed on remittance transfers by a
country's central government. The trade association informed the Bureau
that, by working with a third-party, it thought it could eventually
determine the relevant tax laws for most countries. The trade
association, however, stated that there were several challenges
associated with determining and disclosing the applicable tax under the
proposed estimation method. According to the trade association and
other commenters, one concern was that many foreign taxes have
exceptions and exclusions that are not imposed uniformly on all
transfers. The trade association noted that, even if a database listed
applicable tax laws, it might be difficult for remittance transfer
providers, particularly smaller providers, to apply these exceptions
and incorporate the exceptions into computer programs or onto forms to
arrive at an accurate tax disclosure. Some industry commenters also
noted that, if a provider did not apply an exception, that provider
might appear to be imposing a higher tax than another provider that
applied the exception, even if the tax is the same. Thus, these
commenters stated that a sender might misidentify the cheapest
provider.
Relatedly, several other industry commenters expressed concern that
a tax law might be misinterpreted or misunderstood by the remittance
transfer provider because of the challenges of interpreting foreign
laws. As a result, several industry commenters and a trade association
stated that the Bureau should provide a safe harbor for providers that
use some reasonable processes to acquire the tax information. Other
commenters stated that they would favor a safe harbor whereby, if the
provider relied on some reasonable source of information in obtaining
tax information, that provider would not be liable if the disclosed tax
was incorrect.
Industry commenters also echoed similar comments to those made with
respect to the December Proposal's provisions regarding the recipient
institution fee disclosures, stating that the estimated tax disclosure
would be of limited benefit to senders because they believed that in
many instances the same tax likely would apply to all
[[Page 30676]]
transfers to a particular country. As a result, a disclosure of the
foreign tax would not improve a sender's ability to comparison shop
among remittance transfer providers. In addition, other commenters
noted that because the Bureau's proposed estimation method required a
disclosure of the highest possible foreign tax that could be imposed
with respect to any unknown variable, a sender might transfer more
money than was required to compensate for the high estimated tax that
the sender believed would be deducted. The commenters noted, for
example, that if a sender was transferring funds to a foreign merchant,
the higher disclosed tax could harm the sender who inadvertently
provided more money than was necessary to pay for a good or service.
In contrast to industry commenters and as with respect to the
Bureau's proposal to eliminate the requirement to disclose subnational
taxes, consumer groups were divided with respect to their comments
about the proposed change to allow estimation to be used in the
determination of the foreign country tax disclosure. Some consumer
groups stated that the estimation of foreign taxes would harm senders
because they would not know exactly how much money would be received.
In contrast, other consumer groups supported the Bureau's proposed
estimation method for those taxes imposed by a country's central
government. These consumer groups stated that the Bureau's proposed
estimation method would facilitate compliance, and thereby encourage
providers to stay in the market or prevent providers from increasing
prices.
Similar to its reasoning with respect to the elimination of the
requirement to disclose certain recipient institution fees, as a result
of comments received, additional outreach, and the Bureau's independent
monitoring of efforts to implement the 2012 Final Rule, the Bureau
believes it is necessary and proper both to further the purposes of the
EFTA and to facilitate compliance to exercise its exception authority
under EFTA section 904(c) to eliminate the requirement that remittance
transfer providers include taxes collected by a person other than the
provider--including both subnational taxes and taxes imposed by a
foreign country's central government, in the calculation of the amount
to be disclosed under Sec. 1005.31(b)(1)(vii). Consistent with this
revision, the Bureau is also eliminating the requirement to disclose
taxes imposed by a person other than the remittance transfer provider
under Sec. 1005.31(b)(1)(vi) since such taxes are no longer necessary
to clarify the calculation of the amount to be received under Sec.
1005.31(b)(1)(vii). Under the 2013 Final Rule, a provider continues to
be required to disclose any taxes collected by the provider, as
described under Sec. 1005.31(b)(ii), but providers are no longer
required to disclose taxes collected by other persons.
As stated in the February Final Rule, the Bureau believes that
disclosures regarding the taxes collected by a person other than the
remittance transfer provider can benefit senders by making them aware
of the impact of these taxes on the total amount transferred, deciding
how much money to transfer, facilitating comparison shopping, and
aiding in error resolution. Yet, while this foreign tax information is
important for consumers, the Bureau is concerned that requiring
disclosure of taxes collected by a person other than the provider could
at this time produce increased costs for all transactions or result in
a significant contraction in access to remittance transfers,
particularly for less popular corridors. Similar to its decision about
eliminating the requirement to disclose certain recipient institution
fees, the Bureau believes that both of these results would
substantially harm consumers and undermine the broader purposes of the
statutory scheme. Accordingly, the Bureau has concluded that in the
current environment, this amendment to the tax disclosure requirements
will best preserve access to competitive prices for remittance
transfers for a wide range of countries.
As with fees, one key factor in the Bureau's decision was a concern
that the required tax disclosure might limit the availability of
remittance services to certain countries or result in an increased cost
for many transfers. With respect to cost increases, under the 2012
Final Rule and the December Proposal, most remittance transfer
providers would have needed to conduct research to determine (or
purchase information regarding) the relevant foreign tax laws,
potentially for many countries. These providers would also need to
expend resources to update this information on a regular basis.
Although one industry association has been undertaken to develop a
database of applicable central government taxes, that association
acknowledged several challenges both in developing the database and
with how individual providers would make use of the data contained in
it. For example, validation and continuous updating of the information
collected remains a substantial concern. As described above, the Bureau
is concerned that many providers would pass the costs associated with
these efforts on to senders in the form of increased prices that would
affect remittance transfers across the board, even to countries in
which no such taxes are actually imposed. The Bureau also remains
concerned that the cost of maintaining the required tax information
could cause providers to exit the market, or limit their offerings--
even if the requirement was limited to taxes imposed by a foreign
country's central government. Some providers, for example, might
curtail their services and limit transfers only to the highest traffic
corridors in order to minimize their necessary foreign tax law
research. Because some providers might restrict their services to
certain corridors with less volume, a sender might have limited ability
to send transfers to those regions.
As a result, while the Bureau generally believes that senders can
benefit from transparency regarding the foreign tax disclosure, in the
present market, the cost of obtaining the necessary tax information may
exceed the benefit of this information to many senders. As with
recipient institution fees, the Bureau also recognizes that in many
instances the benefit of the disclosure may be minimized because the
actual foreign tax imposed is likely to be uniform across all
remittance transfers to a particular person in a particular country
(and, therefore, the same tax would apply).\7\
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\7\ The Bureau recognizes that this uniformity may not always be
the case. For example, a tax could be imposed differently based on
whether the tax law treated transfers sent through a closed or open
network differently. But, for most transfers, the Bureau believes
that a tax law would apply in the same manner where a transfer was
of the same amount to the same destination in a country.
---------------------------------------------------------------------------
In addition, as with the estimation of recipient institution fees,
the disclosure of the highest tax estimates based on any unknown
variable, as required in the December Proposal, could result in
consumer confusion where providers disclosed different tax estimates.
Even if third-party providers developed common databases of
information, there is still a risk of inconsistent disclosures
depending on providers' knowledge of potentially relevant variables,
practices, and interpretations of foreign tax law. The Bureau believes
that using the general disclaimer and moving any voluntarily provided
estimates or actual numbers lower on the form will help to reduce the
risk that senders mistakenly choose providers based on discrepancies in
tax estimates. Further, rather than adopting a systematic rule that
tends to overestimate tax rates, the Bureau believes that senders may
prefer
[[Page 30677]]
to apply different approaches to different types of transfers, for
instance by being more conservative about the risk of overfunding a
transfer to a business as compared to a family member.
The Bureau also does not believe that it is appropriate or feasible
to create a safe harbor for remittance transfer providers that rely on
a third-party database or some other third-party source for tax
information. At this time, the Bureau is not aware of any data source
whose accuracy it can guarantee, absent extensive monitoring. The
Bureau is not currently positioned to evaluate the accuracy of each
database that might be created nor can it determine whether providers
are reasonably researching, interpreting, or applying the applicable
foreign tax laws. Similarly, the Bureau does not believe that currently
it is positioned to create a database itself. In addition, even if a
database existed, as noted above, it would still be necessary to
determine how the particular tax laws and exceptions or exclusions
applied, and the Bureau believes that providers are better positioned
to learn over time how foreign tax laws apply to individual transfers.
Overall, given the current burden of researching the foreign taxes
and the potential risks of sender confusion, increased cost, and
reduced transfer services, the Bureau believes that the best result at
this time is to eliminate the obligation to disclose taxes collected by
parties other than the remittance transfer provider and to eliminate
the requirement to include this amount in the calculation of the amount
to be received by the designated recipient. The Bureau, however, notes
that its decision is based on the current feasibility and cost
associated with determining or estimating such taxes imposed on a
remittance transfer, as well as the potential impact on market
structure and pricing practices. The Bureau intends to monitor whether
the development and availability of information regarding taxes
collected on a remittance transfer by a person other than the provider
becomes more feasible in the future. The Bureau will also engage in
stakeholder dialogue about methods to encourage improvements in
communications methodologies and data gathering so as to promote the
provision of increasingly accurate estimates and disclosures of foreign
taxes over time.
Conforming Changes to Sec. 1005.31(b)(1)(vi)
In light of the changes the Bureau is making with respect to the
disclosure of non-covered third-party fees and foreign taxes, Sec.
1005.31(b)(1)(vi) in the 2013 Final Rule requires only the disclosure
of covered third-party fees. The 2013 Final Rule also makes conforming
edits to comment 31(b)(1)(vi)-1 to reflect that the disclosure of
covered third-party fees must be made in the currency in which the
funds will be received by the designated recipient. While the revised
Sec. 1005.31(b)(1)(vi) provides that only covered third-party fees be
disclosed under this subsection, as discussed below, under Sec.
1005.31(b)(1)(viii) a remittance transfer provider would remain free to
disclose separately any non-covered third-party fees or taxes collected
by a person other than the provider of which it is aware, to the extent
consistent with the parameters of that section.
31(b)(1)(vii) Amount Received
Section 1005.31(b)(1)(vi) of the 2012 Final Rule implements EFTA
section 919(a)(2)(A)(i) by requiring that a remittance transfer
provider disclose to the sender the amount that will be received by the
designated recipient, in the currency in which the funds will be
received. As adopted by the 2012 Final Rule, this disclosure must
reflect all charges that would affect the amount to be received
including any recipient institution fees and taxes imposed by a person
other than the provider. As stated above, the Bureau is exercising its
exception authority under EFTA section 904(c) to revise Sec.
1005.31(b)(1)(vii) to eliminate the requirement to include non-covered
third-party fees and taxes collected on a remittance transfer by a
person other than the provider in the calculation of the amount
received, consistent with the narrowed scope of Sec.
1005.31(b)(1)(vi). Section 1005.31(b)(1)(vii) of the 2013 Final Rule
thus provides that the disclosed amount must be disclosed in the
currency in which the funds will be received, using the term ``Total to
Recipient'' or a substantially similar term except that this amount
shall not include any non-covered third party fee or tax collected by a
person other than the provider, whether such fee or tax is disclosed
pursuant to Sec. 1005.31(b)(1)(viii).
While Sec. 1005.31(b)(1)(viii) gives the provider the option to
disclose non-covered third-party fees and taxes collected on a
remittance transfer by a person other than the provider, as discussed
below, a provider cannot, in any circumstance, include these amounts in
the amount disclosed under Sec. 1005.31(b)(1)(vii). The Bureau
believes that eliminating the requirement to include non-covered third-
party fees and taxes collected on the remittance transfer by a person
other than the provider in the calculation of the disclosed amount to
be received by the designated recipient is necessary and proper to
facilitate compliance and further the purposes of the EFTA because the
Bureau is concerned that requiring disclosure of such amounts within
the amount disclosed under Sec. 1005.31(b)(1)(vii) might hamper
senders' ability to make informed comparisons across similar providers.
The 2013 Final Rule also makes conforming edits to comment
31(b)(1)(vii) to clarify that the amount disclosed pursuant to Sec.
1005.31(b)(1)(vii) must reflect the exchange rate, all fees imposed and
all taxes collected on the remittance transfer by the provider, as well
as any covered third-party fees as provided by Sec. 1005.31(b)(1)(vi).
The Bureau recognizes that in some cases the amount disclosed pursuant
to Sec. 1005.31(b)(1)(vii) will not reflect the amount that the
designated recipient will ultimately receive due to additional non-
covered third-party fees and taxes collected on the remittance transfer
by a person other than the provider.
31(b)(1)(viii) Statements That Non-Covered Third-Party Fees or Taxes
Collected on the Remittance Transfer by a Person Other Than the
Provider May Apply
In the December Proposal, the Bureau solicited comment on methods
to reduce the burden of required disclosures of fees and taxes imposed
on remittance transfers by persons other than the providers and
alternative disclosures that could be provided. Several industry and
consumer group commenters suggested that in place of requiring exact or
estimated disclosures of recipient institution fees or foreign taxes,
the Bureau could require a statement within the disclosure forms
alerting senders that the total amount received may be reduced by
recipient institution fees or foreign taxes. These commenters contended
that such a disclosure would ensure that senders are aware of the
potential for further reductions in the disclosed amount received, due
to fees or taxes that are not disclosed, and would encourage senders
and recipients to investigate the fees associated with a transfer to
the recipient's financial institution, as compared to those associated
with other mechanisms for sending a remittance transfer.
Although the Bureau is eliminating the requirement to calculate and
disclose non-covered third-party fees and taxes collected on a
remittance transfer by a person other than the
[[Page 30678]]
remittance transfer provider, the Bureau strongly believes that it is
nonetheless important to inform senders when fees and taxes that are
not disclosed may apply to the remittance transfer. Accordingly, to
further the purposes of the EFTA, the Bureau believes that it is
necessary and proper to exercise its authority under EFTA sections
904(a) and (c) to add Sec. 1005.31(b)(1)(viii), which requires that a
provider include, as applicable, a statement indicating that non-
covered third-party fees or taxes collected on the remittance transfer
by a person other than the provider may apply to the remittance
transfer and result in the designated recipient receiving less than the
amount disclosed pursuant to Sec. 1005.31(b)(1)(vii). Moreover, under
this paragraph, a provider may, but is not required to, disclose any
applicable non-covered third-party fees or taxes collected on the
remittance transfer by a person other than the provider using the
language set for in Model Forms A-30(b)-(d) of Appendix A to this part
or substantially similar language. Any such figures must be disclosed
in the currency in which the funds will be received, using the language
set forth in Model Forms A-30(b) through (d) of Appendix A to this
part, as appropriate, or substantially similar language. The exchange
rate used to calculate any disclosed non-covered third-party fees or
taxes collected on the remittance transfer by a person other than the
provider is the exchange rate used in Sec. 1005.31(b)(1)(iv),
including an estimated exchange rate to the extent permitted by Sec.
1005.32, prior to any rounding of the exchange rate. Although new Sec.
1005.31(b)(1)(viii) makes the disclosure of the amount of non-covered
third-party fees and taxes collected on a remittance transfer by a
person other than the provider optional, the Bureau believes that
providers may be motivated to collect and disclose such information
voluntarily, in the interest of providing high levels of customer
service to senders and to better compete for remittance business
against other providers.
New comment 31(b)(1)(viii)-1 clarifies that if non-covered third-
party fees or taxes collected on the remittance transfer by a person
other than the remittance transfer provider apply to a particular
remittance transfer, or if a provider does not know if such fees or
taxes may apply to a particular remittance transfer, Sec.
1005.31(b)(1)(viii) requires the provider to include the disclaimer
with respect to such fees and taxes. Comment 31(b)(1)(viii)-1
additionally clarifies that required disclosures under Sec.
1005.31(b)(1)(viii) may only be provided to the extent applicable. For
example, if the designated recipient's institution is an agent of the
provider and thus, non-covered third-party fees cannot apply to the
transfer, the provider must disclose all fees imposed on the remittance
transfer and may not provide the disclaimer regarding non-covered
third-party fees. In this scenario, the commentary clarifies, the
provider may only provide the disclaimer regarding taxes collected on
the remittance transfer by a person other than the provider, as
applicable.
New comment 31(b)(1)(viii)-2 explains that Sec.
1005.31(b)(1)(viii) permits a provider to disclose the amount of any
non-covered third-party fees or taxes collected on the remittance
transfer by a person other than the provider. For example, when a
remittance transfer provider knows that the designated recipient's
institution imposes a fee or that a foreign tax will apply, the
provider may choose to disclose the relevant fee or tax as part of the
information disclosed pursuant to Sec. 1005.31(b)(1)(viii). The
comment also notes that Sec. 1005.32(b)(3) permits the provider to
disclose estimated amounts of such taxes and fees, provided any
estimates are based on reasonable source of information. See comment
32(b)(3)-1. It further provides that where the provider chooses, at its
option, to disclose the amounts of the relevant recipient institution
fee or tax as part of the information disclosed pursuant to Sec.
1005.31(b)(1)(viii), the provider must not include that fee or tax in
the amounts disclosed pursuant to Sec. 1005.31(b)(1)(vi) or
(b)(1)(vii).
31(b)(2) Receipt
31(b)(2)(i) Pre-Payment Disclosures on Receipt
Section 1005.31(b)(2)(i) in the 2012 Final Rule provides that the
same disclosures included in the pre-payment disclosure must be
disclosed on the receipt. As discussed above, the Bureau is adding a
new requirement that pre-payment disclosures include disclaimers when
non-covered third-party fees or taxes collected on a remittance
transfer by a person other than the provider may apply. In addition, as
stated above, to facilitate compliance and further the purposes of the
EFTA, the Bureau believes it is necessary and proper to exercise its
exception authority under EFTA section 904(c) to revise Sec.
1005.31(b)(1)(vii) to eliminate the requirement to include non-covered
third-party fees and taxes collected on the remittance transfer by a
person other than the remittance transfer provider in the calculation
of the amount received, disclosed on the receipt provided to the sender
under Sec. 1005.31(b)(2)(i), consistent with the narrowed scope of
Sec. 1005.31(b)(1)(vi). As discussed above, to further the purposes of
the EFTA, the Bureau also believes that it is necessary and proper to
exercise its authority under EFTA sections 904(a) and (c) to require
providers to include disclaimers stating, as applicable, that non-
covered third-party fees or taxes collected by a person other than the
provider may apply to the remittance transfer and result in the
designated recipient receiving less than the amount disclosed pursuant
to Sec. 1005.31(b)(1)(vii). Accordingly, the Bureau is amending the
cross-reference in Sec. 1005.31(b)(2)(i) to require that such
disclaimers be provided on the receipt. These changes would also be
reflected on a combined disclosure. See Sec. 1005.31(b)(3).
31(c) Specific Format Requirements
31(c)(1) Grouping
EFTA section 919(a)(3)(A) states that disclosures provided pursuant
to EFTA section 919 must be clear and conspicuous. The 2012 Final Rule
incorporates this requirement and sets forth grouping, proximity,
prominence, size, and segregation requirements to ensure that it is
satisfied. In particular, Sec. 1005.31(c)(1) requires that information
about the transfer amount, fees and taxes imposed by a person other
than the provider, and amount received by the designated recipient be
grouped together. The purpose of this grouping requirement is to make
clear to the sender how the total amount to be transferred to the
designated recipient, in the currency to be made available to the
designated recipient, will be reduced by fees imposed or taxes
collected on the remittance transfer by a person other than the
remittance transfer provider. As previously discussed, under the 2013
Final Rule the disclosure of non-covered third-party fees and taxes
collected on the remittance transfer by a person other than the
provider is no longer required under Sec. 1005.31(b)(1)(vi), or
included in the calculation of the amount required to be disclosed
under Sec. 1005.31(b)(1)(vii), but instead is subject to new Sec.
1005.31(b)(1)(viii). Consequently, the 2013 Final Rule amends Sec.
1005.31(c)(1) to group the new Sec. 1005.31(b)(1)(viii) disclosure
requirement with the information required by Sec. Sec.
1005.31(b)(1)(v), (vi), and (vii). The Bureau believes that this
grouping will ensure that the sender
[[Page 30679]]
will understand that the total amount received by the designated
recipient will be affected by these additional fees and taxes as
applicable. In addition, the Bureau clarifies that although disclosures
provided via mobile application or text message to the extent permitted
by Sec. 1005.31(a)(5) generally need not comply with the grouping
requirements, information required or permitted by Sec.
1005.31(b)(1)(viii) must be grouped with Sec. 1005.31(b)(1)(vii). The
Bureau believes that it is important that the new disclaimers--which
advise of potential additional fees and taxes--be grouped with the
disclosure of the amount to be received by the designated recipient in
order to maximize the likelihood that senders will see the disclaimers
and read them in conjunction with the disclosures under Sec.
1005.31(b)(1)(vii). Insofar as the Bureau is requiring that information
required or permitted by Sec. 1005.31(b)(1)(viii) be grouped with
Sec. 1005.31(b)(1)(vii) for disclosures provided via mobile
application or text message, the Bureau is adding guidance in comment
31(c)(1)-1 to explain that to comply with the requirement a provider
could send multiple text messages sequentially to provide the full
disclosure.
31(c)(2) Proximity
To effectuate EFTA section 919(a)(3)(A), Sec. 1005.31(c)(2) of the
2012 Final Rule also requires that certain disclosures be placed in
close proximity to each other. The purpose of this proximity
requirement is to prevent such disclosures from being overlooked by a
sender. As previously discussed, under the 2013 Final Rule the
disclosure of non-covered third-party fees and taxes collected by a
person other than the provider is no longer required under Sec.
1005.31(b)(1)(vi); instead, remittance transfer providers are subject
to the new disclosure provision of Sec. 1005.31(b)(1)(viii).
Consequently, the 2013 Final Rule amends Sec. 1005.31(c) to require
that the new Sec. 1005.31(b)(1)(viii) disclaimers be in close
proximity with the disclosure required by Sec. 1005.31(b)(1)(vii) (the
amount received by the designated recipient). Section 1005.31(c)(2)
further notes that disclosures provided via mobile application or text
message, to the extent permitted by Sec. 1005.31(a)(5), generally need
not comply with the proximity requirements of Sec. 1005.31(c), except
that information required or permitted by Sec. 1005.31(b)(1)(viii)
must follow the information required by Sec. 1005.31(b)(1)(vii). The
Bureau believes that it is important that the new disclaimers--which
advise of potential additional fees and taxes--be grouped in close
proximity to the disclosure of the amount to be received by the
designated recipient. Insofar as the total amount to be received may
not include certain items the disclosure of which is no longer
required, the disclaimers should be placed in close proximity to, or in
the case of disclosures provided via mobile application or text message
follow, the disclosure required by Sec. 1005.31(b)(1)(vii) in order to
maximize the likelihood that senders will see the disclaimers and read
them in conjunction with the amount disclosed pursuant to Sec.
1005.31(b)(1)(vii).
31(c)(3) Prominence
Section 1005.31(c)(3) sets forth the requirements regarding the
prominence and size of the disclosures required under subpart B of
Regulation E. In light of the new disclaimer required by Sec.
1005.31(b)(1)(viii), as well as the optional disclosures under that
paragraph, the Bureau is making conforming edits to Sec. 1005.31(c)(3)
to note that the disclosures required or permitted by Sec. 1005.31(b)
when provided in writing or electronically must be provided on the
front of the page on which the disclosure is printed, in a minimum
eight-point font, except for disclosures provided via mobile
application or text message, and must be in equal prominence to each
other.
Comment 31(c)(4)-2 Segregation
Section 1005.31(c)(4) provides that written and electronic
disclosures required by subpart B must be segregated from everything
else and contain only information that is directly related to the
disclosures required under subpart B. Comment 31(c)(4)-2 in the 2012
Final Rule clarifies that, for purposes of Sec. 1005.31(c)(4), the
following is directly related information: (i) The date and time of the
transaction; (ii) the sender's name and contact information; (iii) the
location at which the designated recipient may pick up the funds; (iv)
the confirmation or other identification code; (v) a company name and
logo; (vi) an indication that a disclosure is or is not a receipt or
other indicia of proof of payment; (vii) a designated area for
signatures or initials; (viii) a statement that funds may be available
sooner, as permitted by Sec. 1005.31(b)(2)(ii); (ix) instructions
regarding the retrieval of funds, such as the number of days the funds
will be available to the recipient before they are returned to the
sender; and (x) a statement that the provider makes money from foreign
currency exchange. In light of new Sec. 1005.31(b)(1)(viii) permitting
certain optional disclosures, the Bureau is amending this list to
clarify that the optional disclosure of non-covered third-party fees
and taxes collected by a person other than the provider is directly
related information.
31(f) Accurate When Payment Is Made
Section 1005.31(f) of the 2012 Final Rule states that except as
provided in Sec. 1005.36(b), disclosures required by this section must
be accurate when a sender makes payment for the remittance transfer,
except to the extent estimates are permitted by Sec. 1005.32. In light
of the new disclaimer required by Sec. 1005.31(b)(1)(viii), as well as
the optional disclosures under that paragraph, the Bureau is making
conforming edits to Sec. 1005.31(f) and comment 31(f)-1 to note that
the disclosures required by Sec. 1005.31(b) or permitted by Sec.
1005.31(b)(1)(viii) must be accurate when a sender makes payment for
the remittance transfer, except to the extent estimates are permitted
by Sec. 1005.32. Comment 31(f)-1 further notes that while a remittance
transfer provider is not required to guarantee the terms of the
remittance transfer in the disclosures required or permitted by Sec.
1005.31(b) for any specific period of time, if any of the disclosures
required or permitted by Sec. 1005.31(b) are not accurate when a
sender makes payment for the remittance transfer, a provider must give
new disclosures before accepting payment.
The Bureau believes that extending the accuracy requirement to the
optional disclosures regarding non-covered third party fees and taxes
collected by persons other than the remittance transfer provider is
necessary in order to communicate accurately to the sender how
confident the remittance transfer provider is concerning the
information provided. As discussed above, the Bureau believes that such
information can be useful to senders under certain circumstances and
hopes to encourage use of increasingly reliable information over time.
Although the vast majority of remittance transfer providers may choose
to disclose any numbers provided as estimates due to the various
uncertainties with regard to foreign taxes and fees discussed above,
the Bureau believes it is important to preserve remittance transfer
providers' ability to compete based on disclosure of actual figures.
31(g) Foreign Language Disclosures
31(g)(1) General
Section 1005.31(g) of the 2012 Final Rule explains that disclosures
required
[[Page 30680]]
by the rule must be provided in English and, in certain circumstances,
in other languages as well. Similar to the changes discussed above
regarding Sec. 1005.31(a)(1) concerning clear and conspicuous
disclosures, the Bureau is making conforming edits to Sec.
1005.31(g)(1) to reflect the addition of the optional disclosures
elsewhere in the 2013 Final Rule. While the disclosures are optional
(see Sec. Sec. 1005.31(b)(1)(viii) and 1005.33(h)(3)), the Bureau
believes it is important that they conform to the 2013 foreign language
disclosure requirements. Thus, the Bureau is amending Sec.
1005.31(g)(1) to state that except as provided in Sec. 1005.31(g)(2),
disclosures required by this subpart or permitted by Sec.
1005.31(b)(1)(viii) or Sec. 1005.33(h)(3) must be made in English and,
if applicable in accordance with Sec. 1005.31(g)(1)(i) and (ii).
Section 1005.32 Estimates
Consistent with EFTA section 919, the 2012 Final Rule generally
requires that disclosures provided to senders state the actual exchange
rate, fees, and taxes that will apply to a remittance transfer and the
actual amount that will be received by the designated recipient of a
remittance transfer. Section 1005.32, as adopted in the 2012 Final
Rule, includes only three specific exceptions to this requirement.
First, consistent with EFTA section 919(a)(4), Sec. 1005.32(a) of the
2012 Final Rule provides a temporary exception for certain transfers by
insured institutions. Second, consistent with EFTA section 919(c),
Sec. 1005.32(b)(1) provides a permanent exception for transfers to
certain countries. Third, the 2012 Final Rule also includes an
exception under Sec. 1005.32(b)(2) for transfers scheduled five or
more business days before the date of the transfer. Thus, a remittance
transfer provider is permitted to estimate exchange rates, fees, and
taxes that are required by Sec. 1005.31 to be disclosed to the extent
permitted in Sec. 1005.32(a) and (b). The December Proposal would have
created additional exceptions to permit estimation with respect to
certain recipient institution fees under proposed Sec. 1005.32(b)(4)
and national foreign taxes under proposed Sec. 1005.32(b)(3). The
proposed related commentary would have described the particular methods
that could be used to estimate under these two methods. As discussed
above, under Sec. 1005.31(d), in both cases, the provider would have
been required to disclose that the amount was estimated pursuant to
Sec. 1005.31(b)(1)(vi) and (vii).
Given that the 2013 Final Rule does not require the disclosure of
non-covered third-party fees or taxes collected by a person other than
the remittance transfer provider (see Sec. 1005.31(b)(1)(vi)), the two
proposed estimation methods are now unnecessary. As a result, the
proposed changes to the 2012 Final Rule under Sec. 1005.32(b)(3) and
(4) are not being adopted nor is the Bureau adopting the related
proposed changes to the commentary. See proposed comments 32(b)(3) and
(4).
Instead, as described below, the Bureau is adopting a new Sec.
1005.32(b)(3) to describe possible reasonable estimation methods that
can be used where a remittance transfer provider elects to disclose
non-covered third-party fees or taxes collected by a person other than
the provider.
32(b)(3) Estimates for Non-Covered Third-Party Fees and Taxes Collected
by a Person Other Than the Provider
As described above, the Bureau is eliminating the requirement to
disclose certain recipient institution fees and taxes collected on the
remittance transfer by a person other than the provider and to include
such amounts in the amount received, required to be disclosed under
Sec. 1005.31(b)(1)(vii) and (b)(2)(i). Nevertheless, the Bureau
believes that where the remittance transfer provider knows or can
reasonably estimate any applicable non-covered third-party fee or tax
collected on the remittance transfer by a person other than the
provider and elects to disclose one or both of such amounts, senders
are likely to benefit from more accurate and informative disclosures.
Consequently, Sec. 1005.31(b)(1)(viii) permits a provider to disclose
any applicable non-covered third-party fees or taxes collected on the
remittance transfer by a person other than the provider applicable to a
remittance transfer in conjunction with the required disclaimers.
In order to encourage the optional disclosure of such information,
Sec. 1005.32(b)(3) of the 2013 Final Rule permits remittance transfer
providers latitude to estimate any applicable non-covered third-party
fees or taxes collected on the remittance transfer by a person other
than the provider. Such estimates may be based on reasonable sources of
information. The Bureau acknowledges that permitting providers to
estimate such amounts may result in providers providing disclosures
that may not reflect the actual charge by individual recipient
institutions or the taxes levied upon such transfers. Nonetheless, the
Bureau believes that permitting a reasonable approximation of the
amount of non-covered third-party fees and taxes collected on the
remittance transfer by persons other than the remittance transfer
provider that could be assessed based on reasonable sources would
provide senders valuable information about the amount to be received
while also allowing the provider sufficient flexibility to disclose
such information.
New comment 32(b)(3)-1 further notes that reasonable sources of
information may include, for example: Information obtained from recent
transfers to the same institution or the same country or region; fee
schedules from the recipient institution; fee schedules from the
recipient institution's competitors; surveys of recipient institution
fees in the same country or region as the recipient institution;
information provided or surveys of recipient institutions' regulators
or taxing authorities; commercially or publicly available databases,
services or sources; and information or resources developed by
international nongovernmental organizations or intergovernmental
organizations. The 2013 Final Rule also includes new model forms that
provides examples of how such information may be integrated within the
disclaimers of Sec. 1005.31(b)(1)(viii). See Model Forms 30(b)-(d).
Additional Conforming Edits to Sec. 1005.32
In addition, because of the changes made to the disclosure
requirements under Sec. 1005.31(b)(1)(vi), Sec. 1005.32(b)(2)(ii) and
(c)(3)(i) have been amended to conform with the requirements of Sec.
1005.31(b)(1)(vi), as amended, which requires that a party disclose
only covered third-party fees. Conforming changes have also been made
to comments 32(a)(1)-1, (a)(1)-2.ii, 32(a)(1)-3.ii, and 32(b)(2)-1 so
that these comments and related headings, as finalized, use the term
``covered third-party fees'' rather than ``other fees.''
In Sec. 1005.32(c)(3)(ii), however, the Bureau notes that it has
retained a reference to fees imposed by both the intermediary and the
final recipient's institution. Although fees imposed by the recipient
institution are generally non-covered third-party fees, under Sec.
1005.30(h), certain recipient institution fees may qualify as covered
third-party fees if they are imposed by an agent of the provider. See
comment 30(h)-2.ii.
In addition to the conforming changes related to the disclosure of
covered third-party fees pursuant to Sec. 1005.31(b)(1)(vi),
references to taxes collected on the remittance transfer by
[[Page 30681]]
a person other than the provider in Sec. 1005.32(b)(2)(ii) and (c)(4)
of the 2012 Final Rule have been deleted and Sec. 1005.32(c)(5) has
been renumbered as Sec. 1005.32(c)(4). Several comments clarifying how
to estimate these taxes have also been deleted, including comments
32(a)(1)-2.iii, 32(a)(1)-3.iii and 32(c)(4)-1.
Section 1005.33 Procedures for Resolving Errors
EFTA section 919(d) provides that remittance transfer providers
shall investigate and resolve errors where a sender provides a notice
of an error within 180 days of the promised date of delivery of a
remittance transfer. The statute generally does not define what types
of transfers and inquiries constitute errors, but rather gives the
Bureau broad authority to set standards for remittance transfer
providers with respect to error resolution relating to remittance
transfers. The 2012 Final Rule implements such error resolution
standards in Sec. 1005.33.
Under Sec. 1005.33, as adopted in the 2012 Final Rule, an error
occurs in various situations including when the remittance transfer is
not made available to a designated recipient by the date of
availability stated in the disclosure provided by Sec. 1005.31(b)(2)
or (3) for the remittance transfer. Such an error may result from a
sender's provision of an incorrect account or routing number to a
remittance transfer provider. Industry expressed concern after the
February Final Rule was published about the remedies available when a
sender provides an incorrect account number to the provider. Providers
have stated that in some cases, as a result of such errors, remittance
transfers may be deposited into the wrong account and, despite
reasonable efforts by the provider, cannot be recovered. Under Sec.
1005.33(c)(2)(ii) of the 2012 Final Rule, a provider is obligated to
resend to the designated recipient or refund to the sender the total
amount of the remittance transfer regardless of whether it can recover
the funds. Industry has noted that this problem is of particular
concern with respect to transfers of large sums, particularly for
smaller institutions that might have more difficulty bearing the loss
of the entire transfer amount. In addition, providers have expressed
concern that the remedy provisions of the 2012 Final Rule create a
potential for fraud, despite an exception that excludes transfers with
fraudulent intent from the definition of error. See Sec.
1005.33(a)(1)(iv)(C).
In response to these concerns, in the December Proposal the Bureau
proposed a new exception to the definition of error in Sec. 1005.33.
The exception set forth in proposed Sec. 1005.33(a)(1)(iv)(D) would
have excluded from the definition of error under Sec.
1005.33(a)(1)(iv) the sender having given the remittance transfer
provider an incorrect account number, provided the provider met certain
specified conditions. The Bureau also proposed several other changes to
the error resolution procedures in Sec. 1005.33 to address questions
of how remittance transfer providers should provide remedies to senders
for errors that occurred because the sender provided incorrect or
insufficient information.
Based on comments received, the Bureau is adopting the proposed
exception and is further revising these procedures as detailed below.
The Bureau is also adopting conforming changes to the error resolution
procedures to reflect revisions to the disclosure requirements
concerning non-covered third-party fees and taxes collected on a
remittance transfer by a person other than the provider as well as
making several technical, non-substantive changes.
33(a) Definition of Error
33(a)(1) Types of Transfers or Inquiries Covered
Section 1005.33(a)(1) lists the types of remittance transfers or
inquiries that constitute ``errors'' under the 2012 Final Rule. The
types of errors relevant to this final rule are discussed below.
33(a)(1)(iii) Incorrect Amount Received by the Designated Recipient
Section 1005.33(a)(1)(iii), as adopted in the 2012 Final Rule,
defines as an error the failure to make available to a designated
recipient the amount of currency stated in the disclosure provided to
the sender under Sec. 1005.31(b)(2) or (3) for the remittance
transfer. The commentary to Sec. 1005.33(a)(1)(iii) explains that this
category includes situations in which the designated recipient may
receive an incorrect amount of currency. See comment 33(a)-2. Insofar
as the Bureau is amending Sec. 1005.31(b)(1)(vii) to exclude from the
disclosed total to be received by the designated recipient non-covered
third-party fees and taxes collected on a remittance transfer by a
person other than the provider, the Bureau has adjusted the definition
of error under Sec. 1005.33(a)(1)(iii) to reflect that change. Thus,
as adopted in the 2013 Final Rule, Sec. 1005.33(a)(1)(iii) states that
an error includes the failure to make available to a designated
recipient the amount of currency disclosed pursuant to Sec.
1005.31(b)(1)(vii) and stated in the disclosure provided to the sender
under Sec. 1005.31(b)(2) or (3) for the remittance transfer.
Relatedly, the Bureau is adding a new exception, in Sec.
1005.33(a)(1)(iii)(C), which states that no error under Sec.
1005.33(a)(1)(iii) occurs if the difference results from the
application of non-covered third-party fees or taxes collected on the
remittance transfer by a person other than the provider and the
provider provided the disclosure required by Sec. 1005.31(b)(1)(viii).
The Bureau is also making conforming edits to Sec.
1005.33(a)(1)(iii)(A) and (B) to allow for the addition of Sec.
1005.33(a)(1)(iii)(C).
The Bureau is also making conforming edits to the related
commentary. In the 2013 Final Rule, the examples in comment 33(a)-3.ii
are revised to reflect the changes discussed above regarding the
disclosure of non-covered third-party fees and taxes collected on a
remittance transfer by a person other than the provider. Comment 33(a)-
3.ii, as revised, discusses as an example a situation in which the
remittance transfer provider provides the sender a receipt stating an
amount of currency that will be received by the designated recipient,
which does not reflect the additional foreign taxes that will be
collected in Colombia on the transfer but includes the disclaimer
required by Sec. 1005.31(b)(1)(viii). The comment explains that
because the designated recipient will receive less than the amount of
currency disclosed on the receipt due solely to the additional foreign
taxes that the provider was not required to disclose, no error has
occurred. Comment 33(a)-3.iii, as revised, addresses a situation where
the receipt provided by the remittance transfer provider does not
reflect additional fees that are imposed by the receiving agent in
Colombia on the transfer. Because the designated recipient in this
example will receive less than the amount of currency disclosed in the
receipt due to the additional covered third-party fees, an error under
Sec. 1005.33(a)(1)(iii) has occurred.
The Bureau is also adding new comment 33(a)-3.vi, which provides an
example of a situation where a sender requests that his bank send
US$120 to a designated recipient's account at an institution in a
foreign country. The foreign institution is not an agent of the
provider. Only US$100 is deposited into the designated recipient's
account because the recipient institution imposed a US$20 incoming wire
fee and deducted the fee from the amount deposited into the designated
recipient's
[[Page 30682]]
account. Because this fee is a non-covered third-party fee that the
remittance transfer provider is not required to disclose under Sec.
1005.31(b)(1)(vi), no error has occurred if the provider provided the
disclosure required by Sec. 1005.31(b)(1)(viii).
Separately, in the December Proposal, the Bureau proposed to make
technical corrections to comment 33(a)-4, which, as published in the
Federal Register as part of the February Final Rule had improperly
cited to Sec. 1005.33(a)(1)(iv)(B) rather than to Sec.
1005.33(a)(1)(iii)(B) and thus improperly described the relevant
exception. The Bureau received no comments on this proposed correction,
and it is adopted as proposed with a change to reflect the revisions
discussed above to Sec. 1005.31(b)(1)(vii).
33(a)(1)(iv) Failure To Make Funds Available by Date of Availability
33(a)(1)(iv)(D)
Section 1005.33(a)(1)(iv) of the 2012 Final Rule defines as an
error a remittance transfer provider's failure to make funds available
to the designated recipient by the date of availability stated on the
receipt or combined disclosure, subject to three listed exceptions,
including an exception for remittance transfers made with fraudulent
intent by the sender or a person working in concert with the sender.
See Sec. 1005.33(a)(1)(iv)(C). Comment 33(a)-5 to the 2012 Final Rule
elaborates on the definition of the term ``error'' under Sec.
1005.33(a)(1)(iv) and explains that such errors under subpart B of
Regulation E include, among other things, the late delivery of funds,
the total non-delivery of a remittance transfer, and the delivery of
funds to the wrong account. See comments 33(a)-5.1 and .ii. The
commentary further notes that if only a portion of the funds are made
available by the disclosed date of availability, then Sec.
1005.33(a)(1)(iv) does not apply, but Sec. 1005.33(a)(1)(iii) may
apply instead.
As explained under comment 33(c)-2 in the 2012 Final Rule, an error
under Sec. 1005.33(a)(1)(iv) would include situations where a
remittance transfer provider failed to make funds in connection with a
remittance transfer available to a designated recipient by the
disclosed date of availability because the sender provided an incorrect
account number to the remittance transfer provider. After issuance of
the 2012 Final Rule, the Bureau received comments from industry that
providers often have no means to verify designated recipients' account
numbers for remittance transfers into foreign bank accounts. As a
result, providers could have to bear the potentially significant costs
of their customers' mistakes in cases in which funds were deposited in
the wrong account and could not be recovered as a result of the
sender's provision of an incorrect account number.
In the December Proposal, the Bureau proposed to revise the
definition of error in Sec. 1005.33(a)(1)(iv) by adding a fourth,
conditional exception. Proposed Sec. 1005.33(a)(1)(iv)(D) would have
excluded from the definition of error a failure to make funds available
to the designated recipient by the disclosed date of availability,
where such failure resulted from the sender having given the remittance
transfer provider an incorrect account number, provided that the
provider met the conditions set forth in proposed Sec. 1005.33(h).
These proposed conditions, would have required providers to notify
senders of the risk that their funds could be lost, to investigate
reported errors, and to attempt to recover the missing funds. In
addition, the exception would have been limited to situations in which
the funds were actually deposited into the wrong account. Where these
conditions were met, the proposed exception would not have required
providers to bear the cost of refunding or resending transfers.
The Bureau sought comment on the proposed exception generally and
whether it should be limited to mistakes regarding account numbers or
expanded to include other incorrect information provided by senders in
connection with remittance transfers, such as routing numbers. Each of
these is discussed below.
Exception for Senders' Mistakes Regarding Account Numbers
Industry commenters uniformly supported the addition of the
proposed exception to the definition of error where the error was
caused by the sender's provision of an incorrect account number. They
put forth a number of reasons why they favored the proposed change. In
many respects, these comments expanded upon those received prior to the
December Proposal.
Industry commenters reiterated earlier concerns about the large
potential exposure given their general inability of remittance transfer
providers to validate the accuracy of a designated recipient's account
number provided in connection with a wire transfers and similar types
of open network transfers sent to accounts at banks and other
institutions abroad. These commenters argued that providers sending
these transfers over open networks generally have limited ability to
cross-check account numbers with the names of accountholders prior to
sending transfers because they often have no direct relationships with
recipient institutions and thus no means of accessing those
institutions' account information. Commenters further stated that as a
result, the only way for a provider to validate such numbers may be to
contact the recipient institution manually, which may be time-consuming
and difficult due to language and time zone issues. Such validation
would necessitate manual handling of remittance transfers and limit the
ability of providers to use automated systems, which are less costly
than manual handling of each transfer. Commenters stated their concern
that manual validation could substantially increase costs to senders
and delay the processing of remittance transfers. Relatedly, several
commenters claimed that it was infeasible to expect providers to
develop account number verification systems, automated or otherwise,
before the effective date of the 2012 Final Rule (which was scheduled
to take effect on February 7, 2013) due to the number of institutions
worldwide that would need to adjust their systems used for transmitting
wires.
Industry commenters also reiterated concerns expressed prior to the
issuance of the December Proposal regarding the potential for fraud if
a sender's provision of an incorrect account number is considered an
error under Sec. 1005.33(a)(1)(iv). As discussed in the December
Proposal, commenters had stated that the 2012 Final Rule could enable
fraudulent activity to flourish because, if unscrupulous senders
provided incorrect account numbers and funds were sent to a
coconspirator, remittance transfer providers might have to send
transfer amounts again to another coconspirator without first
recovering them. Commenters argued that the fraud exception in the 2012
Final Rule--Sec. 1005.33(a)(1)(iv)(C)--is insufficient because for
providers to use the exception would be difficult in most
circumstances. Many industry commenters stated that providers in the
United States typically have a limited ability to gather evidence of
fraud from a recipient institution abroad or to mandate cooperation
from foreign institutions with whom they have no direct relationship.
Industry commenters also noted that even if a provider suspected fraud,
the lack of evidence would cause providers to hesitate to accuse one of
its own customers of fraud. Industry
[[Page 30683]]
commenters also stated that the 2012 Final Rule departed from current
industry practice by requiring that remittance transfer providers
resend or refund a remittance transfer even when a sender's mistake
results in mis-delivery of funds that cannot be recovered.
Many industry commenters expressed concern that in light of the
significant exposure under the 2012 Final Rule's sender error
provisions, if the Bureau did not revise the error resolution
procedures as it proposed to do in the December Proposal, many
remittance transfer providers would curtail their remittance transfer
offerings such as by limiting the amount permitted per transfer,
limiting transfers to certain trusted customers, or by exiting the
remittance transfer business altogether.
Industry commenters also argued that the Bureau should not have
adopted the approach taken in the 2012 Final Rule to sender error
because it was not mandated by statute. One of these commenters opined
that because the Dodd-Frank Act was not specific with respect to who
must bear the cost of a mis-directed remittance transfer, the Bureau's
legal authority to require remittance transfer providers to bear the
cost of mistakes made by senders was questionable.
In contrast to comments from industry, consumer group commenters
were divided on whether the Bureau should adopt the proposed exception
for certain sender errors. Two consumer groups supported the proposed
change because, they contended, the proposed rule achieved the
appropriate allocation of risk between senders and remittance transfer
providers and incentivized providers to minimize the occurrence of
errors. These commenters also stated that it would be difficult for
providers, particularly small providers, to retrieve funds sent to the
wrong account. They further asserted that it would be difficult for
providers, and particularly credit unions, to accuse their customers or
members of fraud in order to avail themselves of the fraud exception in
Sec. 1005.33(a)(1)(iv)(C). As a result, these consumer group
commenters argued that absent the proposed revision, many providers
might choose to exit the remittance transfer business altogether,
resulting in a loss of access to senders.
Other consumer groups opposed the proposed changes and urged the
Bureau not to amend the 2012 Final Rule with respect to sender mistakes
regarding account numbers that result in the loss of the transfer
amount. First, some of these groups argued that the Bureau would be
undermining the intent of Congress, which, they argued, was to motivate
industry to change existing practices to develop more secure means of
sending remittance transfers. By adopting the proposed exception, these
commenters argued, the Bureau would eliminate any incentive for
remittance transfer providers to develop enhanced security procedures.
Relatedly, some consumer groups also argued that the existing
definition of error in subpart A of Regulation E, specifically Sec.
1005.11(a)(ii), already addresses the situation in which a consumer
provides an incorrect recipient account number by creating an error for
``incorrect'' electronic fund transfers.\8\ These commenters noted that
insofar as Sec. 1005.11(a)(ii) is phrased in general terms and refers
to an ``incorrect electronic fund transfer'' by its plain language it
does not exclude incorrect information provided by a consumer (or any
other party). Insofar as Sec. 1005.11(a)(ii) has long applied to a
portion of remittance transfers, the commenters contended that had
Congress intended to deny the protections of this provision to
consumers, it would have done so more explicitly.
---------------------------------------------------------------------------
\8\ Section 1005.11 of subpart A of Regulation E contains error
resolution provisions for electronic fund transfers. Section
1005.11(a)(ii) states that a potential error under the rule is an
``incorrect electronic fund transfer to or from the consumer's
account.''
---------------------------------------------------------------------------
Finally, some consumer group commenters suggested that the Bureau
should not adopt the proposed exception to the definition of error,
even if the 2012 Final Rule would result in some remittance transfer
providers exiting the market because they are unable to implement
adequate verification procedures today. Alternatively, these commenters
suggested that, in order to reduce the risk of market exit, that the
Bureau could adopt the proposed revisions, but limit the proposed
exception to the definition of error to transfers over a certain dollar
amount so that senders of smaller transfers would still benefit from
the error provisions in the 2012 Final Rule.
Upon consideration of these comments and further consideration and
to facilitate compliance, the Bureau is finalizing Sec.
1005.33(a)(1)(iv)(D) with several changes from the proposed provision,
which are discussed below. As in the December Proposal, the exception
as finalized will only apply if a remittance transfer provider can meet
certain conditions including warnings to senders and use of reasonable
validation methods where available. These conditions are set forth in
Sec. 1005.33(h) and also are discussed in detail below. Where the
exception applies, providers will not be required to bear the cost of
refunding or resending transfers if funds ultimately cannot be
recovered.
As it noted in the December Proposal, the Bureau believes that this
exception appropriately allocates risk based on remittance transfer
providers' existing methods for sending transfers, which often do not
allow for or facilitate verification of designated recipients' account
numbers. The Bureau continues to believe it is important for industry
to develop improved security procedures and expects to engage in a
dialogue with industry about how to encourage the growth of improved
controls and communication mechanisms. But the Bureau understands that
industry is unlikely to be reasonably able to implement such changes in
the near future. Subpart B of Regulation E does not regulate most
recipient institutions, and the Bureau has concluded that individual
providers, and particularly those sending transfers through open
networks have limited ability to influence the practices of financial
institutions worldwide in the short term.
Absent such changes, the Bureau is concerned that remittance
transfer providers will exit the market or reduce remittance offerings
rather than risk having to bear the cost of the entire transfer amount
where funds are deposited into the wrong account due to the sender's
provision of an incorrect account number. The Bureau believes such an
interim disruption would not be in consumers' best interests, and thus
has finalized the proposed exception as discussed below. The Bureau,
however, will continue to evaluate the development of procedures as it
monitors providers' implementation of and compliance with the 2013
Final Rule.
The Bureau disagrees with those consumer group commenters that the
2012 Final Rule should be allowed to take effect absent the proposed
exception for sender account number mistakes, and that the Bureau
should instead monitor whether the concerns summarized in the December
Proposal--such as increased fraud and remittance transfer providers
exiting the market--actually materialize. As stated above and in the
December Proposal, the Bureau is concerned that absent the proposed
change, some providers would severely curtail their offerings or
withdraw from the remittance transfer business altogether, and such a
market change could have a negative impact on senders. The Bureau also
does not believe, as commenters suggested, that it
[[Page 30684]]
is appropriate to limit the scope of the exception to larger value
transfers, because doing so could potentially encourage providers to
limit senders' access to smaller value transfers. In addition, the
Bureau does not believe it appropriate to engage in line drawing or to
provide differential protections in this circumstance. Furthermore, the
Bureau disagrees that the proposed exception would harm senders in that
the exception in many ways maintains the status quo insofar as the
Bureau believes that, today, senders typically bear the loss when their
mistake leads to a mis-deposit. Nor does the Bureau believe that the
problem of senders losing the transfer amount is particularly
widespread today; insofar as the status quo is maintained, the Bureau
does not expect this to change. The Bureau's outreach confirmed that in
most cases where there is a problem in the transmission of a remittance
transfer, the provider is able to retrieve the funds or have them
routed properly.
With regard to commenters' arguments about the Bureau's statutory
authority, the Bureau disagrees both with industry participant and
consumer group arguments that the EFTA or section 1073 of the Dodd-
Frank Act specifies which party must bear the cost of a sender's
mistake with respect to remittance transfer. Rather, EFTA section 919
gives the Bureau broad discretion to set standards for remittance
transfer providers with respect to error resolution, including to
define errors, and does not mandate a specific result with regard to
which party should bear the risk of loss under any particular
circumstances. Nor does the Bureau believe that the definition of error
in subpart A of Regulation E, which does not apply to all remittance
transfers, precludes the Bureau from adopting more specifically
tailored error resolutions, and corresponding definitions, applicable
to all remittance transfers under subpart B of Regulation E. See also
Sec. 1005.33(f). Accordingly, the Bureau has adopted the proposed
exception for sender account number mistakes subject to specific
conditions discussed below.
The Scope of the Sender Error Exception
As noted above the Bureau also sought comment on the scope of the
proposed exception to the definition of error under Sec.
1005.33(a)(1)(iv) and whether it should apply to incorrect information
provided by senders in addition to designated recipients' account
numbers and, in particular, whether the proposed exception should apply
in cases in which senders make mistakes regarding routing numbers or
similar institution identifiers in addition to mistakes regarding
account numbers.
In response, many industry commenters suggested that the proposed
exception be expanded to refer to sender mistakes regarding any
information provided by a sender in connection with a remittance
transfer rather than just mistaken account numbers, as proposed. Other
commenters listed specific types of incorrect information that should
be addressed by the exception to Sec. 1005.33(a)(1)(iv), such as:
Routing numbers, Business Identifier Codes (BICs), Society for
Worldwide Interbank Financial Telecommunication codes (SWIFT codes),
International Bank Account Numbers (IBANs), local bank codes, prepaid,
debit or credit card account numbers, recipient institutions' names,
designated recipients' names, escrow account numbers, currencies in
which transfers will be received, incomplete wire instructions, and
recipients' email addresses, phone numbers, and addresses. Commenters
offered different reasons as to why the proposed exception should be
expanded to include sender mistakes regarding each suggested type of
information. In addition to considering these comments, the Bureau
conducted additional outreach to understand the nature of errors
related to the suggested types of information and why remittance
transfer providers thought they should be included in any exception to
an error under Sec. 1005.33(a)(1)(iv) in the 2012 Final Rule.
Many of the industry commenters that urged that the proposed
exception should be extended to all mistakes made by senders argued, as
noted above, that there is no statutory basis to make remittance
transfer providers bear the cost of all senders' mistakes. Relatedly,
one commenter argued that no other consumer finance statute protects
consumers from their own errors and that there is a distinction between
allocating risk to a provider for mistakes by third parties, or where
fault cannot be determined, and requiring providers to bear the cost of
senders' mistakes.
As for the specific types of information provided by senders,
nearly all industry commenters and some consumer group commenters
favored expanding the proposed exception to apply to sender mistakes
regarding routing numbers and other recipient institution identifiers.
Commenters explained that for many remittance transfers into accounts,
remittance transfer providers request, in addition to the number of the
designated recipient's account, an alphanumeric identifier of the
recipient institution, similar to the routing numbers used to identify
depository institutions in the United States.\9\ Providers, and any
other intermediaries involved in the transfer, then use this identifier
to determine the institution to which the transfer should be sent.
Commenters further explained that, in many cases, a sender's mistake
regarding the identifier of a bank could pose a similar problem for a
provider as an incorrect account number. The commenters stated that,
like account numbers, many providers lack the ability to verify the
accuracy of alphanumerical identifiers related to recipient
institutions that are provided by senders. If a recipient institution
identifier is incorrect and the provider does not match it with an
institution name, funds could conceivably be mis-deposited if the
institution represented by the incorrect routing number has an account
matching the number provided by the sender.
---------------------------------------------------------------------------
\9\ For example, in order to route a wire transfer to a foreign
bank, a bank in the United States may require that the sender
provide the name of the designated recipient and the recipient's
institution as well as the BIC for the recipient's institution, and
the recipient's account number.
---------------------------------------------------------------------------
In addition to sender mistakes regarding account numbers and
recipient institution identifiers, several commenters asked that the
Bureau exclude from the definition of error under Sec.
1005.33(a)(1)(iv) senders' mistakes regarding correspondent routing
instructions (i.e., if the sender suggests that the remittance transfer
provider send the transfer through a particular correspondent that is
unable to complete the transfer). Several commenters stated that
generally this sort of mistake generally would lead to a delay of a
transfer and not its mis-deposit into the wrong account.
Finally, several industry commenters argued that the proposed
exception should be expanded to apply to senders' mistakes regarding
designated recipients' names and information that the designated
recipient themselves might need to apply the proceeds of remittance
transfers after receipt. For example, a trade association commenter
asked that the Bureau expand the proposed exception to include sender
mistakes about additional information a designated recipient needs to
process a transfer it receives. The commenter stated that if, for
example, the designated recipient is an insurer, it might need the
designated recipient's policy number to process the funds received.
Similarly, one commenter stated that if a designated recipient is a
property lessor, the lessor might need an identifying apartment number
in order
[[Page 30685]]
to process a transfer that is a rent payment.
After careful consideration of the comments received and upon
further consideration, the Bureau is expanding the exception to the
definition of error in Sec. 1005.33(a)(1)(iv)(D) to include situations
where a sender has provided an incorrect recipient institution
identifier in addition to situations where a sender provides an
incorrect account number, as long as the error results in a mis-deposit
of the funds and that the remittance transfer provider meets the
conditions set forth in Sec. 1005.33(h). As discussed below, the 2013
Final Rule includes as one such condition, that the provider use
reasonably available means to verify the recipient institution
identifier provided by the sender. See Sec. 1005.33(h)(2).
Based on its monitoring of the remittance market, review of comment
letters, and other outreach, the Bureau believes that situations in
which an incorrect recipient institution identifier could result in a
transfer being deposited into the wrong account are exceedingly rare
but not unheard of. More typically, the Bureau understands, a mistaken
identifier will result in a transfer that is returned to the remittance
transfer provider because either the identifier does not match any
institution or the account number does not match an account at the
institution to which the transfer is mistakenly directed. Nevertheless,
the Bureau is expanding the exception in the 2013 Final Rule beyond
what was proposed because, upon further consideration, it believes that
it is appropriate to treat mistakes in recipient institution
identifiers similarly to mistakes in account numbers. The two types of
identifiers are similar in purpose and, in some cases, are combined
into one. In addition, these identifiers may not be easily verifiable
by providers sending remittance transfers over an open network and are
used in straight-through, automated processing of transfers.
Additionally, although less likely than as with respect to account
numbers, under the 2012 Final Rule an unscrupulous sender could
potentially provide an incorrect routing number to perpetrate a fraud
with a coconspirator abroad.
Contrary to requests by commenters that the Bureau extend the
proposed exception for sender mistakes regarding account numbers to
mistakes regarding all types of information, the Bureau is limiting the
exception in Sec. 1005.33(a)(1)(iv)(D) to sender mistakes regarding
account numbers and recipient institution identifiers because it does
not believe it is appropriate to extend the exception to all mistakes a
sender might make in connection with a remittance transfer for several
reasons. While the chance of mis-deposit is limited for all sender
mistakes, the Bureau believes there is a greater risk for mistakes
regarding account numbers and recipient institution identifiers.
However, for most other types of sender mistakes identified by
commenters, such as mistakes regarding the recipient's address or wire
instructions, the Bureau does not believe that the incorrect
information would usually result in a mis-deposit of a remittance
transfer. Instead, the Bureau believes that these mistakes will at most
result in a delay of delivery or in non-delivery of the remittance
transfer. In situations where the recipient institution identifies a
customer with the same name as the designated recipient but is unable
to match that customer's name to the provided account number, the
Bureau believes that the recipient institution will generally be unable
to apply the funds and that the transfer will be returned or otherwise
delayed but that the funds will not be mis-deposited.
The Bureau does not believe that it is warranted to extend the
exception to those sender mistakes that are likely to result only in
either a delay or a return of the transfer to the remittance transfer
provider, and not the loss of funds, because the cost to the provider
of delay or non-delivery differs markedly from the cost of lost
transfers. Under the 2012 Final Rule, when a transfer is delayed or
returned to the provider, the provider must refund its fee to the
sender. See Sec. 1005.33(c)(2)(ii). Additionally, when the transfer is
returned to the provider, the sender can request that the transfer be
resent at no charge (although third-party fees may be imposed on the
resend) or have the transfer amount refunded. See Sec.
1005.33(c)(2)(ii). The cost to the provider in these circumstances
differs markedly from the cost to the provider under the 2012 Final
Rule for a transfer that is mis-deposited into the wrong account and
cannot be retrieved. When a mis-deposit occurs, absent an exception,
the provider may have to resend or refund the entire transfer amount if
the transfer could not be retrieved from the wrong account rather than
merely refund its fee or send a transfer at no cost. See Sec.
1005.33(c)(2)(ii) and comment 33(c)-2 in the 2012 Final Rule. Thus, for
mis-deposited transfers, the fact that the provider is potentially at
risk of having to absorb a loss of principal is far higher than for
other types of errors and thus is far more likely to lead to a
significant curtailment of services. Furthermore, the Bureau believes
that, in many respects, the remedy under the 2012 Final Rule for non-
delivery is similar to many providers' existing practices in that they
now resend funds at no charge with the corrected information.
Therefore, to maintain as an error sender mistakes that merely result
in delay or non-delivery of the remittance transfer as part of this
final rule would not require a significant adjustment for those
providers. Finally, the 2012 Final Rule already allows providers a
mechanism to manage uncertainty regarding the date of delivery of
funds. See Sec. 1005.31(b)(2)(ii) and comment 32(b)(2)-1 (interpreting
Sec. 1005.31(b)(2)(ii) to allow a provider to disclose the ``latest
date on which funds will be available'').
Several industry commenters suggested that the Bureau should make
senders, rather than providers, bear the costs of their own mistakes
because no other consumer protection regimes makes the regulated
entities bear the costs of consumers' mistakes. The Bureau does not
think it is necessary or appropriate that the remittances rules' remedy
provisions match perfectly those in other consumer protection regimes,
given the unique statutory structure and nature of the transactions at
issue. The Bureau is maintaining the 2012 Final Rule's error provisions
regarding sender mistakes other than those covered by the exception in
Sec. 1005.33(a)(1)(iv)(D), because it believes providers are generally
in the best position to institute systems to limit their occurrence and
to work with other industry participants to resolve particular mistakes
in transmissions.
With respect to those mistakes that are likely to result only in a
delay or non-delivery of a remittance transfer (e.g., mistakes other
than those regarding account number or the recipient institution
identifier), the Bureau believes that retaining the current rule, which
does not include an exception for such mistakes, strikes the
appropriate balance been protecting senders and encouraging providers
to limit the incidence of such errors without exposing providers to the
risk of loss of the transfer amount. With respect to those sender
mistakes that make it impossible for the recipient (as opposed to the
recipient institution) to know how to use the funds received (e.g., an
apartment number to apply a rent payment), the Bureau does not believe
that such mistakes would give rise to an error under Sec.
1005.33(a)(1)(iv). This is true because the 2013 Final Rule only does
not define as an error the inability of the designated recipient to
[[Page 30686]]
timely apply the funds for a particular purpose once a transfer is
received.
The Bureau also does not believe that a sender's provision of an
incorrect name would result in an error under the 2013 Final Rule, and
thus a sender's provision of an incorrect name need not be included in
the exception from the term error under Sec. 1005.33(a)(1)(iv)(D). As
defined under Sec. 1005.30(c), a designated recipient is ``any person
specified by the sender as the authorized recipient of a remittance
transfer to be received at a foreign country.'' As noted above, comment
30(c)-1 in the 2012 Final Rule stated that a designated recipient can
be either a natural person or an organization, such as a corporation.
The Bureau is further clarifying this comment in the 2013 Final Rule to
explain that the designated recipient is identified by the name of the
person provided by the sender to the remittance transfer provider and
disclosed by the provider to the sender pursuant to Sec.
1005.31(b)(1)(iii). See comment 30(c)-1. Thus, assume for example that
a sender tells a remittance transfer provider to send a transfer to
``Jane Doe'' at a foreign bank, the provider discloses ``Jane Doe''
pursuant to Sec. 1005.31(b)(2)(iii), and the transfer is timely
deposited by that bank into Jane Doe's account. If the sender later
asserts that an error occurred because the sender in fact intended the
transfer to be sent to ``John Doe'' but had not communicated that to
the provider, no error has occurred under the final rule because ``Jane
Doe'' was the name of the designated recipient stated on the receipt
provided to the sender.
In some cases, however, a sender's name can result in an error. If,
for example, the recipient institution could not deliver the remittance
transfer described above because no one named ``Jane Doe'' had an
account at the recipient institution, or more than one person named
``Jane Doe'' had an account at that institution such that the funds
could not be applied, the transfer would be delayed or rejected
resulting in an error because the sender provided incorrect or
insufficient information. Insofar as this would not lead to the deposit
of the transfer in the wrong account, the Bureau is not inclined to
include these mistakes in the exception.
Commenters also urged the Bureau to include in the exception to
Sec. 1005.33(a)(1)(iv) to mistakes regarding mobile phone numbers,
email addresses, and debit, credit and prepaid card numbers, arguing
that these additional categories of identifiers warrant the same
treatment as those covered by proposed Sec. 1005.33(a)(1)(iv)(D).
Commenters supporting expansion of the exception to include these
identifiers generally put forth the same reasons as those discussed
above regarding account numbers and recipient institution identifiers.
These commenters generally did not address the practical differences
between transfers sent between bank accounts and those sent to other
types of accounts.
The Bureau does not think it appropriate to extend the exception to
Sec. 1005.33(a)(1)(iv)(D) to these sorts of identifiers for several
reasons. First, Sec. 1005.31(b)(2)(iii) requires that a remittance
transfer provider disclose the name of the designated recipient to the
sender and comment 30(c)-1 now clarifies that the designated recipient
is identified by the name of the person stated on the disclosure
provided pursuant to Sec. 1005.31(b)(1)(iii) regardless of what other
identifying information that the sender may also have provided to the
provider. Insofar as a provider must disclose the name of the
designated recipient on the receipt provided to the sender, the
provider is not permitted to process a remittance transfer under the
2013 Final Rule by only disclosing a non-name identifier, such as a
card number, email address, or mobile number. To the extent providers
currently send transfers without disclosing a name to the sender, they
will not be able to continue doing so once the 2013 Final Rule takes
effect.
Second, the Bureau believes that in the current market, only a
small number of providers send remittance transfers to designated
recipients who are identified by mobile phone numbers, email addresses,
and debit, credit and prepaid card numbers. These providers are often
conducting transfers between two of their own customers through a
closed network, and thus are in position to verify designated
recipients' identities. In other words, for transfers conducted through
these closed-networks, both the sender and recipient will have agreed
to sign on to the provider's network in order to send or receive funds.
The Bureau understands that, today, a number of the providers using
these identifiers may not verify that the identifier matches the name
of the designated recipient in every instance. However, the Bureau
believes that unlike providers using account numbers to identify
designated recipients in transfers through the open network system,
these providers have a reasonable ability to implement security
measures in order to limit the possibility that senders make mistakes
regarding designated recipients' mobile phone numbers, email addresses,
and debit, credit and prepaid card numbers. These measures might
include confirmation codes, test transactions, or other methods to
prevent transfers from being sent to the wrong person.
Third, the Bureau believes that the systems are still limited and
nascent for transfers in which the mobile phone numbers, email
addresses, and debit, credit and prepaid card numbers are used to
identify designated recipients and the transfer is not sent entirely
over the remittance transfer provider's own network. As these systems
grow, the Bureau expects that providers can proactively design systems
in such a way as to allow for the development of better verification
protocols. If, in the future, providers intend to develop new systems
to allow transfers using only names and mobile phone numbers to
identify designated recipients, for example, the Bureau believes that
such systems should be designed to verify that the provided names and
numbers match before recipients can receive transfers. The Bureau does
not believe that such methods can be implemented for most transfers
sent to bank accounts. As described above, such transfers are generally
sent as wire transfers, through an open network system.
As noted, the Bureau has limited the exception in Sec.
1005.33(a)(1)(iv)(D) to account numbers and recipient institution
identifiers in order to encourage the growth of improved controls and
communication mechanisms that may generally limit the possibility of
other errors in the transmission of remittance transfers. Furthermore,
the Bureau intends to monitor closely industry's ability to verify
account numbers and recipient institution identifiers and will consider
modifying this exception if it thinks such verification methods become
reasonably available and are able to prevent most errors from
occurring.
Comment 33(a)-7
In the December Proposal, the Bureau proposed comment 33(a)-7 to
explain further when the proposed exception in Sec.
1005.33(a)(1)(iv)(D) would apply. The Bureau received no comments on
this proposed comment and it is adopted with minor clarifying changes
in light of the conditions in Sec. 1005.33(h) in the 2013 Final Rule,
which are discussed further below. Comment 33(a)-7 in the 2013 Final
Rule now states that the exception in Sec. 1005.33(a)(1)(iv)(D)
applies where a sender gives the remittance transfer provider an
incorrect account number or recipient institution identifier and all
five conditions in Sec. 1005.33(h) are satisfied. The exception does
not apply, however, where the
[[Page 30687]]
failure to make funds available is the result of a mistake by a
provider or a third party or due to incorrect or insufficient
information provided by the sender other than an incorrect account
number or recipient institution identifier, such as an incorrect name
of the recipient institution.
Comments 33(a)-8 and 33(a)-9
To clarify what the Bureau means by account number and recipient
institution identifier, the Bureau is also adopting new comment 33(a)-
8. Comment 33(a)-8 states that, for purposes of the exception in Sec.
1005.33(a)(1)(iv)(D), the terms account number and recipient
institution identifier refer to alphanumerical account or institution
identifiers other than names or addresses, such as account numbers,
routing numbers, Canadian transit numbers, ISO 9362 or 13616 codes
(including International Bank Account Numbers (IBANs) and Business
Identifier Codes (BICs)) and other similar account or institution
identifiers. In addition, for purposes of this exception, the term
designated recipient's account refers only to an account held in the
recipient's name at a bank, credit union, or equivalent institution
that maintains savings or checking accounts or accounts used for the
purchase or sale of securities. An account for purposes of this
definition is not limited to accounts held by consumers. For the
reasons discussed above, the comment states that the term does not,
however, refer to a credit card, prepaid card, or a virtual account
held by an Internet-based or mobile phone company that is not a bank,
credit union, or equivalent institution.
The Bureau proposed to renumber comment 33(a)-7 in the 2012 Final
Rule as comment 33)(a)-8. Due to the addition of both comments 33(a)-7
and -8 in the 2013 Final Rule, this comment will be renumbered as
comment 33(a)-9 but is otherwise unchanged from the 2012 Final Rule.
33(a)(2) Types of Inquiries and Transfers Not Covered
Section 1005.33(a)(2) and the accompanying commentary address
circumstances that do not constitute errors under the 2012 Final Rule.
Section 1005.33(a)(2)(iv) provides that an error does not include a
change in the amount or type of currency stated in the disclosure
provided to the sender under Sec. 1005.31(b)(2) or (3), if the
remittance transfer provider relied on information provided by the
sender as permitted by the commentary accompanying Sec. 1005.31 in
making such disclosure. Comment 33(a)-8 of the 2012 Final Rule provides
two illustrative examples.
The December Proposal would have made revisions to Sec.
1005.33(a)(2)(iv) in accordance with the proposed revisions to
Sec. Sec. 1005.31(b)(1)(vi) and (vii) and the accompanying commentary
to make clear that an error does not include a change in the amount of
currency received by the designated recipient from the amount disclosed
because the remittance transfer provider did not disclose foreign taxes
other than those imposed by a central government. This proposed change
would have been consistent with the proposed elimination of the
requirement to disclose subnational taxes pursuant to proposed Sec.
1005.31(b)(1)(vi). Insofar as the Bureau is not adopting this part of
the proposal these proposed changes to Sec. 1005.33(a)(1)(iii) are not
being adopted in the 2013 Final Rule.
The Bureau also proposed revisions to renumber and revise comment
33(a)-8 in the 2012 Final Rule in light of the revisions proposed to
Sec. 1005.31(b)(1)(vi) and (vii) to explain that a remittance transfer
provider need not disclose regional, provincial, state or other local
foreign taxes. Proposed comment 33(a)-9 would have revised the comment
to explain that a provider need not disclose regional, provincial,
state or other local foreign taxes. The proposed revisions also would
have made clear that where, under the proposal, a provider was
permitted to rely on a sender's representations, no error would have
occurred. As proposed, comment 33(a)-9 would additionally have
explained that any discrepancy between the amount disclosed and the
actual amount received resulting from the provider's reliance upon the
proposed provision that would not have required the disclosure of
subnational taxes would not constitute an error under Sec.
1005.33(a)(2)(iv). Insofar as the Bureau is not adopting the proposed
changes regarding subnational taxes, the proposed revisions to the
comment are no longer relevant and are not being adopted. The Bureau
is, however, removing language from comment 33(a)-8 that referred to a
provider's reliance on the sender's representations regarding variables
that affect the amount of taxes imposed by a person other than the
provider because such taxes are no longer required to be disclosed. The
comment is finalized as comment 33(a)-10. In the 2013 Final Rule
comment 33(a)-10 states that under the commentary accompanying Sec.
1005.31, the remittance transfer provider may rely on the sender's
representations in making certain disclosures. See, e.g., comments
31(b)(1)(iv)-1 and 31(b)(1)(vi)-1. For example, suppose a sender
requests U.S. dollars to be deposited into an account of the designated
recipient and represents that the account is U.S. dollar-denominated.
If the designated recipient's account is actually denominated in local
currency and the recipient account-holding institution must convert the
remittance transfer into local currency in order to deposit the funds
and complete the transfer, the change in currency does not constitute
an error pursuant to Sec. 1005.33(a)(2)(iv).
33(c) Time Limits and Extent of Investigation
33(c)(2) Remedies
Section 1005.33(c)(2) of the 2012 Final Rule implements EFTA
section 919(d)(1)(B) and establishes procedures and remedies for
correcting an error under the rule. In particular, where there has been
an error under Sec. 1005.33(a)(1)(iv) for failure to make funds
available to a designated recipient by the disclosed date of
availability, Sec. 1005.33(c)(2)(ii) of the 2012 Final Rule permits a
sender to choose either to: (1) Obtain a refund of the amount tendered
in connection with the remittance that was not properly transmitted, or
an amount appropriate to resolve the error; or (2) have the remittance
transfer provider resend to the designated recipient the amount
appropriate to resolve the error, at no additional cost to the sender
or designated recipient. See Sec. 1005.33(c)(2)(ii)(A). However, if
the error resulted from the sender having provided incorrect or
insufficient information, Sec. 1005.33(c)(2)(ii)(A)(2) permits third-
party fees to be imposed for resending the remittance transfer with the
corrected information although the provider may not charge its own fee
again. In addition, comment 33(c)-2 explains that Sec. 1005.33(c)(2)
requires a remittance transfer provider to resend a transfer at the
exchange rate it is using on the date of resend if funds were not
already exchanged in the first unsuccessful remittance transfer
attempt. Comment 33(c)-2 in the 2012 Final Rule also explains that the
provider was required to disclose this new exchange rate to senders in
accordance with Sec. 1005.31.
The December Proposal would have allowed for additional flexibility
in providing the required disclosures when funds are resent following
errors that occurred because the sender provided incorrect or
insufficient information. The December Proposal was intended to address
concerns expressed by industry participants that the approach taken in
[[Page 30688]]
the 2012 Final Rule created certain operational tensions between the
timing and accuracy provisions in Sec. 1005.31(e) and (f), as
referenced in comments 33(c)-2, 33(c)-3, and 33(c)-4, which together
did not allow a remittance transfer provider to resend a transfer in
some circumstances without contacting the sender because the sender
either previously requested that the transfer be resent or the provider
is employing its default remedy, which is to resend the transfer.
To reduce this tension, the December Proposal would have created a
new Sec. 1005.33(c)(3), revised comment 33(c)-2 and added a new
comment 33(c)-11. Proposed Sec. 1005.33(c)(3) would have provided new
remedy procedures for errors that occurred pursuant to Sec.
1005.33(a)(1)(iv) where a sender provides incorrect or insufficient
information. These proposed procedures would have allowed remittance
transfer providers to provide oral, streamlined disclosures. The
proposed commentary would have made clear that providers need not treat
resends of remittance transfers as entirely new remittance transfers.
Under proposed Sec. 1005.33(c)(3)(i), a provider would have been able
to set a future date of transfer and to disclose an estimated exchange
rate pursuant to Sec. 1005.32(b)(2) if the provider did not make
direct contact with the sender. If a provider had disclosed an
estimated exchange rate under proposed Sec. 1005.33(c)(3)(i), the rule
would have required the sender to disclose the cancellation period
pursuant to Sec. 1005.36(c), as well as the date the provider will
complete the resend, using the term ``Transfer Date'' or a
substantially similar term. A sender would have been allowed to cancel
the resend up to three business days before the date of transfer. In
the alternative, proposed Sec. 1005.33(c)(3)(ii) would have required a
provider that made direct contact with the sender to disclose and apply
the exchange rate used for remittance transfers on the date of resend,
rather than providing an estimate.
Under Sec. 1005.33(c)(2)(ii)(A)(2) of the 2012 Final Rule, a
remittance transfer provider could impose third-party fees, but not
include taxes, for resending the remittance transfer when an error
occurred because the sender provided incorrect or insufficient
information. Separately, the 2012 Final Rule did not state expressly
whether a provider should be permitted to deduct third-party fees
imposed or taxes collected on a remittance transfer when a transfer is
returned from an institution abroad, following a failed delivery, to
the provider before being resent or refunded. In the December Proposal,
the Bureau also sought comment on whether the provider should be
permitted to impose taxes incurred when resending funds or, more
generally, whether other remedies were appropriate with respect to fees
and taxes.
With respect to the appropriate remedy for errors that occurred
because a sender provided incorrect or insufficient information,
industry commenters generally stated that they appreciated the Bureau's
attempt to revise the resend procedures in the 2012 Final Rule.
However, those who commented on this issue stated that the Bureau's
proposed approach was too complicated because proposed Sec.
1005.33(c)(3) required disclosures with distinct content, timing and
accuracy requirements that did not necessarily apply to other
disclosures required by the 2012 Final Rule, particularly if the
provider was not otherwise providing the disclosures unique to transfer
scheduled before the date of transfer. See Sec. 1005.36(a). As a
result, these commenters contended that the new requirements would
necessitate the development of additional disclosures, systems changes,
and additional employee training. Commenters asserted that proposed
Sec. 1005.33(c)(3) would be difficult, costly, and time-consuming to
implement and that they had concerns about the compliance costs and
operation challenges posed by this part of the December Proposal.
Instead, several industry trade association commenters suggested an
alternative approach, under which a remittance transfer provider would
provide notice that the sender provided incorrect or insufficient
information in connection with a remittance transfer, that funds had
been credited (at the current exchange rate) to the sender's account,
and that the sender should notify the provider if the sender wished to
initiate a new remittance transfer. Commenters argued that this
approach would simplify the remedy in situations where an error occurs
due a sender's mistake.
Commenters further suggested that the Bureau should not allow a
sender to designate a resend remedy prior to the remittance transfer
provider's investigation of the error, permitted under Sec.
1005.33(c)(2) as explained by comment 33(c)-2. Instead, regardless of
the sender's prior remedy election, the commenters advocated requiring
the sender to elect affirmatively to resend funds after the provider
completed its investigation and the sender received notice of that
investigation and the related refund.
As for the amount appropriate to refund or resend, industry
commenters generally urged the Bureau to revise the 2012 Final Rule so
that remittance transfer providers are permitted to deduct from the
amount refunded or resent the fees imposed or taxes collected on the
first unsuccessful transfer by a party other than the provider both
when the transfer was initially sent and when it was returned to the
provider. These commenters contended that it was unfair that providers
would also have to refund to senders any amounts actually deducted from
the transfer amount when a mis-delivered transfer is returned to the
provider (i.e., lifting fees and taxes deducted from the transfer
amount in the process of returning the funds to the provider in the
United States after the failed delivery of the initial transaction).
Based on comments received and upon further consideration, the
Bureau adopts new Sec. 1005.33(c)(2)(iii), which states that in the
case of an error under Sec. 1005.33(a)(1)(iv) that occurred because
the sender provided incorrect or insufficient information in connection
with the remittance transfer, the remittance transfer provider shall
refund to the sender the amount of funds provided by the sender in
connection with the remittance transfer that was not properly
transmitted, or the amount appropriate to resolve the error, within
three business days of providing the report required by Sec.
1005.33(c)(1) or (d)(1) except that the provider may agree to the
sender's request, upon receiving the results of the error
investigation, that the funds be applied towards a new remittance
transfer, rather than be refunded, if the provider has not yet
processed a refund. The provider may deduct from the amount refunded or
applied towards a new transfer any fees actually imposed on or, to the
extent not prohibited by law, taxes actually collected on the
remittance transfer as part of the first unsuccessful remittance
transfer attempt.
The Bureau is adopting this approach because it has concluded that
for the small number of transactions to which these provisions would
likely apply, the Bureau's proposed alternative to the 2012 Final
Rule's approach could be complicated for remittance transfer providers
to implement. The Bureau is adopting the revised provision in Sec.
1005.33(c)(2)(iii) rather than in Sec. 1005.33(c)(3), as originally
proposed, because the Bureau believes it more appropriate to put all
remedies for errors arising under Sec. 1005.33(a)(1)(iv) under
subsection Sec. 1005.33(c)(2). Accordingly, the Bureau is revising
Sec. Sec. 1005.33(c)(2) and (c)(2)(ii) to make
[[Page 30689]]
clear that these provisions only apply when an error did not occur
because the sender provided incorrect or insufficient information.
Similarly, the Bureau is also revising Sec. Sec. 1005.33(c)(2)(A)(2)
and (c)(2)(B) to remove references to situations in which an error
occurred because the sender provided incorrect or insufficient
information. The provision that was Sec. 1005.33(c)(2)(iii) in the
2012 Final Rule is finalized as Sec. 1005.33(c)(2)(iv) with no
substantive changes.
Specifically, the Bureau is adopting this new approach because of
the challenges associated with both resending a transfer at a new
exchange rate and timely disclosing such rate to the sender. The Bureau
is convinced by commenters' assertions that the Bureau's attempts to
make disclosures more streamlined and reduce the number of paper
disclosures provided could potentially increase the cost of compliance
for remittance transfer providers, by necessitating changes in
disclosures and procedures. Furthermore, the Bureau believes that the
new Sec. 1005.33(c)(2)(iii) will preserve the 2012 Final Rule's
protections for senders in event of a resend that follows an error that
occurred due to a sender's mistake.
Although commenters suggested that an alternative where funds could
be credited instantly to a sender's account, not all remittance
transfers are made from an account. In some cases, a sender may not
receive notice immediately or the sender would have to wait to resend
funds until receiving the refund check. See comment 33(c)-6. As
adopted, under Sec. 1005.33(c)(2)(iii) in the 2013 Final Rule, in
situations where a sender wants to resend the transfer, the sender
would have to make a request to the remittance transfer provider after
receipt of the error investigation report and the provider would treat
the remittance transfer as a new remittance transfer request subject to
the same disclosures and other procedures as any other new transfer
requested. The transaction would be subject to applicable fees and
taxes and processed at the exchange rate in effect at the time the
sender authorizes the new transfer.
Additionally, the Bureau agrees with commenters that it is not
appropriate, in situations where funds are returned because of a
sender's mistake, for the remittance transfer provider to have to bear
the cost of fees imposed by third parties and taxes that have been
collected in connection with the unsuccessful remittance transfer and,
if applicable, when the undelivered funds are returned to the provider.
Finally, although the Bureau had also sought comment on the
exchange rate that should apply when transfers are resent following an
error that occurred because the sender provided incorrect or
insufficient information, that issue is largely moot insofar as the
2013 Final Rule requires these transactions to be treated as new
remittance transfers. As explained by comment 33(c)-2 in the 2012 Final
Rule, if a remittance transfer was to be resent because an error
occurred following a sender's mistake, the original exchange rate
applied to the resend of the transfer. Thus, the recipient would have
received the same amount and type of currency that the sender had
provided to fund the transfer. Industry commenters generally had argued
that a sender should not benefit from an exchange rate that has changed
in the sender's favor due to an error that occurred because of the
sender's mistake and thus the same exchange rate that applied to the
original transfer should apply to the resent transfer. Insofar as the
Bureau is revising the remedy in the 2013 Final Rule for errors that
occurred because of a sender's mistake, if a sender chooses to resend a
remittance transfer under the revised rule and the remittance transfer
provider agrees, the remittance transfer will be treated as a new
remittance transfer, and thus the exchange rate used for transfers on
the date of resend will necessarily apply to it. Insofar as providers
are concerned with the exchange rate used when funds are refunded to
the sender in the original currency, the Bureau believes it appropriate
to maintain the originally disclosed exchange rate insofar as the
refund should put the parties in the same position they were in prior
to the transfer, less the taxes and fees that the provider may deduct.
Revisions to the Official Interpretations of Sec. 1005.33(c)(2)
As noted above, in the December Proposal, the Bureau proposed to
modify comment 33(c)-2 to eliminate a phrase stating that requests to
resend (following an error that occurred because the sender provided
incorrect or insufficient information) are considered requests for
remittance transfers. Relatedly, proposed comment 33(c)-11 would have
clarified how to provide the disclosures required by proposed Sec.
1005.33(c)(3). Insofar as resends, as they existed in the 2012 Final
Rule, will no longer be permitted as remedies for errors pursuant to
Sec. 1005.33(a)(1)(iv) where a sender provided incorrect or
insufficient information, the Bureau is not adopting these proposed
revisions to comment 33(c)-2. The December Proposal also would have
revised comment 33(c)-2 to correspond with the proposed exception in
Sec. 1005.33(a)(1)(iv)(D) by removing the comment's reference to
senders' mistakes about an account number and to make clear that no
error would have occurred in this situation if the remittance transfer
provider satisfied the requirements of proposed Sec. 1005.33(h). The
Bureau received no comments regarding the specific amendments to
proposed Sec. 1005.33(c)(2) and comment 33(c)-2, with respect to the
proposed adjustments necessary to correspondent to the proposed
exception in Sec. 1005.33(a)(1)(iv)(D). Consequently, those portions
of proposed comment 33(c)-2 are adopted as proposed with some
alterations to improve clarity.
Comment 33(c)-2, as finalized in the 2013 Final Rule, now states
that the remedy in Sec. 1005.33(c)(2)(iii) applies if a remittance
transfer provider's failure to make funds in connection with a
remittance transfer available to a designated recipient by the
disclosed date of availability occurred because the sender provided
incorrect or insufficient information in connection with the transfer,
such as by erroneously identifying the designated recipient's address
or by providing insufficient information such that the entity
distributing the funds cannot identify the correct designated
recipient. A sender is not considered to have provided incorrect or
insufficient information for purposes of Sec. 1005.33(c)(2)(iii) if
the provider discloses the incorrect location where the transfer may be
picked up, gives the wrong confirmation number/code for the transfer,
or otherwise miscommunicates information necessary for the designated
recipient to pick-up the transfer. The remedies in Sec.
1005.33(c)(2)(iii) do not apply if the sender provided an incorrect
account number or recipient institution identifier and the provider has
met the requirements of Sec. 1005.33(h) because under Sec.
1005.33(a)(1)(iv)(D) no error would have occurred. See Sec.
1005.33(a)(1)(iv)(D) and comment 33(a)-7.
The Bureau is also adopting a new comment 33(c)-11, which reflects
the new refund procedure, and which replaces language regarding resends
from comment 33(c)-2. As revised in the 2013 Final Rule, comment 33(c)-
11 states that Sec. 1005.33(c)(2)(iii) generally requires a remittance
transfer provider to refund the transfer amount to the sender even if
the sender's previously designated remedy was a resend or if the
provider's default remedy in other
[[Page 30690]]
circumstances is a resend. However, if before the refund is processed,
the sender receives notice pursuant to Sec. 1005.33(c)(1) or (d)(1)
that an error occurred because the sender provided incorrect or
insufficient information and then requests that the provider send the
remittance transfer again, and the provider agrees to that request,
Sec. 1005.33(c)(2)(iii) requires that the request be treated as a new
remittance transfer and the provider must provide new disclosures in
accordance with Sec. 1005.31 and all other applicable provisions of
subpart B. However, Sec. 1005.33(c)(2)(iii) does not obligate the
provider to agree to a sender's request to send a new remittance
transfer.
Section 1005.33(c)(2)(iii), as adopted in the 2013 Final Rule,
applies in situations where an error occurs because the sender provided
incorrect or insufficient information, and overrides provisions that
generally permit both a sender's prior selection of a resend remedy,
see comment 33(c)-3, and a remittance transfer provider's designation
of a default remedy, see comment 33(c)-4, where that default is to
resend a transfer. Accordingly, the Bureau is revising comments 33(c)-3
and -4.
As to comment 33(c)-3 in the 2012 Final Rule, which explains how a
sender designates a preferred remedy insofar as the revisions to Sec.
1005.33(c)(2) will no longer allow a sender to designate a remedy (or
will nullify a designation of a resend remedy prior to the conclusion
of an investigation) when an error occurs because the sender provided
incorrect or insufficient information, the portion of the comment
discussing advance designation of a remedy is revised in the 2013 Final
Rule. Comment 33(c)-3 now states, like the 2012 Final Rule, that the
provider may also request that the sender indicate the preferred remedy
at the time the sender provides notice of the error. However, as
finalized, the comment states that if the provider does so, it should
indicate that if the sender chooses a resend at that time, the remedy
may be unavailable if the error occurred because the sender provided
incorrect or insufficient information. This will prevent senders from
being confused as to why they did not receive their requested remedy.
However, if the sender does not indicate the desired remedy at the time
of providing notice of error, the provider must notify the sender of
any available remedies in the report provided under Sec. 1005.33(c)(1)
or (d)(1) if the provider determines an error occurred.
Similarly, the Bureau is revising comment 33(c)-4 to explain that a
remittance transfer provider's default remedy is overridden by the
requirements of Sec. 1005.33(c)(2)(iii), which sets forth a specific
remedy that applies when an error occurs because a sender provides
incorrect or insufficient information. The Bureau is also making
conforming changes to comment 33(c)-5 to reflect the renumbering in
Sec. 1005.33(c)(2).
Finally, in light of the changes described above to Sec.
1005.33(c)(2)(ii), the Bureau is adopting new comment 33(c)-12, which
provides guidance on how a remittance transfer provider should
determine the amount to refund to the sender, or to apply to a new
transfer, pursuant to Sec. 1005.33(c)(2)(iii). Comment 33(c)-12
explains that although Sec. 1005.33(c)(2)(iii) permits the provider to
deduct from the amount refunded, or applied towards a new transfer, any
fees or taxes actually deducted from the transfer amount by a person
other than the provider as part of the first unsuccessful remittance
transfer attempt or that were deducted in the course of returning the
transfer amount to the provider following a failed delivery. However, a
provider may not deduct those fees and taxes that will ultimately be
refunded to the provider. When the provider deducts fees or taxes from
the amount refunded pursuant to Sec. 1005.33(c)(2)(iii), the provider
must inform the sender of the deduction as part of the notice required
by either Sec. 1005.33(c)(1) or (d)(1) and the reason for the
deduction. Comment 33(c)-12 also contains several illustrative
examples.
33(h) Incorrect Account Number Provided by the Sender
Proposed Sec. 1005.33(h) contained several conditions that a
remittance transfer provider would have been required to satisfy in
order to benefit from the proposed exception in Sec.
1005.33(a)(1)(iv)(D). Specifically, proposed Sec. 1005.33(h)(1)
through (4) would have provided four conditions, including: That the
provider be able to demonstrate that the sender did in fact provide an
incorrect account number, that the provider gave the sender notice that
if the sender provided an incorrect account number that the transfer
could be lost, that the incorrect account number resulted a deposit of
the transfer into the wrong account, and that the provider used
reasonable efforts to attempt to retrieve the mis-deposited funds.
In response to proposed Sec. 1005.33(h), many industry commenters
sought more specificity in the conditions, especially with respect to
the form of notice required to inform senders that the transfer amount
could be lost, what would satisfy as a reasonable effort to retrieve
lost funds, and the timeframe in which such efforts would be deemed
prompt. Other industry participants, however, supported the generality
in the proposed conditions because the commenters believed that the
conditions provided flexibility and accommodated existing practice. In
addition, some industry commenters expressed concern with the proposed
condition that funds actually be mis-deposited into the wrong account
for the proposed exception to apply. These commenters argued that often
it is difficult for remittance transfer providers to know whether funds
have in fact been mis-deposited. The Bureau has considered these
comments and is finalizing the rule with five conditions in Sec.
1005.33(h)(1) through (5), each of which is discussed below.
Generally speaking, the Bureau believes that the conditions set
forth in Sec. 1005.33(h) are consistent with industry best practices
today and will provide further incentive to continue improving
safeguards against mis-deposit over time. Where a remittance transfer
is deposited into the wrong account today, the Bureau believes that
many, if not most, providers already attempt to recover the principal
amount of the transfer. However, because providers have reported that
they often do not have direct relationships with receiving
institutions, and that in some instances those institutions may be
unresponsive to requests for assistance, providers may face
difficulties in recovering funds from the wrong account. The Bureau
believes that, in many instances, to reverse these transactions
requires the accountholder to authorize a debit from the account and,
thus, the lack of this authority may prohibit a recipient institution
from debiting the account in the amount of the incorrect deposit absent
an authorization. Relatedly, a provider in the United States may be
able to do little to assist the foreign institution in its attempt to
persuade its accountholder to provide debit authorization due to the
lack of privity between the provider and the recipient institution or
the accountholder.
Thus, the 2013 Final Rule strikes an appropriate balance by
limiting the exception in Sec. 1005.33(a)(1)(iv)(D) to circumstances
of actual mis-deposits and by requiring reasonable verification
methods, without holding remittance transfer providers responsible for
circumstances beyond their control.
[[Page 30691]]
33(h)(1)
Proposed Sec. 1005.33(h)(1) would have required that a remittance
transfer provider be able to demonstrate that the sender provided an
incorrect account number in connection with the remittance transfer.
The Bureau explained that it did not believe that this proposed
condition represented a substantial change from the 2012 Final Rule,
which incentivized providers to document whether the sender had
provided inaccurate information in order to invoke the right to charge
certain related fees in connection with a resent transaction. See Sec.
1005.33(c)(2)(ii)(A)(2) in the 2012 Final Rule. The Bureau received no
comments specific to this proposed condition. Accordingly, proposed
Sec. 1005.33(h)(1) is adopted substantially as proposed, except that
it is expanded to apply both to account numbers and recipient
institution identifiers, as discussed above. The comment is also
revised to make clear that the provider must be able to demonstrate
that the sender provided the incorrect account number or recipient
institution identifier, language that was in proposed Sec. 1005.33(h).
33(h)(2)
In the December Proposal, the Bureau noted that typically
remittance transfer providers have no means to verify whether a sender
provided account number for the designated recipient is accurate. Thus,
the Bureau did not propose, as a condition of the proposed exception in
Sec. 1005.33(a)(1)(iv)(D), that providers verify account numbers
before sending a remittance transfer to an account. However, and as
noted above, the Bureau is expanding the exception to Sec.
1005.33(a)(1)(iv) to include senders' mistakes regarding recipient
institution identifiers, as well as mistakes regarding account numbers.
In response to the Bureau's request for comment on sender mistakes
generally, some industry commenters acknowledged that, in some
instances, institution identifier information provided by senders may
be at least partially verifiable. Foremost among these are BICs
(sometimes referred to as SWIFT codes) and other recipient institution
identifiers. Commenters noted, however, that verification is neither
ubiquitous nor perfect. Several consumer group commenters argued, on
the other hand, that the Bureau should not expand the exception to
mistakes regarding recipient institution identifiers because remittance
transfer providers should be able to verify such identifiers.
As a result of the Bureau's inclusion of recipient institution
identifiers in the exception to the definition of error under Sec.
1005.33(a)(1)(iv)(D), the Bureau is adopting new Sec. 1005.33(h)(2),
which provides that for any instance in which the sender provided the
incorrect recipient institution identifier, prior to or when sending
the transfer, the provider used reasonably available means to verify
that the recipient institution identifier provided by the sender
corresponded to the recipient institution name provided by the sender.
As adopted, Sec. 1005.33(h)(2) will permit remittance transfer
providers to rely on the exception in Sec. 1005.33(a)(1)(iv)(D) only
in situations where no reasonable verification is possible or where
reasonably available means were applied but were unable to prevent a
mis-deposit that occurred because the sender provided an incorrect
recipient institution identifier. The exception does not apply to
account number mistakes insofar as the Bureau continues to believe that
no reasonable means to verify that an account number matches the name
of the designated recipient disclosed to the sender exists today for
most transfers. The Bureau will continue to monitor whether expansion
of the condition is appropriate. Furthermore, Sec. 1005.33(h)(2)
requires that the verification occur prior to or when the provider is
sending the transfer because if the verification occurs later it may be
too late to prevent a mis-deposit.
The Bureau is adopting new comment 33(h)-1, which explains that the
exception in Sec. 1005.33(a)(1)(iv)(D) applies only when a sender
provides an incorrect recipient institution identifier, Sec.
1005.33(h)(2) limits the exception in Sec. 1005.33(a)(1)(iv)(D) to
situations where the provider used reasonably available means to verify
that the recipient institution identifier provided by the sender did
correspond to the recipient institution name provided by the sender.
Reasonably available means may include accessing a directory of
Business Identifier Codes and verifying that the code provided by the
sender matches the provided institution name, and, if possible, the
specific branch or location provided by the sender. Comment 33(h)-1
explains that providers may also rely on other commercially available
databases or directories to check other recipient institution
identifiers. If reasonable verification means fail to identify that the
recipient institution identifier is incorrect, the exception in Sec.
1005.33(a)(1)(iv)(D) will apply, assuming that the provider can satisfy
the other conditions in Sec. 1005.33(h). Similarly, if no reasonably
available means exist to verify the accuracy of the recipient
institution identifier, Sec. 1005.33(h)(2) would be satisfied and thus
the exception in Sec. 1005.33(a)(1)(iv)(D) also will apply, again
assuming the provider can satisfy the other conditions in Sec.
1005.33(h). However, where a provider does not employ reasonably
available means to verify a recipient institution identifier, Sec.
1005.33(h)(2) is not satisfied and the exception in Sec.
1005.33(a)(1)(iv)(D) will not apply.
The Bureau is adopting this provision because upon further
consideration, it concludes that if remittance transfer providers want
to avail themselves of the exception to Sec. 1005.33(a)(1)(iv) for
mistakes regarding recipient institution identifiers, they must take
reasonable steps to limit the occurrence of these mistakes. The Bureau
believes that, in many instances providers can and currently do verify
the accuracy of some identifiers, and that in many other instances
verification is not feasible. For example, many providers require, and
senders provide, BICs to identify recipient institutions. Providers, or
their third-party partners, typically have access to a directory in
which they can match the BIC with the institution name (and possibly
location), and the Bureau believes many providers (or their business
partners) perform such verifications today. The Bureau also recognizes,
however, that some providers may not conduct such verification. In
other instances, precise verification that the sender has identified
the proper institution may be challenging, particularly if a recipient
institution has no BIC code or other type of identifier for which there
is an internationally accessible directory, or if a sender has not
given all the information about the recipient institution that may be
reflected in a numerical identifier, such as the branch location.\10\
The Bureau believes the requirement appropriately requires verification
where such mechanisms are reasonable available.
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\10\ See http://www.swift.com/products_services/bic_and_iban_format_registration_bic_details.
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Finally, the Bureau notes that it intends to monitor the
availability of other means to verify account numbers and recipient
institution identifiers and it may propose to revise Sec.
1005.33(a)(1)(iv)(D) and (h)(2) and the related commentary if such
means become reasonably available.
[[Page 30692]]
33(h)(3)
Proposed Sec. 1005.33(h)(2) would have required a remittance
transfer provider to demonstrate that the sender had notice that, if
the sender provided an incorrect account number, the sender could lose
the transfer amount. Although the Bureau did not propose a specific
form of notice under proposed Sec. 1005.33(h)(2), it requested comment
on whether the Bureau should specify the form of the notice and when
and how such notice should be delivered.
Industry commenters were largely divided on whether the Bureau
should provide specific form and content instructions for the required
notice. However, no commenter objected to the basic requirement of
notice, and several commenters affirmatively agreed that notice would
be beneficial. Those commenters who preferred that the Bureau specify a
specific form for the required notice, including several smaller
depository institutions, argued that model language provided by the
Bureau would ease their compliance burden, particularly if there were a
safe harbor for its use. Those commenters who preferred the flexibility
of the proposed notice provisions argued that remittance transfer
providers may already provide this sort of notice in a number of
different forms. To require, or encourage through a safe harbor,
specific model language or a form, these commenters contended, would
cause remittance transfer providers to incur additional compliance
costs as they would be required to alter existing forms and practices
to match whatever the Bureau has established. In addition, these
commenters argued, providers would need additional time to comply with
this final rule if they were required to use specific language to
provide the proposed notice.
Several consumer group commenters argued that the proposed notice
should be provided in a clear and conspicuous manner and in the same
language that the rest of the transfer is conducted. These commenters
urged the Bureau to adopt a notice that comports with the clarity and
language requirements of similar disclosures in other consumer
statutes.
The Bureau adopts proposed Sec. 1005.33(h)(2) with three changes
as Sec. 1005.33(h)(3). New Sec. 1005.33(h)(3) provides as a condition
of Sec. 1005.33(a)(1)(iv)(D) exception, a requirement that the
remittance transfer provider provided notice to the sender before the
sender made payment for the remittance transfer that, in the event the
sender provided an incorrect account number or recipient institution
identifier, the sender could lose the transfer amount. The provision
also provides that for purposes of providing the Sec. 1005.33(h)(3)
notice, Sec. 1005.31(a)(2) applies to this notice unless the notice is
given at the same time as other disclosures required by subpart B for
which information is permitted to be disclosed orally or via mobile
application or text message, in which case this disclosure may be given
in the same medium as the other disclosures
This provision reflects three changes from the December Proposal:
(1) Mention of recipient institution identifiers in light of the
expanded scope of Sec. 1005.33(a)(1)(iv)(D); (2) clarification that
the notice must be provided before the sender authorizes the remittance
transfer; (3) clarification that this notice may be given orally if
provided along with a prepayment disclosure provided orally in
accordance with Sec. 1005.31(a)(2).\11\ The Bureau believes that the
requirement that the notice be provided before authorization of the
transfer is generally in accordance with how most providers currently
provide notice today and thus should not be a significant change from
existing practice. The 2013 Final Rule does not specify the form of
such notice but the Bureau intends to monitor how providers implement
this condition to determine whether additional specificity is
appropriate.
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\11\ Section 1005.31(a)(2) generally requires disclosures
required by subpart B of Regulation E to be in writing. The
provision makes exceptions for pre-payment disclosures, which may be
provided electronically.
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The Bureau notes that, pursuant to the revisions to Sec.
1005.31(a)(1) discussed above, the notice provided pursuant to Sec.
1005.33(h)(3), like all disclosures required by subpart B of Regulation
E, in Sec. 1005.33(h)(3) must be clear and conspicuous. See also
comment 33(a)(1)-1. In addition, insofar as the Bureau has also amended
the foreign language requirements of Sec. 1005.31(g) to apply to all
disclosures permitted by the 2013 Final Rule, the notice permitted by
Sec. 1005.33(h)(3) must be disclosed in accordance with the foreign
language disclosure requirements of Sec. 1005.33(g)(1).
As explained in the December Proposal, the Bureau's goal is to
ensure that senders are informed of the risks of a mistake. Given that
many remittance transfer providers are already providing notices of
this risk through various means, the Bureau wants to ensure that the
practice is adopted across the remainder of the industry while
minimizing the need to change existing notices if they were already
sufficient for the purposes of proposed Sec. 1005.33(h)(2). While the
Bureau understands that providing model language might make compliance
easier for some providers, the Bureau believes that there are
sufficient models available in providers' existing materials that it is
inappropriate to delay adoption of this condition while the Bureau
designs and tests appropriate model language.
33(h)(4)
Proposed 33(h)(3) would have stated that for a remittance transfer
provider to avail itself of the exception in proposed Sec.
1005.33(a)(1)(iv)(D), the provider would be required to demonstrate
that the incorrect account number resulted in the deposit of the
remittance transfer into a customer's account that is not the
designated recipient's.
The Bureau received a number of comments from industry commenters
and some consumer group commenters encouraging the Bureau to eliminate
this proposed condition. These commenters stated that even if funds are
not deposited into another customer's account, other forms of improper
routing due to erroneous information provided by a sender could cause
transferred funds to be lost or, at the very least, delayed beyond the
original date of availability. Other consumer group commenters
disagreed, however, asserting that, in their opinion, remittance
transfer providers typically can retrieve funds that have been
misrouted unless the funds are deposited into the wrong customer's
account. These consumer group commenters opined that so long as the
funds remain in an institution's control, there is generally no concern
that those funds will disappear.
The Bureau is adopting proposed Sec. 1005.33(h)(3) substantially
as proposed as Sec. 1005.33(h)(4). The Bureau believes, as stated in
the December Proposal, that when a remittance transfer is sent with the
wrong account number for the designated recipient, a remittance
transfer provider will be far more likely to recover the funds in
situations where the funds are either rejected by another institution
or otherwise reversed before they are deposited into the wrong account.
To the extent that commenters' concerns related to the delay of funds
rather than their disappearance, as noted above, the Bureau declines to
expand the exception in Sec. 1005.33(a)(1)(iv)(D) to cover delayed
transfers rather than actual mis-deposited transfers.
33(h)(5)
Proposed 33(h)(4) would have required a remittance transfer
provider
[[Page 30693]]
to promptly use reasonable efforts to recover the amount that was to be
received by the designated recipient. Proposed comment 33(h)-1 would
have clarified how a provider might use reasonable efforts to recover
funds. The Bureau received several comments on the proposed provision
and associated commentary.
Several industry commenters and consumer groups agreed with this
proposed condition. These commenters approved of its flexibility and
one industry commenter noted that it was in accordance with its
preexisting practice, which is to exercise best efforts to recover
missing funds. Two other commenters--a trade association and credit
union--asked that the Bureau provide more explanation regarding the
timeframe to meet the promptness requirement and the number of attempts
to recover the funds required. These commenters were concerned that the
lack of clarity would invite litigation as to whether a particular
remittance transfer provider's efforts were in fact reasonable and
prompt.
Finally, one commenter asked that the Bureau clarify that a
recipient institution, even if also the remittance transfer provider,
not be required to debit an account that has a zero balance. In other
words, this commenter sought clarity on whether it would be required to
advance funds on behalf of a customer if that customer has withdrawn
the transfer amount from the customer's account. The Bureau does not
believe clarification on this point is necessary, insofar as nothing in
the 2013 Final Rule states that a provider is required to advance funds
that the recipient institution cannot retrieve from a customer if the
exception in Sec. 1005.33(a)(1)(iv)(D) applies. Rather, the 2013 Final
Rule has the opposite intent--the exception is intended to apply when
funds cannot be retrieved.
Accordingly, the Bureau is finalizing proposed Sec. 1005.33(h)(4)
substantially as proposed as Sec. 1005.33(h)(5). The Bureau continues
to believe--as it explained in the December Proposal--that it is not
appropriate to mandate specific methods that a remittance transfer
provider must use to attempt to recover funds. The Bureau believes the
circumstances around individual transfers can vary greatly and that
what may be reasonable in one circumstance may be unreasonable in
another.
In addition, the Bureau is adopting proposed comment 33(h)-1
substantially as proposed as comment 33(h)-2 with minor revisions to
improve clarity and to replace one of the proposed examples. The Bureau
is also incorporating proposed comment 33(h)-1.iii to comment 33(h)-1,
which now states that Sec. 1005.33(h)(5) requires a remittance
transfer provider to use reasonable efforts to recover the amount that
was to be received by the designated recipient. Whether a provider has
used reasonable efforts does not depend on whether the provider is
ultimately successful in recovering the amount that was to be received
by the designated recipient. Under Sec. 1005.33(h)(5), if the
remittance transfer provider is requested to provide documentation or
other supporting information in order for the pertinent institution or
authority to obtain the proper authorization for the return of the
incorrectly credited amount, reasonable efforts to recover the amount
include timely providing any such documentation to the extent that it
is available and permissible under law. The two examples in proposed
comments 33(h)-1.i and .ii are finalized as proposed as comments 33(h)-
2.i. and .ii.
Proposed comment 33(h)-2 would have explained that the proposed
condition requires a remittance transfer provider to act promptly in
using reasonable efforts to recover the amount that was to be received
by the designated recipient. The Bureau received comments from industry
that it should clarify when exactly reasonable efforts are considered
to be prompt and also that it should create a safe harbor time period
in which efforts would be deemed prompt. The Bureau continues to
believe that whether a particular provider's efforts are prompt depends
on the facts and circumstances, for instance when the fact of an error
is first identified. In general, the Bureau believes a provider acts
promptly where it acts before the date that the funds are expected to
be made available to the recipient, but a provider may not have notice
that there is a problem with the transfer that early. Accordingly, the
Bureau has adopted proposed comment 33(h)-2 as comment 33(h)-3 and is
expanding its discussion. The comment adopts the proposed language
explaining that Sec. 1005.33(h)(5) requires that a remittance transfer
provider act promptly in using reasonable efforts to recover the amount
that was to be received by the designated recipient and that whether a
provider acts promptly to use reasonable efforts depends on the facts
and circumstances. The comment also provides an example stating that
where a sender informs the provider that he or she had provided a
mistaken account number before the date of availability disclosed
pursuant to Sec. 1005.31(b)(2)(ii), the provider has acted promptly if
it attempts to contact the institution that received the incorrect
remittance transfer before the disclosed date of availability.
Section 1005.36 Transfers Scheduled Before the Date of Transfer
Under Sec. 1005.36 of the 2012 Final Rule, the Bureau established
disclosure requirements specifically applicable to remittance transfers
scheduled before the date of transfer. Section 1005.36(a) and (b)
address specific requirements for the timing and accuracy of
disclosures for these remittance transfers. Section 1005.36(c)
addresses the cancellation requirements applicable to any remittance
transfer scheduled by the sender at least three business days before
the date of the transfer, including preauthorized remittance transfers.
As described above, there is no longer a requirement to disclose taxes
collected by a person other than the provider. See Sec.
1005.31(b)(1)(vi). As a result, comment 36(a)(2)-1, which relates to
disclosures required for preauthorized transfers, has been amended to
refer solely to the required disclosure of taxes collected by the
provider and not those collected by a third party.
Appendix A--Model Disclosure Clauses and Forms
In Appendix A of the 2012 Final Rule, the Bureau provides twelve
model forms that a remittance transfer provider may use in connection
with remittance transfers. The 2012 Final Rule also provides
instructions related to the use of these model forms. In particular,
Instruction 4 to Appendix A provides general instructions for how
providers may use the model forms, including instructions as to
formatting and necessary disclosures. Instruction 4 also describes what
portions of the disclosures are optional, and states that the Bureau
will not review or approve providers' disclosure forms.
In light of the changes to the 2012 Final Rule's disclosure
requirements discussed above, the 2013 Final Rule amends the model
forms, as well as the related instructions in Appendix A, and includes
several additional model forms reflecting the new requirements. First,
the Bureau is removing from all of the model forms references to
``Other Taxes'' because the Bureau has eliminated this disclosure
requirement. See Sec. 1005.31(b)(1)(vi). Second, although there is no
longer a requirement to disclose recipient institution fees in certain
circumstances, there remains a requirement that remittance transfer
providers disclose covered third-party fees under
[[Page 30694]]
Sec. 1005.31(b)(1)(vi). As a result, the line on the model forms that
relates to the disclosure of the amount of ``Other Fees'' has been
retained and will now reflect only covered third-party fees imposed
upon the remittance transfer.
Third, insofar as Sec. 1005.31(b)(1)(viii) requires a remittance
transfer provider to include disclaimers on the required disclosures
where non-covered third-party fees or taxes collected on the remittance
transfer by a person other than the provider may apply, the model forms
have been amended to include versions of these disclaimers. These
disclaimers are required unless a provider knows that neither non-
covered third-party fees nor taxes collected on the remittance transfer
by a person other than the provider apply. See Sec.
1005.31(b)(1)(viii) and comment 31(b)(1)(viii)-1. Thus, where a
disclaimer is necessary, there are now three potential disclaimer
statements that could be used depending on the nature of the
transaction: (1) A disclaimer that states that the recipient may
receive less due to fees charged by the recipient's bank; \12\ (2) A
disclaimer that states that the recipient may receive less due to
foreign taxes; \13\ or (3) A disclaimer that states that the recipient
may receive less due to fees charged by the recipient's bank and
foreign taxes.
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\12\ In the interest of clarity on the model forms, non-covered
third-party fees are referred to as ``fees charged by a recipient's
bank.'' However, to the extent that the term ``bank'' is imprecise,
a provider may use an alternate term to describe the recipient
institution.
\13\ Also in the interest of clarity, these taxes are described
as ``foreign taxes,'' although it is possible that the taxes
collected by a person other than the provider could include taxes
imposed by a U.S. state or the Federal government where such taxes
are not collected by the provider.
---------------------------------------------------------------------------
In addition to the requirement to include these disclaimers, a
remittance transfer provider may also elect to disclose the actual or
estimated amounts of non-covered third-party fees and taxes collected
by a person other than the provider. See Sec. Sec. 1005.31(b)(1)(viii)
and 1005.32(b)(3). Model forms A-30(a) through (d) include samples of
how a provider may include versions of these required disclaimers, as
well as the optional disclosures regarding the actual or estimated
amount of such fees and taxes.
Specifically, Model Form A-30(a) provides sample disclaimer
language that ``a recipient may receive less due to fees charged by the
recipient's bank and foreign taxes.'' Model Forms A-30(b) through (d)
include examples of how a remittance transfer provider could include
the optional estimates of non-covered third-party fees and taxes
collected on the remittance transfer by a person other than the
provider. Specifically, Model Form A-30(b) includes a sample disclaimer
that shows a parenthetical containing an estimate of the applicable
non-covered third-party fees that may apply to the sample transfer,
while Model Form A-30(c) includes a sample disclaimer that shows a
parenthetical with an estimate for the taxes collected on the
remittance transfer by a person other than the provider that may apply.
Model Form A-30(d) includes an example for how a provider could provide
an estimate for both non-covered third-party fees and taxes collected
on the remittance transfer by a person other than the provider.
Finally, although not included in a model form, if a provider knows
that fees or taxes will be deducted, the disclaimer could indicate that
the recipient ``will receive less,'' rather than ``may receive less,''
due to non-disclosed fees and taxes. A provider also may elect to
include the precise amounts for fees and/or taxes.
Instruction 4 also has been amended to indicate that the disclosure
of the actual or estimated amounts for non-covered third-party fees and
taxes collected by a person other than the provider is optional as
provided in Sec. 1005.31(b)(1)(viii) in the 2013 Final Rule.
Instruction 4 also now includes language that a remittance transfer
provider cannot include disclaimers that cannot apply to the particular
transfer. For example, if the provider knows that the only fees that
can apply to the transfer are covered third-party fees, a provider
should not include a fee disclaimer. See Sec. 1005.31(b)(1)(viii) and
comment 31(b)(1)(viii)-1.
Finally, because additional model forms have been added, the
Appendix and Instructions are revised to indicate that there are now 15
model forms.
Effective Date
This final rule is effective on October 28, 2013. As discussed
below, the Bureau believes that this effective date will, on balance,
facilitate the implementation of both the remaining requirements of the
2012 Final Rule and the new requirements of the 2013 Final Rule.
In the December Proposal, the Bureau proposed to temporarily delay
the effective date of the 2012 Final Rule from February 7, 2013, until
90 days after the publication of the 2013 Final Rule in the Federal
Register. The Bureau stated then that it believed that this modest
delay would balance the need for consumers to receive the protections
afforded by the rule as quickly as possible with industry's need to
make adjustments to comply with the provisions of the rule. As part of
the December Proposal, the Bureau sought comment on this proposed 90-
day extension period. On January 29, 2013, in the Temporary Delay Rule,
the Bureau temporarily delayed the February 7, 2013 effective date
pending completion of this rulemaking.
All commenters--including consumer group commenters--generally
agreed that the Bureau should extend the effective date of the 2013
Final Rule until at least 90 days after it is published in the Federal
Register. Although no commenters suggested an implementation period of
fewer than 90 days following publication of the 2013 Final Rule, one
consumer group commenter noted that while it did not object to a 90
day-extension, it saw no need for any implementation period longer than
90 days after the finalization of this rule. Additionally, one industry
trade association suggested a 90-day implementation period could be
workable depending on the scope of the final rule. Most industry
commenters, however, urged the Bureau to extend the effective date
beyond 90 days. In doing so, industry commenters suggested a range of
periods--with many industry commenters suggesting periods of between
180 and 365 days following the publication of the 2013 Final Rule. One
industry trade association provided an example of an implementation
timeline suggesting that a large correspondent would need at least 121
days from when the final rule is released in order to integrate a
compliance solution within its client banks' systems. Industry
commenters in general contended that remittance transfer providers,
their vendors, and other business partners all would need additional
time to adjust their computer systems and compliance procedures,
renegotiate contracts, and train staff.
Separately, commenters representing smaller insured institutions in
particular requested a longer implementation period, stating that many
of these remittance transfer providers depend on larger third-parties
to aid their compliance. These commenters uniformly stated that smaller
providers might face particular challenges with implementing necessary
changes over a short time period because smaller providers will only be
able to integrate compliance solutions after the third parties have
incorporated necessary updates and conduct testing, and include the
changes in their scheduled releases. Relatedly, a number of these
commenters referenced the Bureau's recent rulemakings pursuant to
[[Page 30695]]
title XIV of the Dodd-Frank Act \14\ and indicated that implementing
all of the requirements of those rules and the requirements of this
final rule at the same time will create a significant cumulative
burden. These industry commenters also expressed concern over both the
breadth and complexity of new rules expected from the Bureau.
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\14\ See Escrow Requirements under the Truth in Lending Act
(Regulation Z), 78 FR 4725 (Jan. 22, 2013); Ability to Repay and
Qualified Mortgage Standards Under the Truth in Lending Act
(Regulation Z), 78 FR 6407 (Jan. 30, 2013; High-Cost Mortgage and
Homeownership Counseling Amendments to the Truth in Lending Act
(Regulation Z) and Homeownership Counseling Amendments to the Real
Estate Settlement Procedures Act (Regulation X), 78 FR 6855 (Jan.
31, 2013); Real Estate Settlement Procedures Act (Regulation X) and
Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules,
78 FR 10695 (Feb. 14, 2013); Disclosure and Delivery Requirements
for Copies of Appraisals and Other Written Valuations Under the
Equal Credit Opportunity Act (Regulation B), 78 FR 7215 (Jan. 31,
2013); Appraisals for Higher-Priced Mortgage Loans, 78 FR 10367
(Feb. 13, 2013); Loan Originator Compensation Requirements under the
Truth in Lending Act (Regulation Z), 78 FR 11279 (Feb. 15, 2013).
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The industry commenters' concerns regarding the implementation
period, particularly those relating to necessary system changes, were
largely focused around three expected results of the 2012 Final Rule,
as it would have been modified by the December Proposal: (1) The need
to build and maintain a database of applicable taxes imposed by foreign
countries' central governments; (2) the need to obtain fee schedules or
other information regarding applicable recipient institution fees in
order to compute estimates of the applicable fees; and (3) the need to
adjust systems and processes to accommodate the provisions discussing
resends to correct errors that occurred because the sender provided
incorrect or insufficient information. Furthermore, some industry
commenters suggested that the appropriate effective date would depend
on the scope of the final rule. Noting the difficulty of collecting
certain information concerning recipient institution fees and foreign
taxes, as indicated above, one industry trade association commenter
indicated that if the Bureau eliminated the requirement to disclose
recipient institution fees and foreign taxes and simplified the
procedure for resends, then this commenter thought that a 90-day
implementation period could be workable.
The Bureau is adopting an effective date of October 28, 2013. In
light of the way the Bureau has streamlined the requirements of the
2012 Final Rule, the Bureau believes that an effective date of October
28, 2013 (or approximately 180 days after the release of the 2013 Final
Rule) will allow sufficient time for providers, both large and small,
to implement any necessary changes to their systems in order to comply
with the 2013 Final Rule. The Bureau is adopting a date certain in
order to eliminate the risks of delay and provide greater assurances to
both consumers and industry as to when to expect the valuable
protections of the new rule. The Bureau also believes that this
implementation period allows sufficient time because the Bureau is not
adopting the aspects of the December Proposal that commenters
identified as requiring the most time to implement.
The primary additional substantive requirements in the 2013 Final
Rule are the requirement that remittance transfer providers include
disclaimers regarding non-covered third-party fees and taxes collected
by a person other than the provider and adopt additional verification
measures and provide notice to senders of the potential loss of funds
to take advantage of the Bureau's expansion of the exception to the
definition of the term error under Sec. 1005.33(a)(1)(iv)(D). The
Bureau believes that any programmatic changes required by these
provisions should not take most providers a particularly long period of
time to implement. To the extent providers need to change the terms of
their consumer contracts or other communications to provide senders the
notice contemplated by Sec. 1005.33(h)(3), the Bureau expects the
required time to produce this notice will be modest, particularly
because the 2013 Final Rule does not mandate any particular notice
form, or format apart from requiring that such notice be clear and
conspicuous and meet certain foreign language requirements. Although
translating such notice may require testing and certain systems
changes, and the Bureau expects that many providers will integrate any
such notice into existing communications or the required prepayment
disclosures.
Moreover, based on its outreach and monitoring of the market, the
Bureau believes that responsible providers and correspondents are
already using reasonable methods of verification to reduce the risk of
errors. Nonetheless, recognizing that the 2013 Final Rule will likely
require changes to informational technology and operational procedures
and that small providers may benefit from additional time in order to
test compliance solutions for their customers, the Bureau believes a
modest increase in the implementation period from what was proposed may
limit potential disruptions in the remittance transfer market.
For these reasons, the Bureau is expanding the implementation
period for this final rule beyond what was proposed by making it
effective October 28, 2013.
VI. Dodd-Frank Act Section 1022(b)(2)
Section 1022(b)(2) Analysis
A. Overview
In developing the 2013 Final Rule, the Bureau has considered
potential benefits, costs, and impacts \15\ and has consulted or
offered to consult with the prudential regulators and the Federal Trade
Commission, including regarding the consistency of the 2013 Final Rule
with prudential, market, or systemic objectives administered by such
agencies.\16\
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\15\ Section 1022(b)(2)(A) of the Dodd-Frank Act calls for the
Bureau to consider the potential benefits and costs of a regulation
to consumers and covered persons, including the potential reduction
of access by consumers to consumer financial products or services;
the impact on depository institutions and credit unions with $10
billion or less in total assets as described in section 1026 of the
Dodd-Frank Act; and the impact on consumers in rural areas.
\16\ The Bureau also solicited feedback from other agencies with
supervisory and enforcement authority regarding the 2013 Final Rule.
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The analysis below considers the benefits, costs, and impacts of
the key provisions of the 2013 Final Rule against the baseline provided
by the 2012 Final Rule. Those provisions regard: The disclosure of non-
covered third-party fees and taxes collected by a person other than the
remittance transfer provider, error resolution requirements with
respect to situations in which senders provide incorrect or
insufficient information regarding remittance transfers (including
account numbers and recipient institution identifiers), and the
effective date. With respect to these provisions, the analysis
considers the benefits and costs to senders (consumers) and remittance
transfer providers (covered persons).\17\ The Bureau has discretion in
future rulemakings to choose the most appropriate baseline for that
particular rulemaking.
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\17\ Benefits and costs incurred by remittance transfer
providers may, in practice, be shared among providers' business
partners, such as agents, correspondent banks, or foreign exchange
providers. To the extent that any of these business partners are
covered persons, the 2013 Final Rule could have benefits or costs
for these covered persons as well.
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The Bureau notes at the outset that quantification of the potential
benefits, costs, and impacts of the 2013 Final Rule is not possible due
to the lack of available data. As discussed in the February Final Rule,
there is a limited
[[Page 30696]]
amount of data about remittance transfers and remittance transfer
providers that are publicly available and representative of the full
market. Similarly, there are limited data on consumer behavior, which
would be essential for quantifying the benefits or costs to consumers.
Furthermore, as the Bureau has delayed the effective date of the 2012
Final Rule, providers are still in the process of implementing its
requirements. Therefore, this analysis generally provides a qualitative
discussion of the benefits, costs, and impacts of the 2013 Final Rule.
As discussed in more detail below, the Bureau expects that the 2013
Final Rule will generally benefit providers by facilitating compliance,
while maintaining many of the 2012 Final Rule's valuable new consumer
protections and ensuring that these protections can effectively be
delivered to consumers.
B. Potential Benefits and Costs to Consumers and Covered Persons
1. Non-Covered Third-Party Fees and Taxes Collected by a Person Other
Than the Provider
a. Benefits and Costs to Covered Persons
Compared to the 2012 Final Rule, the 2013 Final Rule benefits
remittance transfer providers by eliminating some of the information
that they were previously required to disclose, which will likely
reduce the cost of providing required disclosures for most providers.
The changes regarding fee and tax disclosures might additionally
benefit providers by facilitating their continued participation in the
market. Industry commenters suggested that due in part to the 2012
Final Rule's third-party fee and foreign tax disclosure requirements,
some providers might eliminate or reduce their remittance transfer
offerings, such as by not sending transfers to markets where tax or fee
information is particularly difficult to obtain in light of the lack of
ongoing reliable and complete information sources. By reducing the
amount of information needed to provide disclosures, the Bureau expects
that the 2013 Final Rule will encourage more providers to retain their
current services (and thus any associated profit, revenue, and
customers).
The 2013 Final Rule requires remittance transfer providers to add
an additional disclaimer to disclosure forms in instances where non-
covered third-party fees imposed and taxes collected by a person other
than the provider may apply. The Bureau believes that the cost of
adding these disclaimers will be small, particularly compared to the
costs of complying with the disclosure requirements of the 2012 Final
Rule. Affected providers will also have to reprogram systems to conform
to the new requirements for calculating ``Other Fees'' (pursuant to
Sec. 1005.31(b)(1)(vi)) and the amount to be disclosed pursuant to
Sec. 1005.31(b)(1)(vii)). All providers will have to remove references
to ``Other Taxes'' from their forms, and make any necessary system
changes, insofar as the Bureau has eliminated this disclosure. The
modification to existing forms and systems changes may be minimal for
many providers whose processes allow for them to adjust forms and
systems more easily, and the Bureau expects that some providers may not
have finished any systems modifications necessary to comply with the
2012 Final Rule, and thus may be able to incorporate any changes into
previously planned work. Furthermore, to the extent any provider elects
to provide optional disclosures of non-covered third-party fees or
taxes collected on the remittance transfer by a person other than the
provider, providers may bear some costs in determining these amounts
and programming disclosures to allow for the dynamic disclosure of this
information.
The Bureau expects that the provisions regarding fee and tax
disclosures will have the largest impact on depository institutions,
credit unions, and broker-dealers that are remittance transfer
providers. These types of providers tend to send most or all of their
remittances transfers to foreign accounts, for which non-covered third-
party fees could be charged. Furthermore, due to the mechanisms these
providers use to send money, they generally have the ability to send
transfers to virtually any destination country (for which tax research
might be required) and thus many different recipient institutions. By
contrast, money transmitters that are providers are more likely to send
remittance transfers to be received by agents, for which non-covered
third-party fees will not be relevant. Furthermore, with some
exceptions, most money transmitters, and particularly small ones,
generally send transfers to a limited number of countries and
institutions; consequently, the benefits, in terms of avoided costs, of
eliminating the requirement that taxes be disclosed may not be as large
for these money transmitters as for other remittance transfer
providers.
b. Benefits and Costs to Consumers
The changes regarding the disclosure of non-covered third-party
fees and taxes collected on the remittance transfer by a person other
than the provider may allow senders to avoid increased costs to the
extent that remittance transfer providers pass along any cost savings
from the new requirements in the form of lower prices. Also, if the
2013 Final Rule facilitates providers' continued participation in the
market, it will prevent senders from having their access to remittance
transfers limited, by giving them a wider set of options for sending
transfers.
The Bureau believes that a minority of transfers will be affected
by the refinements in the 2013 Final Rule concerning non-covered third-
party fees insofar as a minority of remittance transfers are deposited
into accounts. The Bureau is retaining the requirement to disclose
covered third-party fees and, therefore, senders will retain the
benefits derived from the disclosure of such fees. Specifically, the
Bureau believes that the majority of remittance transfers are received
in cash; therefore, the senders of those transfers will generally
receive complete information about the fees applicable to the transfer.
The Bureau, however, believes that most, if not all, transfers will be
affected by the refinements concerning taxes collected on a remittance
transfer by a person other than the provider, as providers may not be
able to verify whether taxes may apply to particular transactions. It
is important to note that the Bureau expects that fee and tax
disclosures that would have been required by the 2012 Final Rule but
that will not be required by the 2013 Final Rule will generally not
vary across providers sending money to the same recipient account using
the same mechanism.
The 2013 Final Rule may impose costs on senders that want a
guarantee that the designated recipient receives a particular amount,
to the extent that it makes disclosures for a particular transfer less
accurate because disclosures will now contain disclaimers in lieu of
actual figures regarding non-covered third-party fees, for transfer
that could involve such fees, and taxes collected on the remittance
transfer by a person other than the provider.
In addition, without the tax and fee disclosures, senders may have
a more difficult time ensuring that an exact amount of money reaches a
designated recipient and thus also may have difficulty determining if
an error occurred because the designated recipient did not receive the
amount disclosed. However, this difficulty should be mitigated when a
sender
[[Page 30697]]
repeatedly transfers funds to the same recipient via the same method,
as the recipient can inform the sender about taxes and fees that
routinely apply to the transfer.
Eliminating the requirement that non-covered third-party fees be
disclosed also may have varied effects on the ability of senders to
comparison shop. As to those senders who are only shopping between
providers that can send remittance transfers to a particular account
via the same method, the 2013 Final Rule should not significantly
reduce the ability of senders to compare costs across remittance
transfer providers that can send remittances to this account. In fact,
to the extent that providers are not providing differing estimates of
the same recipient institution fees, consumers may benefit because
comparisons will be easier. However, senders may have a more difficult
time comparing costs across providers sending funds via different
mechanisms. For example, if a sender is agnostic as to whether the
designated recipient should receive the transfer in cash verses the
transfer being deposited in the designated recipient's account, to the
extent non-covered third-party fees are not disclosed, the sender may
not appreciate the full costs of the latter option for sending the
remittance transfer, or understand which method of transfer is likely
to be most cost effective. For the transfer to an account, the pre-
payment disclosure may not contain a disclosure of non-covered third-
party fees, while the disclosure for the transfer to be received in
cash must disclose all fees. Therefore, whether a sender's ability to
comparison shop has been impaired by the changes in the 2013 Final Rule
may depend on the type of comparison undertaken by the sender.
Nevertheless, as important as this information is for senders,
requiring disclosure of non-covered third-party fees and taxes
collected on the remittance transfer by a person other than the
provider would likely require a substantial delay in implementation of
all of the 2012 Final Rule or would produce a significant contraction
in senders' access to remittance transfer services, particularly in
smaller corridors. The Bureau believes that both of these results would
impose significant costs on consumers and undermine the broader
purposes of the statutory scheme.
2. Incorrect or Insufficient Information
a. Benefits and Costs to Covered Persons
The 2013 Final Rule includes two sets of changes related to errors
caused by the sender's provision of incorrect or insufficient
information in connection with a remittance transfer. First, the 2013
Final Rule creates a new exception to the definition of error for
situations in which a sender provides an incorrect account number or
recipient institution identifier, and the remittance transfer provider
meets certain conditions. Second, the 2013 Final Rule also adjusts the
remedy in certain situations, other than those covered by this new
exception, in which an error occurred because the sender provided
incorrect or insufficient information.
The exception to the definition of error benefits remittance
transfer providers in instances in which senders' mistakes regarding
account numbers or recipient institution identifiers, which would have
resulted in errors under the 2012 Final Rule, will not constitute
errors under the 2013 Final Rule, provided that providers satisfies the
conditions enumerated in Sec. 1005.33(h). There are several cumulative
benefits of these changes to providers. First, to the extent that the
new exception applies, providers will no longer bear the costs of funds
that they cannot recover. The magnitude of the benefit will depend on
the frequency of senders' mistakes regarding account numbers or
recipient institution identifiers that result in funds being deposited
in the wrong account with the provider unable to recover funds, and the
sizes of those lost transfers.\18\ The magnitude will also depend on
the extent to which providers maintain procedures necessary to satisfy
the conditions enumerated in Sec. 1005.33(h).
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\18\ Prior to the February Final Rule, the Credit Union National
Association reported a rate of less than 1% for international wire
``exceptions.'' In more recent outreach, other industry participants
suggested that investigation or exception rates for international
wire transfers tend to be between 1 percent and 3 percent of all
wire transfers.
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Second, remittance transfer providers may derive additional benefit
if the 2013 Final Rule reduces the potential for fraudulent account
number mistakes made by unscrupulous senders, which providers have
cited as a risk under the 2012 Final Rule. By eliminating the
requirement, in some circumstances, that the provider resend or refund
the transfer amount, the 2013 Final Rule reduces the direct costs of
fraud and the indirect costs of fraud prevention and facilitates
providers' continued participation in the remittance transfer market,
without (or with fewer) new limitations on service. Industry commenters
indicated that, at least in part, due to the risk of such fraud under
the 2012 Final Rule, providers might exit the market or limit the size
or type of transfers sent. The cumulative magnitude of these benefits
will depend on the magnitude of the actual and perceived risk of
account number- or recipient institution identifier-related fraud under
the 2012 Final Rule.
The new exception to the definition of error does not impose any
new requirements on remittance transfer providers and therefore will
not directly impose costs on providers. But, to ensure that they can
satisfy the conditions enumerated in Sec. 1005.33(h) and thus trigger
the new exception, providers may choose to bear some costs. For
instance, providers may change their customer contracts or other
communications to provide to senders the notice contemplated by Sec.
1005.33(h)(3). However, the Bureau expects that the cost of doing so
will be modest, particularly because the 2013 Final Rule does not
mandate any particular notice wording, form, or format (apart from
being clear and conspicuous and meeting certain foreign language
requirements), and the Bureau expects that many providers already have
included any such notice in their existing communications or the
required prepayment disclosures. While the notice required by Sec.
1005.33(h)(3) must generally be in writing, the Bureau believes that
providers typically provide this notice in writing today. Relatedly,
providers may change their existing procedures to implement the
verification procedures contemplated by Sec. 1005.33(h)(2). Again,
however, insofar as most providers are already implementing
verification methods like those contemplated by the 2013 Final Rule,
most providers will bear minimal cost in complying with this
requirement.
The Bureau expects that remittance transfer providers will
generally not experience any other costs if they choose to satisfy the
remainder of the conditions in Sec. 1005.33(h), because their existing
practices generally will already satisfy those conditions. In
particular, based on outreach, the Bureau believes that keeping records
or other documents that can satisfy the conditions described in Sec.
1005.33(h) will generally match providers' usual and customary
practices to serve their customers, to manage their risk, and to
satisfy the requirements under the 2012 Final Rule to retain records of
the findings of investigations of alleged errors. See Sec.
1005.33(g)(2).
The extent to which remittance transfer providers will choose to
bear any costs related to Sec. 1005.33(h) and the magnitude of such
costs will depend on providers' existing business practices, their
expectations about the frequency
[[Page 30698]]
and size of transfers that are deposited into the wrong accounts and
not recovered because of account number or recipient institution
identifier mistakes by senders, their expectations about the risk of
fraud, as well as the extent to which providers have already begun
adapting their practices to the 2012 Final Rule. The Bureau expects
that providers will only develop their practices to comply with Sec.
1005.33(h) if doing so will benefit the providers by reducing the costs
of losses due to account number and recipient institution identifier
mistakes by senders or fraud by more than the costs of implementing
these practices. The Bureau believes that this could be the case for
most providers that make transfers to accounts covered by the
exception, particularly because the practices described in Sec.
1005.33(h) closely match existing practice, and for those providers for
whom it does not match existing practice, the practices that providers
would have otherwise developed to comply with the 2012 Final Rule.
The changes regarding remedies for certain errors that occurred
because the sender provided incorrect or insufficient information
(other than those errors covered by the exception in Sec.
1005.33(a)(1)(iv)(D)) will also benefit remittance transfer providers.
In instances in which they are applicable, as discussed above, the
changes will allow a provider to refund the transfer amount to the
sender without having to meet the timing and other requirements of the
2012 Final Rule. In addition, insofar as the 2013 Final Rule permits
providers, for errors that occurred because the sender provided
incorrect or insufficient information, to deduct from the amount
refunded any fees or taxes actually deducted from the transfer amount
as part of the first unsuccessful transfer attempt, providers will no
longer have to bear the cost of these fees and taxes, which previously
providers could not pass on to senders. The changes regarding these
remedies could impose a cost on remittance transfer providers to revise
their procedures. Providers may need to arrange to send refunds when
previously they were going to resend funds. Providers may also have to
bear costs from the need to adjust their default remedies, procedures
for requesting senders' preferred remedies, and error resolution
reports, but the Bureau believes these costs should be minimal.
b. Benefits and Costs to Consumers
The new exception to the definition of error will allow senders to
avoid increased prices, compared to the 2012 Final Rule, to the extent
that remittance transfer providers pass along any cost savings in the
form of lower prices. The new exception will also allow senders to
avoid disruptions in available remittance transfer services, to the
extent it would enable more providers to stay in the market or preserve
the breadth of their current offerings, thus preserving competition.
Under certain conditions, a sender who provides an incorrect
account or recipient institution identifier resulting in funds being
delivered to the wrong account will bear the costs of those mis-
deposited funds. However, as discussed above, the Bureau expects that
the incidence of such losses will be rare; furthermore, the risk of
incurring such costs may be mitigated, because senders will have
stronger incentives to ensure the accuracy of account number and
recipient institution identifier information to the extent possible. In
addition, with respect to recipient institution identifiers, the
exception is limited to situations in which the provider could not
reasonably be expected to verify that the recipient institution
identifier matches the institution's name or location or in which the
verification does not prevent an error from occurring.
The Bureau expects that the changes regarding remedies for errors
that occur because a sender provided incorrect or insufficient
information will have very small impacts on senders. As described
above, the Bureau expects that the circumstances in which the changes
apply will arise infrequently. However, the changes impose a modest
cost on senders for two reasons. First, for those senders that want to
resend funds, they will be unable ask the provider to do so until the
provider's investigation is complete (and the provider is not obligated
to resend the funds at all). Second, insofar as the 2013 Final Rule
permits providers to deduct from the amount refunded any fees or taxes
actually deducted from the transfer amount by a person other than the
provider as part of the first unsuccessful remittance transfer, this
provision will impose a cost for senders in that they will now have to
bear the cost of these fees and taxes that were to be absorbed by the
provider under the 2012 Final Rule.
3. Effective Date
The extension of the 2012 Final Rule's effective date generally
benefits remittance transfer providers by delaying the start of any
ongoing compliance costs. The additional time may also enable providers
(and their vendors) to build solutions that cost less than those that
might otherwise have been possible. Senders also benefit to the extent
that the changes eliminate any disruptions in the provision of
remittance transfer services. But the delay also imposes costs on
senders by delaying the time when they will receive the benefits of the
2012 Final Rule.
C. Access to Consumer Financial Products and Services
As discussed above, the Bureau expects that the 2013 Final Rule
will not decrease consumers' (senders') access to consumer financial
products and services relative to the 2012 Final Rule and may
significantly preserve access by refining certain provisions of the
rule that were likely to drive some remittance transfer providers to
suspend or curtain their remittance services. By avoiding some of the
costs that providers might otherwise have had to bear in order to
provide disclosures and resolve errors under the 2012 Final Rule, the
2013 Final Rule may lead providers to reduce their prices and may
reduce the likelihood that providers will exit the remittance market,
compared to what might have occurred under the 2012 Final Rule. By
facilitating providers' participation in the market, the 2013 Final
Rule may give senders a wider set of options for sending transfers, as
well as preserve competition within this market.
D. Impact on Depository Institutions and Credit Unions With $10 Billion
or Less in Total Assets
Given the lack of data on the characteristics of remittance
transfers, the ability of the Bureau to distinguish the impact of the
2013 Final Rule on depository institutions and credit unions with $10
billion or less in total assets (as described in section 1026 of the
Dodd-Frank Act) from the impact on depository institutions and credit
unions in general is quite limited. Overall, the impact of the 2013
Final Rule on depository institutions and credit unions will depend on
a number of factors, including whether they are remittance transfer
providers, the importance of remittance transfers for the institutions,
how many institutions or countries they send to, the cost of complying
with the 2012 Final Rule, and the progress made toward compliance with
the 2012 Final Rule.
However, information that the Bureau obtained prior to finalizing
the August Final Rule suggests that among depository institutions and
credit unions that provide any remittance transfers, an institution's
asset size and
[[Page 30699]]
the number of remittance transfers sent by the institution are
positively, though imperfectly, related. There are several inferences
that can be drawn from this relationship. First, the Bureau expects
that among depository institutions and credit unions with $10 billion
or less in total assets that provide any remittance transfers, compared
to larger such institutions, a greater share qualify for the safe
harbor related to the definition of ``remittance transfer provider''
and therefore are entirely unaffected by the 2013 Final Rule because
they are not subject to the requirements of the 2012 Final Rule. See
Sec. 1005.30(f)(2). Second, the Bureau believes that depository
institutions and credit unions with $10 billion or less in total assets
that are covered by the 2012 Final Rule will experience, on a per-
institution basis, less of the variable benefits and costs described
above because they generally perform fewer remittance transfers than
larger institutions. However, to the extent that the 2013 Final Rule
will reduce any fixed costs of compliance, such as the costs of
gathering information on taxes and fees if these institutions were to
attempt to do that themselves, these institutions may experience more
of the benefits described above, on a per-transfer basis because that
is likely how they pay the third party for the compliance services.
Additionally, the Bureau believes that the magnitude of the 2013
Final Rule's impact on smaller depository institutions and credit
unions will be affected by these institutions' likely tendency to rely
on correspondents or other service providers to obtain recipient
institution fee and foreign tax information, as well as provide
standard disclosure forms. In some cases, this reliance will mitigate
the impact on these providers of 2013 Final Rule's provisions regarding
such information because those third parties will likely spread the
cost of any required work (or cost savings) across its customer
institutions.
E. Impact of the 2013 Final Rule on Consumers in Rural Areas
Senders in rural areas may experience different impacts from the
2013 Final Rule than other senders. The Bureau does not have data with
which to analyze these impacts in detail. However, to the extent that
the 2013 Final Rule leads to more remittance transfer providers to
continue to provide remittance transfers, the 2013 Final Rule may
disproportionately benefit senders living in rural areas. Senders in
rural areas may have fewer options for sending remittance transfers,
and therefore may benefit more than other senders from changes that
keep more providers in the market.
VII. Regulatory Flexibility Act
A. Overview
The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct an initial regulatory flexibility analysis (IRFA) and a
final regulatory flexibility analysis (FRFA) of any rule subject to
notice-and-comment rulemaking requirements, unless the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. The Bureau also is subject to
certain additional procedures under the RFA involving the convening of
a panel to consult with small business representatives prior to
proposing a rule for which an IRFA is required. 5 U.S.C. 609.
The Bureau is certifying the 2013 Final Rule. Therefore, a FRFA is
not required for this rule because it will not have a significant
economic impact on a substantial number of small entities.
B. Affected Small Entities
The analysis below evaluates the potential economic impact of the
2013 Final Rule on small entities as defined by the RFA.\19\ The 2013
Final Rule applies to entities that satisfy the definition of
``remittance transfer provider'': any person that provides remittance
transfers for a consumer in the normal course of its business,
regardless of whether the consumer holds an account with such person.
See Sec. 1005.30(f).\20\ Potentially affected small entities include
insured depository institutions and credit unions that have $175
million or less in assets and that provide remittance transfers in the
normal course of their business, as well as non-depository institutions
that have average annual receipts that do not exceed $7 million and
that provide remittance transfers in the normal course of their
business.\21\ These affected small non-depository entities may include
state-licensed money transmitters, broker-dealers, and other money
transmission companies.\22\
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\19\ For purposes of assessing the impacts of the 2013 Final
Rule on small entities, ``small entities'' is defined in the RFA to
include small businesses, small not-for-profit organizations, and
small government jurisdictions. 5 U.S.C. 601(6). A ``small
business'' is determined by application of Small Business
Administration regulations and reference to the North American
Industry Classification System (``NAICS'') classifications and size
standards. 5 U.S.C. 601(3). A ``small organization'' is any ``not-
for-profit enterprise which is independently owned and operated and
is not dominant in its field.'' 5 U.S.C. 601(4). A ``small
governmental jurisdiction'' is the government of a city, county,
town, township, village, school district, or special district with a
population of less than 50,000. 5 U.S.C. 601(5).
\20\ The definition of ``remittance transfer provider'' includes
a safe harbor that means that if a person provided 100 or fewer
remittance transfers in the previous calendar year and provides 100
or fewer such transfers in the current calendar year, it is deemed
not to be providing remittance transfers for a consumer in the
normal course of its business, and is thus not a remittance transfer
provider. See Sec. 1005.30(f)(2).
\21\ Small Bus. Admin., Table of Small Business Size Standards
Matched to North American Industry Classification System Codes,
http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf. Effective October 1, 2012.
\22\ Many state-licensed money transmitters act through agents.
However, the 2012 Final Rule applies to remittance transfer
providers and explains, in official commentary, that a person is not
deemed to be acting as a provider when it performs activities as an
agent on behalf of a provider. Comment 30(f)-1. Furthermore, for the
purpose of this analysis, the Bureau assumes that providers, and not
their agents, will assume any costs associated with implementing the
modifications.
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This analysis examines the benefits, costs, and impacts of the key
provisions of the 2013 Final Rule relative to the baseline provided by
the 2012 Final Rule. The Bureau has discretion in future rulemakings to
choose the most appropriate baseline for that particular rulemaking.
C. Non-Covered Third-Party Fees and Taxes Collected on the Remittance
Transfer by a Person Other Than the Provider
The 2013 Final Rule eliminates the requirement that remittance
transfer providers disclose non-covered third-party fees imposed and
taxes collected on the remittance transfer by a person other than the
provider. Under the 2013 Final Rule, providers are required to provide
disclaimers, where applicable, noting that additional fees and taxes
may apply and reduce the amount disclosed pursuant to Sec.
1005.31(b)(1)(vii). The Bureau believes that the cost of adding these
disclaimers will be small. Affected providers will also have to
reprogram systems to conform to the new requirements for calculating
``Other Fees'' (pursuant to Sec. 1005.31(b)(1)(vi)) and the amount to
be disclosed (pursuant to Sec. 1005.31(b)(1)(vii)). All providers will
have to remove references to ``Other Taxes'' from their forms, and make
any necessary systems changes, insofar as the Bureau has eliminated
this disclosure. The modifications to existing forms and systems
changes may be minimal for many providers whose processes allow for
them to adjust forms and systems more easily, and the Bureau expects
that some providers may not have finished any systems modifications
necessary to comply with the 2012 Final Rule, and thus may be
[[Page 30700]]
able to incorporate any changes into previously planned work.
Furthermore, to the extent any provider elects to provide optional
disclosures of non-covered third-party fees or taxes collected on the
remittance transfer by a person other than the provider, providers may
bear some costs in determining these amounts and programming
disclosures to allow for the dynamic disclosure of this information.
Also, the Bureau expects that many small depository institutions and
credit unions are relying on correspondent institutions or other
service providers to provide standard disclosure forms; as a result,
related costs will often be spread across multiple institutions.
The 2013 Final Rule's elimination of the requirement to disclose
non-covered third-party fees and taxes collected on the remittance
transfer by a person other than the provider may provide meaningful
benefits to remittance transfer providers. The benefits include a
reduced cost to prepare required disclosures. Furthermore, industry has
suggested that due in part to the 2012 Final Rule's third party fee and
foreign tax disclosure requirements, some providers might have
eliminated or reduced their remittance transfer offerings, such as by
not sending to countries where tax or fee information is particularly
difficult to obtain, due to the lack of ongoing reliable and complete
information sources. By reducing the amount of information needed to
provide disclosures, the 2013 Final Rule will encourage more providers
(including small entities) to retain their current services (and thus
any associated profit, revenue, and customers).
The Bureau expects that, amongst small entities, the revised
provisions regarding recipient institution fees will have the largest
effect on remittance transfer providers that are depository
institutions, credit unions, and broker-dealers that are remittance
transfer providers. These types of providers tend to send most or all
of their remittances transfers to foreign accounts, for which recipient
institution fees may be charged. Furthermore, due to the mechanisms
these providers use to send money, they generally have the ability to
send transfers to virtually any destination country for which tax
research might be required. By contrast, money transmitters that are
providers are more likely to send remittance transfers to be received
by agents, for which non-covered third-party fees will not be relevant.
Furthermore, with some exception, most money transmitters, and
particularly small ones, generally send transfers to a limited number
of countries and institutions, so the benefits, in avoided costs, of
eliminating the requirement that taxes be disclosed may not be as large
for money transmitters as for other providers.
D. Incorrect or Insufficient Information
The 2013 Final Rule includes two sets of changes related to errors
caused by the sender's provision of incorrect or insufficient
information. First, the 2013 Final Rule creates a new exception to the
definition of the error for situations in which a sender provides an
incorrect account number or recipient institution identifier, and the
remittance transfer provider meets certain conditions. Second, the 2013
Final Rule also adjusts the remedy in certain situations in which an
error occurred because the sender provided incorrect or insufficient
information (other than those covered by the new exception).
The Bureau expects that a number of small remittance transfer
providers will be unaffected by the changes regarding the definition of
error as they only apply to remittance transfers that are received in
accounts. Though some money transmitters send money to be deposited
into bank accounts, the Bureau's outreach suggests that, unlike most
small depository institutions, credit unions, and broker-dealers, many
small money transmitters only send money to be received in cash, and
some of those that do send money to be deposited into accounts may be
doing so through agent relationships.
With regard to small remittance transfer providers that do send
money to accounts at recipient institutions that are not agents, the
new exception to the definition of error does not impose any mandatory
costs. Under the 2013 Final Rule, certain account number and recipient
institution identifier mistakes will no longer generate ``errors'' if
the provider satisfied certain conditions enumerated in Sec.
1005.33(h). Instead of satisfying these conditions, providers can
continue under the 2012 Final Rule's definition of error.
If remittance transfer providers choose to satisfy the conditions
enumerated in Sec. 1005.33(h), they may incur some costs for
implementing certain verification procedures pursuant to Sec.
1005.33(h)(2) and changing the terms of their consumer contracts or
other communications to provide senders the notice contemplated by
Sec. 1005.33(h)(3). However, the Bureau expects that the cost of
providing this notice will be modest, particularly because the 2013
Final Rule does not mandate any particular notice, form, or format
(apart from requiring that the notice be clear and conspicuous and
meeting certain foreign language requirements), and the Bureau expects
that many providers already have included any such notice into existing
communications or the required prepayment disclosures. While the notice
required by Sec. 1005.33(h)(3) must generally be in writing, the
Bureau also believes that providers already provide this notice in
writing.
The Bureau believes that satisfying the remainder of the conditions
in Sec. 1005.33(h) will not impose new costs on remittance transfer
providers because their existing practices generally will already
satisfy those conditions. In particular, based on outreach, the Bureau
believes that that keeping records or other documents that can satisfy
the conditions described in Sec. 1005.33(h) will generally match
providers' usual and customary practices to serve their customers, to
manage their risk, and to satisfy the requirements under the 2012 Final
Rule to retain records of the findings of investigations of alleged
errors. See Sec. 1005.33(g)(2).
In any case, the Bureau expects that remittance transfer providers
will only develop their practices to comply with Sec. 1005.33(h), and
thus take advantage of the new exception to the definition of error, if
doing so will reduce the costs of losses due to account number and
recipient institution identifier mistakes by senders or fraud by more
than the costs of implementing these practices. The Bureau believes
that for most providers, including small ones, the changes to the
definition of error likely will provide greater benefits than
implementation costs. If the new exception applies, providers will no
longer bear the cost of funds that they could not recover if they are
able to satisfy the conditions of Sec. 1005.33(h). Providers will
further benefit if the 2013 Final Rule reduces the potential for
fraudulent account number and recipient institution identifier mistakes
made by unscrupulous senders, which providers have cited as a risk
under the 2012 Final Rule. By reducing the remedies available in such
cases, the 2013 Final Rule will reduce the direct costs of fraud and
the indirect costs of fraud prevention and facilitate providers'
continued participation in the remittance transfer market, without (or
with fewer) new limitations on service. Industry commenters indicated
that, at least in part, due to the risk of such fraud under the 2012
Final Rule, providers might exit the market or limit the size or type
of transfers sent.
The change regarding remedies for certain errors that occurred
because the
[[Page 30701]]
sender provided incorrect or insufficient information will also benefit
small remittance transfer providers, though the Bureau expects that the
benefits would be small because the circumstances covered by the change
will arise very infrequently.\23\ In instances in which they are
applicable, the changes will require a provider to refund the transfer
amount unless the sender requested a resend after being informed of the
results of the error investigation and the provider agreed to such a
resend. Any request to resend the funds will be treated as a new
remittance transfer. Similarly, the changes will benefit providers
insofar as they may deduct from the amount refunded, or applied towards
a new transfer, any fees or taxes actually deducted from the transfer
amount by a person other than the provider and thus they will no longer
have to bear the cost of these fees and taxes, which previously
providers could not pass on to senders. The changes regarding certain
instances in which remittance transfer providers resend transactions to
correct errors could impose a cost on providers to revise their
procedures. Providers may also have to bear costs from the need to
adjust their default remedies, procedures for requesting senders'
preferred remedies, and error resolution reports, but the Bureau
believes these costs will be modest.
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\23\ The Bureau expects that remittance transfer providers will
generally experience low error rates. Prior to the February Final
Rule, the Credit Union National Association reported a rate of less
than 1% for international wire ``exceptions.'' In more recent
outreach, other industry participants suggested that investigation
or exception rates for international wire transfers tend to be
between 1 percent and 3 percent of all wire transfers.
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E. Effective Date
The 2013 Final Rule will not take effect until October 28, 2013.
This change will generally benefit small remittance transfer providers,
by delaying the start of any ongoing compliance costs. The additional
time might also enable providers (and their vendors) to build solutions
that cost less than those that might otherwise have been possible.
F. Cost of Credit for Small Entities
The 2013 Final Rule does not apply to credit transactions or to
commercial remittances. Therefore, the Bureau does not expect this rule
to increase the cost of credit for small businesses. With a few
exceptions, the 2013 Final Rule generally does not change or lowers the
cost of compliance for depositories and credit unions, many of which
offer small business credit. Any effect of the 2013 Final Rule on small
business credit, however, would be highly attenuated. The 2013 Final
Rule also generally does not change or lowers the cost of compliance
for money transmitters. Money transmitters typically do not extend
credit to any entity, including small businesses.
G. Certification
Accordingly, the undersigned hereby certifies that this rule will
not have a significant economic impact on a substantial number of small
entities.
VIII. Paperwork Reduction Act
Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et
seq.) (PRA) requires that the Bureau may not conduct or sponsor and,
notwithstanding any other provision of law, a respondent is not
required to respond to an information collection unless the collection
displays a valid OMB control number. Regulation E, 12 CFR part 1005,
contains collections of information that have previously approved by
OMB. The Bureau's OMB control number for Regulation E is 3170-0014.
Certain provisions of the 2013 Final Rule contain revisions to the
information collection requirements as currently approved under OMB No.
3170-0014. The revised information collection requirements as contained
in the 2013 Final Rule and identified as such have been submitted to
OMB for review under section 3507(d) of the PRA and are not effective
until OMB approval is obtained. The unapproved revised information
collection requirements are contained in Sec. Sec.
1005.31(b)(1)(viii), 1005.33(h), and 1005.33(g) of this final rule.
Documentation prepared in support of this submission to OMB is
available at www.reginfo.gov. This documentation contains among other
things a description of likely respondents to these information
collection requirements and detailed burden analysis. The Bureau will
publish a separate notice in the Federal Register announcing OMB's
action on this submission.
A. Overview
The title of these information collections is Electronic Fund
Transfer Act (Regulation E) 12 CFR part 1005. The frequency of
collection is on occasion. As described below, the 2013 Final Rule
amends portions of the collections of information currently in
Regulation E. Some portions of these information collections are
required to provide benefits for consumers and are mandatory. However,
some portions are voluntary because certain information collections
under the 2013 Final Rule would simply give remittance transfer
providers optional methods of compliance. Because the Bureau does not
collect any information under the 2013 Final Rule, no issue of
confidentiality arises. The likely respondents are providers, including
small businesses. Respondents are required to retain records for 24
months, but this regulation does not specify the types of records that
must be maintained. See Sec. Sec. 1005.13(c) and 1005.33(g)(2).
Under the 2013 Final Rule, the Bureau generally accounts for the
paperwork burden associated with Regulation E for the following
respondents pursuant to its administrative enforcement authority:
Insured depository institutions and insured credit unions with more
than $10 billion in total assets, and their depository institution and
credit union affiliates (together, ``the Bureau depository
respondents''), and certain non-depository remittance transfer
providers, such as certain state-licensed money transmitters and
broker-dealers (``the Bureau non-depository respondents'').
Using the Bureau's burden estimation methodology, the Bureau
estimates that the total one-time burden for the estimated 5,915
respondents potentially affected by the 2013 Final Rule would be
approximately 385,000 hours.\24\ The Bureau estimates that the ongoing
burden to comply with Regulation E would be reduced by approximately
276,000 hours per year by the 2013 Final Rule. The aggregate estimates
of total burdens presented in this analysis are based on estimated
costs that are averages across respondents. The Bureau expects that the
amount of time required to implement the changes for a given remittance
transfer provider may
[[Page 30702]]
vary based on the size, complexity, and practices of the respondent.
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\24\ The decrease in respondents relative to the PRA analysis
for the August Final Rule reflects a change in the number of insured
depository institutions and credit unions supervised by the Bureau,
a focus on the Bureau's estimate of the number of insured depository
institutions and credit unions that will qualify as remittance
transfer providers, and a revision by the Bureau of the estimated
number of state-licensed money transmitters that offer remittance
services. The revised estimate of the number of state-licensed money
transmitters that offer remittance services is based on subsequent
analysis of publicly available state registration lists and other
information about the business practices of licensed entities. The
decrease in burden relative to what was previously reported for the
2012 Final Rule from this revision is not included in the change in
burden reported here. However, the revised entity counts are used
for calculating other changes in burden that will arise from the
2013 Final Rule. The total estimated number of respondents also
includes an estimated 162 broker-dealers that may be remittance
transfer providers.
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For the 153 Bureau depository respondents, the Bureau estimates for
the purpose of this PRA analysis that the 2013 Final Rule will increase
one-time burden by approximately 9,900 hours and reduce ongoing burden
by approximately 7,300 hours per year. For the estimated 300 Bureau
non-depository respondents, the Bureau estimates that the 2013 Final
Rule will increase one-time burden by approximately 20,000 hours and
reduce ongoing burden by 6,300 hours per year.\25\ The Bureau and the
Federal Trade Commission (FTC) generally both have enforcement
authority over non-depository institutions under Regulation E,
including state-licensed money transmitters. The Bureau has allocated
to itself half of its estimated burden to Bureau non-depository
respondents, (or approximately 10,000 hours in one-time burden and a
reduction in ongoing burden of 3,150 hours) which is based on an
estimate of the number of state-licensed money transmitters that are
remittance transfer providers. The FTC is responsible for estimating
and reporting to OMB its total paperwork burden for the institutions
for which it has administrative enforcement authority. It may, but is
not required to, use the Bureau's burden estimation methodology.
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\25\ The Bureau's estimate of non-depository respondents is
based on an estimate of the number of state-licensed money
transmitters that are remittance transfer providers. Furthermore,
the Bureau notes that while its analysis in the February Final Rule
attributed burden to the agents of state-licensed money
transmitters, in this case, the Bureau expects that the changes in
burden discussed in this PRA analysis will generally be borne only
by money transmitters themselves, not their agents. In particular,
the Bureau believes that money transmitters will generally gather
and prepare recipient institution fee and foreign tax information
centrally, rather than requiring their agents to do so. Similarly,
the Bureau expects that money transmitters will generally
investigate and respond to errors centrally, rather than asking
their agents to take responsibility for such functions. Comment
30(f)-1 states that a person is not deemed to be acting as a
remittance transfer provider when it performs activities as an agent
on behalf of a remittance transfer provider.
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B. Analysis of Potential Burden
1. Recipient Institution Fees and Foreign Taxes
As described in parts V and VI above, in lieu of disclosing certain
recipient institution fees and foreign taxes, remittance transfer
providers will be required to bear some cost of modifying their systems
to include the disclaimer required by Sec. 1005.31(b)(1)(viii).
Effected providers will also have to reprogram systems to conform to
the new requirements for calculating ``Other Fees'' (pursuant to Sec.
1005.31(b)(1)(vi)) and the amount to be disclosed (pursuant to Sec.
1005.31(b)(1)(vii)). In addition, certain providers may choose to
program their systems to include the option to disclose non-covered
third-party fees and taxes collected by a person other than the
provider pursuant to Sec. 1005.31(b)(1)(viii). All providers will have
to remove references to ``Other Taxes'' from their forms. The Bureau
also expects that many depository institutions and credit unions are
relying on correspondent institutions or other service providers to
provide recipient institution fee and foreign tax information, as well
as standard disclosure forms; as a result, any development cost
associated with the 2013 Final Rule will be spread across multiple
institutions.
Furthermore, the Bureau expects that some remittance transfer
providers may not have finished any systems modifications necessary to
comply with the 2012 Final Rule, and thus may be able to incorporate
any changes into previously accounted-for work. In the interest of
providing a conservative estimate, however, the Bureau assumes that all
providers will need to modify their systems to calculate disclosures
and to add the new disclaimers. The Bureau estimates that making
revisions to systems to adjust to the new disclosure requirements will
take, on average, 40 hours per provider. Because the forms to be
modified are existing forms, the Bureau estimates that adding the
disclaimer will require eight hours per form per provider.
On the other hand, the 2013 Final Rule will eliminate remittance
transfer providers' ongoing cost of obtaining and updating information
on foreign taxes and, for some providers, eliminate the ongoing cost of
obtaining and updating information on recipient institution fees. By
eliminating these ongoing costs, the Bureau estimates that insured
depository institutions and credit unions will save, on average, 48
hours per year and non-depository institutions will save, on average,
21 hours per year. The Bureau cannot estimate the number of providers
that will choose to provide optional disclosures of foreign taxes and
non-covered third-party fees. The Bureau believes even for such
providers there will be significant time savings as providers may
choose to focus on heavily trafficked corridors where information may
be more easily obtainable.
2. Incorrect or Insufficient Information
As described in parts V and VI above, the Bureau expects that
remittance transfer providers that send money to accounts, in order to
benefit from the changes to the definition of the term error, may
choose to provide senders with notice that if they provide incorrect
account numbers, they could lose the transfer amount, and providers may
also choose to maintain sufficient records to satisfy, wherever
possible, the conditions enumerated in Sec. 1005.33(h) (though no such
recordkeeping is required). These enumerated conditions include: Being
able to demonstrate facts regarding senders' responsibility for any
account number or recipient institution identifier mistake;
verification of recipient institution identifiers; the above-referenced
notice; the results of an incorrect account number or recipient
institution identifier; and the provider's effort to recover funds. In
addition, Sec. 1005.33(h) may encourage providers to implement
security procedures for verifying account and recipient institution
identifiers that they did not previously utilize.
Because this will likely involve modifications to existing
communications, the Bureau estimates that providing senders with the
notice described above will require a one-time burden of eight hours
per remittance transfer provider and will not generate any ongoing
burden. With regard to satisfying compliance with the conditions
enumerated in Sec. 1005.33(h), the Bureau believes that any related
record retention will be a usual and customary practice by providers
under the 2012 Final Rule, and that therefore there will be no
additional burden associated with these aspects of the 2013 Final Rule.
Many commenters indicated that their existing disclosures to consumers
already contain a notice of the sort contemplated by this provision.
Under the 2013 Final Rule, to correct an error caused by incorrect
or insufficient information provided by a sender, a remittance transfer
provider must refund a transfer amount to the sender, unless the sender
specifically requests that the provider resend the funds as a new
remittance transfer and the provider agrees to do so. When a sender and
provider agree to send a new transfer, the procedures for sending that
new transfer should not result in any increased burden.\26\
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\26\ In the December Proposal, the Bureau proposed that
providers be permitted to use simplified disclosures that would have
contained one additional piece of information that was not otherwise
required on existing disclosures. Insofar as the Bureau is not
finalizing this part of the December Proposal, the burden allotted
to this disclosure is not included in this analysis.
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The Bureau also estimates that to reflect the changes regarding
certain errors, remittance transfer providers will
[[Page 30703]]
spend, on average, one hour, to update written policies and procedures
designed to ensure compliance with respect to the error resolution
requirements applicable to providers, pursuant to Sec. 1005.33(g).
The Bureau expects that the revised remedy for certain errors will
also reduce remittance transfer providers' ongoing burden, by
eliminating the need to provide both a pre-payment disclosure and a
receipt under covered circumstances. However, because the Bureau
expects that the covered circumstances will arise very infrequently,
the Bureau expects that this burden reduction would be minimal.
In summary, the 2013 Final Rule will result in an increase in one-
time burden for CFPB respondents of approximately 20,000 hours and a
decrease in ongoing burden for CFPB respondents of 10,000 hours per
year. The current total annual burden for OMB No. 3170-0014 is
4,005,122 hours. As a result of the 2013 Final Rule, the new burden for
OMB No. 3170-0014 will be 4,014,323 hours.
List of Subjects in 12 CFR Part 1005
Banking, Banks, Consumer protection, Credit unions, Electronic fund
transfers, National banks, Remittance transfers, Reporting and
recordkeeping requirements, Savings associations.
Authority and Issuance
For the reasons stated in the preamble, the Bureau further amends
12 CFR part 1005, as amended February 7, 2012 (77 FR 6194) and August
20, 2012 (77 FR 50244) and delayed January 29, 2013 (78 FR 6025), as
set forth below:
PART 1005--ELECTRONIC FUND TRANSFERS (REGULATION E)
0
1. The authority citation for part 1005 continues to read as follows:
Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1693b.
Subpart B is also issued under 12 U.S.C. 5601.
Subpart B--Requirements for Remittance Transfers
0
2. Section 1005.30 is amended by revising the introductory text and
adding paragraph (h) to read as follows:
Sec. 1005.30 Remittance transfer definitions.
Except as otherwise provided, for purposes of this subpart, the
following definitions apply:
* * * * *
(h) Third-party fees. (1) ``Covered third-party fees.'' The term
``covered third-party fees'' means any fees imposed on the remittance
transfer by a person other than the remittance transfer provider except
for fees described in paragraph (h)(2) of this section.
(2) ``Non-covered third-party fees.'' The term ``non-covered third-
party fees'' means any fees imposed by the designated recipient's
institution for receiving a remittance transfer into an account except
if the institution acts as an agent of the remittance transfer
provider.
0
3. Section 1005.31 is amended by revising paragraphs (a)(1),
(b)(1)(ii), (b)(1)(v), (b)(1)(vi), (b)(1)(vii), (b)(2)(i), (c)(1),
(c)(2), (c)(3), (f), and (g)(1), and adding paragraph (b)(1)(viii) to
read as follows:
Sec. 1005.31 Disclosures.
(a) General form of disclosures--(1) Clear and conspicuous.
Disclosures required by this subpart or permitted by paragraph
(b)(1)(viii) of this section or Sec. 1005.33(h)(3) must be clear and
conspicuous. Disclosures required by this subpart or permitted by
paragraph (b)(1)(viii) of this section or Sec. 1005.33(h)(3) may
contain commonly accepted or readily understandable abbreviations or
symbols.
* * * * *
(b) * * *
(1) * * *
(ii) Any fees imposed and any taxes collected on the remittance
transfer by the provider, in the currency in which the remittance
transfer is funded, using the terms ``Transfer Fees'' for fees and
``Transfer Taxes'' for taxes, or substantially similar terms;
* * * * *
(v) The amount in paragraph (b)(1)(i) of this section, in the
currency in which the funds will be received by the designated
recipient, but only if covered third-party fees are imposed under
paragraph (b)(1)(vi) of this section, using the term ``Transfer
Amount'' or a substantially similar term. The exchange rate used to
calculate this amount is the exchange rate in paragraph (b)(1)(iv) of
this section, including an estimated exchange rate to the extent
permitted by Sec. 1005.32, prior to any rounding of the exchange rate;
(vi) Any covered third-party fees, in the currency in which the
funds will be received by the designated recipient, using the term
``Other Fees,'' or a substantially similar term. The exchange rate used
to calculate any covered third-party fees is the exchange rate in
paragraph (b)(1)(iv) of this section, including an estimated exchange
rate to the extent permitted by Sec. 1005.32, prior to any rounding of
the exchange rate;
(vii) The amount that will be received by the designated recipient,
in the currency in which the funds will be received, using the term
``Total to Recipient'' or a substantially similar term except that this
amount shall not include non-covered third party fees or taxes
collected on the remittance transfer by a person other than the
provider regardless of whether such fees or taxes are disclosed
pursuant to paragraph (b)(1)(viii) of this section. The exchange rate
used to calculate this amount is the exchange rate in paragraph
(b)(1)(iv) of this section, including an estimated exchange rate to the
extent permitted by Sec. 1005.32, prior to any rounding of the
exchange rate.
(viii) A statement indicating that non-covered third-party fees or
taxes collected on the remittance transfer by a person other than the
provider may apply to the remittance transfer and result in the
designated recipient receiving less than the amount disclosed pursuant
to paragraph (b)(1)(vii) of this section. A provider may only include
this statement to the extent that such fees or taxes do or may apply to
the transfer, using the language set forth in Model Forms A-30(a)
through (c) of Appendix A to this part, as appropriate, or
substantially similar language. In this statement, a provider also may,
but is not required, to disclose any applicable non-covered third-party
fees or taxes collected by a person other than the provider. Any such
figure must be disclosed in the currency in which the funds will be
received, using the language set forth in Model Forms A-30(b) through
(d) of Appendix A to this part, as appropriate, or substantially
similar language. The exchange rate used to calculate any disclosed
non-covered third-party fees or taxes collected on the remittance
transfer by a person other than the provider is the exchange rate in
paragraph (b)(1)(iv) of this section, including an estimated exchange
rate to the extent permitted by Sec. 1005.32, prior to any rounding of
the exchange rate;
(2) * * *
(i) The disclosures described in paragraphs (b)(1)(i) through
(viii) of this section;
* * * * *
(c) Specific format requirements--(1) Grouping. The information
required by paragraphs (b)(1)(i), (ii), and (iii) of this section
generally must be grouped together. The information required by
paragraphs (b)(1)(v), (vi), (vii), and (viii) of this section generally
must be grouped together. Disclosures provided via mobile application
or text message, to the extent permitted by paragraph (a)(5) of this
section, generally need not comply with the grouping requirements
[[Page 30704]]
of this paragraph, however information required or permitted by
paragraph (b)(1)(viii) of this section must be grouped with information
required by paragraph (b)(1)(vii) of this section.
(2) Proximity. The information required by paragraph (b)(1)(iv) of
this section generally must be disclosed in close proximity to the
other information required by paragraph (b)(1) of this section. The
information required by paragraph (b)(2)(iv) of this section generally
must be disclosed in close proximity to the other information required
by paragraph (b)(2) of this section. The information required or
permitted by paragraph (b)(1)(viii) must be in close proximity to the
information required by paragraph (b)(1)(vii) of this section.
Disclosures provided via mobile application or text message, to the
extent permitted by paragraph (a)(5) of this section, generally need
not comply with the proximity requirements of this paragraph, however
information required or permitted by paragraph (b)(1)(viii) of this
section must follow the information required by paragraph (b)(1)(vii)
of this section.
(3) Prominence and size. Written disclosures required by this
subpart or permitted by paragraph (b)(1)(viii) of this section must be
provided on the front of the page on which the disclosure is printed.
Disclosures required by this subpart or permitted by paragraph
(b)(1)(viii) of this section that are provided in writing or
electronically must be in a minimum eight-point font, except for
disclosures provided via mobile application or text message, to the
extent permitted by paragraph (a)(5) of this section. Disclosures
required by paragraph (b) of this section or permitted by paragraph
(b)(1)(viii) of this section that are provided in writing or
electronically must be in equal prominence to each other.
* * * * *
(f) Accurate when payment is made. Except as provided in Sec.
1005.36(b), disclosures required by this section or permitted by
paragraph (b)(1)(viii) of this section must be accurate when a sender
makes payment for the remittance transfer, except to the extent
estimates are permitted by Sec. 1005.32.
(g) Foreign language disclosures--(1) General. Except as provided
in paragraph (g)(2) of this section, disclosures required by this
subpart or permitted by paragraph (b)(1)(viii) of this section or Sec.
1005.33(h)(3) must be made in English and, if applicable, either in:
* * * * *
0
4. Section 1005.32 is amended by revising paragraphs (b)(2)(ii) and
(c)(3), adding paragraph (b)(3), revising paragraph (c)(4) and removing
paragraph (c)(5) to read as follows:
Sec. 1005.32 Estimates.
* * * * *
(b) * * *
(2) * * *
(ii) Covered third-party fees described in Sec. 1005.31(b)(1)(vi)
may be estimated under paragraph (b)(2)(i) of this section only if the
exchange rate is also estimated under paragraph (b)(2)(i) of this
section and the estimated exchange rate affects the amount of such
fees.
* * * * *
(3) Permanent exception for optional disclosure of non-covered
third-party fees and taxes collected by a person other than the
provider. For disclosures described in Sec. Sec. 1005.31(b)(1) through
(3) and 1005.36(a)(1) and (2), estimates may be provided for applicable
non-covered third-party fees and taxes collected on the remittance
transfer by a person other than the provider, which are permitted to be
disclosed under Sec. 1005.31(b)(1)(viii), provided such estimates are
based on reasonable sources of information.
(c) * * *
(3) Covered third-party fees. (i) Imposed as percentage of amount
transferred. In disclosing covered third-party fees, as described under
Sec. 1005.31(b)(1)(vi), that are a percentage of the amount
transferred to the designated recipient, an estimated exchange rate
must be based on the estimated exchange rate provided in accordance
with paragraph (c)(1) of this section, prior to any rounding of the
estimated exchange rate.
(ii) Imposed by the intermediary or final institution. In
disclosing covered third-party fees pursuant to Sec.
1005.31(b)(1)(vi), an estimate must be based on one of the following:
* * * * *
(4) Amount of currency that will be received by the designated
recipient. In disclosing the amount of currency that will be received
by the designated recipient as required under Sec. 1005.31(b)(1)(vii),
an estimate must be based on the information provided in accordance
with paragraphs (c)(1) through (3) of this section, as applicable.
0
5. Section 1005.33 is amended by revising paragraphs (a)(1)(iii),
(a)(1)(iv)(B), (c)(2) introductory text, (c)(2)(ii) introductory text,
(c)(2)(ii)(A)(2) and (c)(2)(ii)(B), redesignating paragraph (c)(2)(iii)
as paragraph (c)(2)(iv), and adding paragraphs (a)(1)(iv)(D),
(c)(2)(iii) and (h) to read as follows:
Sec. 1005.33 Procedures for resolving errors.
(a) * * *
(1) * * *
(iii) The failure to make available to a designated recipient the
amount of currency disclosed pursuant to Sec. 1005.31(b)(1)(vii) and
stated in the disclosure provided to the sender under Sec.
1005.31(b)(2) or (3) for the remittance transfer, unless:
(A) The disclosure stated an estimate of the amount to be received
in accordance with Sec. 1005.32(a), (b)(1) or (b)(2) and the
difference results from application of the actual exchange rate, fees,
and taxes, rather than any estimated amounts; or
(B) The failure resulted from extraordinary circumstances outside
the remittance transfer provider's control that could not have been
reasonably anticipated; or
(C) The difference results from the application of non-covered
third-party fees or taxes collected on the remittance transfer by a
person other than the provider and the provider provided the disclosure
required by Sec. 1005.31(b)(1)(viii).
(iv) * * *
(B) Delays related to the remittance transfer provider's fraud
screening procedures or in accordance with the Bank Secrecy Act, 31
U.S.C. 5311 et seq., Office of Foreign Assets Control requirements, or
similar laws or requirements;
* * * * *
(D) The sender having provided the remittance transfer provider an
incorrect account number or recipient institution identifier for the
designated recipient's account or institution, provided that the
remittance transfer provider meets the conditions set forth in
paragraph (h) of this section;
* * * * *
(c) * * *
(2) Remedies. Except as provided in paragraph (c)(2)(iii) of this
section, if, following an assertion of an error by a sender, the
remittance transfer provider determines an error occurred, the provider
shall, within one business day of, or as soon as reasonably practicable
after, receiving the sender's instructions regarding the appropriate
remedy, correct the error as designated by the sender by:
* * * * *
(ii) Except as provided in paragraph (c)(2)(iii) of this section,
in the case of an error under paragraph (a)(1)(iv) of this section
(A) * * *
(2) Making available to the designated recipient the amount
appropriate to resolve the error. Such amount must be
[[Page 30705]]
made available to the designated recipient without additional cost to
the sender or to the designated recipient; and
(B) Refunding to the sender any fees imposed and, to the extent not
prohibited by law, taxes collected on the remittance transfer;
(iii) In the case of an error under paragraph (a)(1)(iv) of this
section that occurred because the sender provided incorrect or
insufficient information in connection with the remittance transfer,
the remittance transfer provider shall refund to the sender the amount
of funds provided by the sender in connection with the remittance
transfer that was not properly transmitted, or the amount appropriate
to resolve the error, within three business days of providing the
report required by paragraph (c)(1) or (d)(1) of this section except
that the provider may agree to the sender's request, upon receiving the
results of the error investigation, that the funds be applied towards a
new remittance transfer, rather than be refunded, if the provider has
not yet processed a refund. The provider may deduct from the amount
refunded or applied towards a new transfer any fees actually imposed on
or, to the extent not prohibited by law, taxes actually collected on
the remittance transfer as part of the first unsuccessful remittance
transfer attempt.
* * * * *
(h) Incorrect account number or recipient institution identifier
provided by the sender. The exception in paragraph (a)(1)(iv)(D) of
this section applies if:
(1) The remittance transfer provider can demonstrate that the
sender provided an incorrect account number or recipient institution
identifier to the provider in connection with the remittance transfer;
(2) For any instance in which the sender provided the incorrect
recipient institution identifier, prior to or when sending the
transfer, the provider used reasonably available means to verify that
the recipient institution identifier provided by the sender
corresponded to the recipient institution name provided by the sender;
(3) The provider provided notice to the sender before the sender
made payment for the remittance transfer that, in the event the sender
provided an incorrect account number or recipient institution
identifier, the sender could lose the transfer amount. For purposes of
providing this disclosure, Sec. 1005.31(a)(2) applies to this notice
unless the notice is given at the same time as other disclosures
required by this subpart for which information is permitted to be
disclosed orally or via mobile application or text message, in which
case this disclosure may be given in the same medium as those other
disclosures;
(4) The incorrect account number or recipient institution
identifier resulted in the deposit of the remittance transfer into a
customer's account that is not the designated recipient's account; and
(5) The provider promptly used reasonable efforts to recover the
amount that was to be received by the designated recipient.
0
6. Appendix A to part 1005 is amended as follows:
0
a. Title A-30 is removed and reserved and new titles A-30(a) through A-
30(d) are added.
0
b. New Model Forms A-30(a), A-30(b), A-30(c), A-30(d) are added, and
Model Forms A-31 through A-41 are revised.
The additions and revisions read as follows:
Appendix A to Part 1005--Model Disclosures and Forms
* * * * *
A-30(a)--Model Form for Pre-Payment Disclosures for Remittance
Transfers Exchanged into Local Currency including a disclaimer where
non-covered third-party fees and foreign taxes may apply (Sec.
1005.31(b)(1))
A-30(b) --Model Form for Pre-Payment Disclosures for Remittance
Transfers Exchanged into Local Currency including a disclaimer with
estimate for non-covered third-party fees (Sec. 1005.31(b)(1) and
Sec. 1005.32(b)(3))
A-30(c)--Model Form for Pre-Payment Disclosures for Remittance
Transfers Exchanged into Local Currency including a disclaimer with
estimate for foreign taxes (Sec. 1005.31(b)(1) and Sec.
1005.32(b)(3))
A-30(d)--Model Form for Pre-Payment Disclosures for Remittance
Transfers Exchanged into Local Currency, including a disclaimer with
estimates for non-covered third-party fees and foreign taxes (Sec.
1005.31(b)(1) and Sec. 1005.32(b)(3))
* * * * *
A-30(a)--Model Form for Pre-Payment Disclosures for Remittance
Transfers Exchanged into Local Currency (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.242
A-30(b)--Model Form for Pre-Payment Disclosures for Remittance
Transfers Exchanged into Local Currency (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.243
[[Page 30706]]
A-30(c)--Model Form for Pre-Payment Disclosures for Remittance
Transfers Exchanged into Local Currency (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.244
A-30(d)--Model Form for Pre-Payment Disclosures for Remittance
Transfers Exchanged into Local Currency (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.245
A-31--Model Form for Receipts for Remittance Transfers Exchanged
into Local Currency (Sec. 1005.31(b)(2))
[GRAPHIC] [TIFF OMITTED] TR22MY13.246
A-32--Model Form for Combined Disclosures for Remittance Transfers
Exchanged into Local Currency (Sec. 1005.31(b)(3))
[GRAPHIC] [TIFF OMITTED] TR22MY13.247
[[Page 30707]]
[GRAPHIC] [TIFF OMITTED] TR22MY13.248
A-33--Model Form for Pre-Payment Disclosures for Dollar-to-Dollar
Remittance Transfers (Sec. 1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.249
[[Page 30708]]
A-34--Model Form for Receipts for Dollar-to-Dollar Remittance
Transfers (Sec. 1005.31(b)(2))
[GRAPHIC] [TIFF OMITTED] TR22MY13.250
[[Page 30709]]
A-35--Model Form for Combined Disclosures for Dollar-to-Dollar
Remittance Transfers (Sec. 1005.31(b)(3))
[GRAPHIC] [TIFF OMITTED] TR22MY13.251
[[Page 30710]]
A-36--Model Form for Error Resolution and Cancellation Disclosures
(Long) (Sec. 1005.31(b)(4))
[GRAPHIC] [TIFF OMITTED] TR22MY13.252
[[Page 30711]]
A-37--Model Form for Error Resolution and Cancellation Disclosures
(Short) (Sec. 1005.31(b)(2)(iv) and (b)(2)(vi))
[GRAPHIC] [TIFF OMITTED] TR22MY13.253
[[Page 30712]]
A-38--Model Form for Pre-Payment Disclosures for Remittance
Transfers Exchanged into Local Currency--Spanish (Sec.
1005.31(b)(1))
[GRAPHIC] [TIFF OMITTED] TR22MY13.254
A-39--Model Form for Receipts for Remittance Transfers Exchanged
into Local Currency--Spanish (Sec. 1005.31(b)(2))
[GRAPHIC] [TIFF OMITTED] TR22MY13.255
[GRAPHIC] [TIFF OMITTED] TR22MY13.256
[[Page 30713]]
A-40--Model Form for Combined Disclosures for Remittance Transfers
Exchanged into Local Currency--Spanish (Sec. 1005.31(b)(3))
[GRAPHIC] [TIFF OMITTED] TR22MY13.257
[[Page 30714]]
A-41--Model Form for Error Resolution and Cancellation Disclosures
(Long)--Spanish (Sec. 1005.31(b)(4))
[GRAPHIC] [TIFF OMITTED] TR22MY13.258
* * * * *
0
7. In Supplement I to Part 1005--Official Interpretations:
0
A. Under Section 1005.30:
0
i. Under comment 30(c), paragraph 1 is revised.
0
ii. Comment 30(h) is added.
0
B. Under Section 1005.31:
0
i. Under comment 31(b), paragraphs 1 and 2 are revised.
0
ii. Under comment 31(b)(1), paragraphs 1, 2, and 3 are revised.
0
iii. The heading of comment 31(b)(1)(vi) is revised.
0
iv. Under newly designated comment 31(b)(1)(vi), paragraph 1 is revised
and paragraph 2 is removed.
0
v. Under comment 31(b)(1)(vii), paragraph 1 is revised.
0
vi. Comment 31(b)(1)(viii) is added.
0
vii. Under comment 31(c)(1), paragraph 1 is revised.
[[Page 30715]]
0
viii. Under comment 31(c)(4), paragraph 2.xi.is added.
0
ix. Under comment 31(f), paragraph 1 is revised.
0
C. Under Section 1005.32 Estimates:
0
i. Under comment 32(a)(1), paragraphs 1, 2.ii, and 3.ii. are revised,
and paragraphs 2.iii and 3.iii are removed.
0
ii. Under comment 32(b)(2), paragraph 1 is revised.
0
iii. Comment 32(b)(3) is added.
0
iv. The heading of comment 32(c)(3) is revised.
0
v. Comment 32(c)(4) is removed.
0
D. Under Section 1005.33:
0
i. Under comment 33(a):
0
a. Paragraphs 7 and 8 are redesignated as paragraphs 9 and 10.
0
b. Paragraphs 3.ii, 3.iii, 4 and newly redesignated paragraph 10 are
revised.
0
c. Paragraphs 3.vi, 7, and 8 are added.
0
ii. Under comment 33(c), paragraphs 2, 3, 4 and 5 are revised, and
paragraphs 11 and 12 are added.
0
iii. Comment 33(h) is added.
0
E. Under Section 1005.36:
0
i. Under comment 36(a)(2), paragraph 1 is revised.
0
G. Under Subheading Appendix A, paragraph 2. and paragraph 4. are
revised.
0
The additions and revisions read as follows:
Supplement I to Part 1005--Official Interpretations
* * * * *
0
Section 1005.30--Remittance Transfer Definitions
* * * * *
30(c) Designated Recipient
1. Person. A designated recipient can be either a natural person or
an organization, such as a corporation. See Sec. 1005.2(j) (definition
of person). The designated recipient is identified by the name of the
person provided by the sender to the remittance transfer provider and
disclosed by the provider to the sender pursuant to Sec.
1005.31(b)(1)(iii).
* * * * *
30(h) Third-Party Fees
1. Fees imposed on the remittance transfer. Fees imposed on the
remittance transfer by a person other than the remittance transfer
provider include only those fees that are charged to the designated
recipient and are specifically related to the remittance transfer. For
example, overdraft fees that are imposed by a recipient's bank or funds
that are garnished from the proceeds of a remittance transfer to
satisfy an unrelated debt are not fees imposed on the remittance
transfer because these charges are not specifically related to the
remittance transfer. Account fees are also not specifically related to
a remittance transfer if such fees are merely assessed based on general
account activity and not for receiving transfers. Where an incoming
remittance transfer results in a balance increase that triggers a
monthly maintenance fee, that fee is not specifically related to a
remittance transfer. Similarly, fees that banks charge one another for
handling a remittance transfer or other fees that do not affect the
total amount of the transaction or the amount that will be received by
the designated recipient are not fees imposed on the remittance
transfer. For example, an interchange fee that is charged to a provider
when a sender uses a credit or debit card to pay for a remittance
transfer is not a fee imposed upon the remittance transfer. Fees that
specifically relate to a remittance transfer may be structured on a
flat per-transaction basis, or may be conditioned on other factors
(such as account status or the quantity of remittance transfers
received) in addition to the remittance transfer itself. For example,
where an institution charges an incoming transfer fee on most
customers' accounts, but not on preferred accounts, such a fee is
nonetheless specifically related to a remittance transfer. Similarly,
if the institution assesses a fee for every transfer beyond the fifth
received each month, such a fee would be specifically related to the
remittance transfer regardless of how many remittance transfers
preceded it that month.
2. Covered third-party fees. i. Under Sec. 1005.30(h)(1), a
covered third-party fee means any fee that is imposed on the remittance
transfer by a person other than the remittance transfer provider that
is not a non-covered third-party fee.
ii. Examples of covered third-party fees include:
A. Fees imposed on a remittance transfer by intermediary
institutions in connection with a wire transfer (sometimes referred to
as ``lifting fees'').
B. Fees imposed on a remittance transfer by an agent of the
provider at pick-up for receiving the transfer.
3. Non-covered third-party fees. Under Sec. 1005.30(h)(2), a non-
covered third-party fee means any fee imposed by the designated
recipient's institution for receiving a remittance transfer into an
account except if such institution acts as the agent of the remittance
transfer provider. For example, a fee imposed by the designated
recipient's institution for receiving an incoming transfer into an
account is a non-covered third-party fee, provided such institution is
not acting as the agent of the remittance transfer provider. See also
comment 31(b)(1)(viii)-1. Furthermore, designated recipient's account
in Sec. 1005.30(h)(2) refers to an asset account, regardless of
whether it is a consumer asset account, established for any purpose and
held by a bank, savings association, credit union, or equivalent
institution. A designated recipient's account does not, however,
include a credit card, prepaid card, or a virtual account held by an
Internet-based or mobile telephone company that is not a bank, savings
association, credit union or equivalent institution.
* * * * *
Section 1005.31--Disclosures
* * * * *
31(b) Disclosure Requirements
1. Disclosures provided as applicable. Disclosures required by
Sec. 1005.31(b) need only be provided to the extent applicable. A
remittance transfer provider may choose to omit an item of information
required by Sec. 1005.31(b) if it is inapplicable to a particular
transaction. Alternatively, for disclosures required by Sec.
1005.31(b)(1)(i) through (vii), a provider may disclose a term and
state that an amount or item is ``not applicable,'' ``N/A,'' or
``None.'' For example, if fees or taxes are not imposed in connection
with a particular transaction, the provider need not provide the
disclosures about fees and taxes generally required by Sec.
1005.31(b)(1)(ii), the disclosures about covered third-party fees
generally required by Sec. 1005.31(b)(1)(vi), or the disclaimers about
non-covered third-party fees and taxes collected by a person other than
the provider generally required by Sec. 1005.31(b)(1)(viii).
Similarly, a Web site need not be disclosed if the provider does not
maintain a Web site. A provider need not provide the exchange rate
disclosure required by Sec. 1005.31(b)(1)(iv) if a recipient receives
funds in the currency in which the remittance transfer is funded, or if
funds are delivered into an account denominated in the currency in
which the remittance transfer is funded. For example, if a sender in
the United States sends funds from an account denominated in Euros to
an account in France denominated in Euros, no exchange rate would need
to be provided. Similarly, if a sender funds a remittance transfer in
U.S. dollars and requests that a remittance transfer be delivered to
the recipient in U.S. dollars, a provider need not disclose an exchange
rate.
2. Substantially similar terms, language, and notices. Certain
[[Page 30716]]
disclosures required by Sec. 1005.31(b) must be described using the
terms set forth in Sec. 1005.31(b) or substantially similar terms.
Terms may be more specific than those provided. For example, a
remittance transfer provider sending funds may describe fees imposed by
an agent at pick-up as ``Pick-up Fees'' in lieu of describing them as
``Other Fees.'' Foreign language disclosures required under Sec.
1005.31(g) must contain accurate translations of the terms, language,
and notices required by Sec. 1005.31(b) or permitted by Sec.
1005.31(b)(1)(viii) and Sec. 1005.33(h)(3).
31(b)(1) Pre-Payment Disclosures
1. Fees and taxes. i. Taxes collected on the remittance transfer by
the remittance transfer provider include taxes collected on the
remittance transfer by a State or other governmental body. A provider
need only disclose fees imposed or taxes collected on the remittance
transfer by the provider in Sec. 1005.31(b)(1)(ii), as applicable. For
example, if no transfer taxes are imposed on a remittance transfer, a
provider would only disclose applicable transfer fees. See comment
31(b)-1. If both fees and taxes are imposed, the fees and taxes must be
disclosed as separate, itemized disclosures. For example, a provider
would disclose all transfer fees using the term ``Transfer Fees'' or a
substantially similar term and would separately disclose all transfer
taxes using the term ``Transfer Taxes'' or a substantially similar
term.
ii. The fees and taxes required to be disclosed by Sec.
1005.31(b)(1)(ii) include all fees imposed and all taxes collected on
the remittance transfer by the provider. For example, a provider must
disclose any service fee, any fees imposed by an agent of the provider
at the time of the transfer, and any State taxes collected on the
remittance transfer at the time of the transfer. Fees imposed on the
remittance transfer by the provider required to be disclosed under
Sec. 1005.31(b)(1)(ii) include only those fees that are charged to the
sender and are specifically related to the remittance transfer. See
also comment 30(h)-1. In contrast, the fees required to be disclosed by
Sec. 1005.31(b)(1)(vi) are any covered third-party fees as defined in
Sec. 1005.30(h)(1).
iii. The term used to describe the fees imposed on the remittance
transfer by the provider in Sec. 1005.31(b)(1)(ii) and the term used
to describe covered third-party fees under Sec. 1005.31(b)(1)(vi) must
differentiate between such fees. For example the terms used to describe
fees disclosed under Sec. 1005.31(b)(1)(ii) and (vi) may not both be
described solely as ``Fees.''
2. Transfer amount. Sections 1005.31(b)(1)(i) and (v) require two
transfer amount disclosures. First, under Sec. 1005.31(b)(1)(i), a
provider must disclose the transfer amount in the currency in which the
remittance transfer is funded to show the calculation of the total
amount of the transaction. Typically, the remittance transfer is funded
in U.S. dollars, so the transfer amount would be expressed in U.S.
dollars. However, if the remittance transfer is funded, for example,
from a Euro-denominated account, the transfer amount would be expressed
in Euros. Second, under Sec. 1005.31(b)(1)(v), a provider must
disclose the transfer amount in the currency in which the funds will be
made available to the designated recipient. For example, if the funds
will be picked up by the designated recipient in Japanese yen, the
transfer amount would be expressed in Japanese yen. However, this
second transfer amount need not be disclosed if covered third-party
fees as described under Sec. 1005.31(b)(1)(vi) are not imposed on the
remittance transfer. The terms used to describe each transfer amount
should be the same.
3. Exchange rate for calculation. The exchange rate used to
calculate the transfer amount in Sec. 1005.31(b)(1)(v), the covered
third-party fees in Sec. 1005.31(b)(1)(vi), the amount received in
Sec. 1005.31(b)(1)(vii), and the optional disclosures of non-covered
third-party fees and other taxes permitted by Sec. 1005.31(b)(1)(viii)
is the exchange rate in Sec. 1005.31(b)(1)(iv), including an estimated
exchange rate to the extent permitted by Sec. 1005.32, prior to any
rounding of the exchange rate. For example, if one U.S. dollar
exchanges for 11.9483779 Mexican pesos, a provider must calculate these
disclosures using this rate, even though the provider may disclose
pursuant to Sec. 1005.31(b)(1)(iv) that the U.S. dollar exchanges for
11.9484 Mexican pesos. Similarly, if a provider estimates pursuant to
Sec. 1005.32 that one U.S. dollar exchanges for 11.9483 Mexican pesos,
a provider must calculate these disclosures using this rate, even
though the provider may disclose pursuant to Sec. 1005.31(b)(1)(iv)
that the U.S. dollar exchanges for 11.95 Mexican pesos (Estimated). If
an exchange rate need not be rounded, a provider must use that exchange
rate to calculate these disclosures. For example, if one U.S. dollar
exchanges for exactly 11.9 Mexican pesos, a provider must calculate
these disclosures using this exchange rate.
* * * * *
31(b)(1)(vi) Disclosure of Covered Third-Party Fees
1. Fees disclosed in the currency in which the funds will be
received. Section 1005.31(b)(1)(vi) requires the disclosure of covered
third-party fees in the currency in which the funds will be received by
the designated recipient. A covered third-party fee described in Sec.
1005.31(b)(1)(vi) may be imposed in one currency, but the funds may be
received by the designated recipient in another currency. In such
cases, the remittance transfer provider must calculate the fee to be
disclosed under Sec. 1005.31(b)(1)(vi) in the currency of receipt
using the exchange rate in Sec. 1005.31(b)(1)(iv), including an
estimated exchange rate to the extent permitted by Sec. 1005.32, prior
to any rounding of the exchange rate. For example, an intermediary
institution involved in sending an international wire transfer funded
in U.S. dollars may impose a fee in U.S. dollars, but funds are
ultimately deposited in the recipient's account in Euros. In this case,
the provider would disclose the covered third-party fee to the sender
expressed in Euros, calculated using the exchange rate disclosed under
Sec. 1005.31(b)(1)(iv), prior to any rounding of the exchange rate.
For purposes of Sec. 1005.31(b)(1)(v), (vi), and (vii), if a provider
does not have specific knowledge regarding the currency in which the
funds will be received, the provider may rely on a sender's
representation as to the currency in which funds will be received. For
example, if a sender requests that a remittance transfer be deposited
into an account in U.S. dollars, the provider may provide the
disclosures required in Sec. 1005.31(b)(1)(v), (vi), and (vii) in U.S.
dollars, even if the account is actually denominated in Mexican pesos
and the funds are subsequently converted prior to deposit into the
account. If a sender does not know the currency in which funds will be
received, the provider may assume that the currency in which funds will
be received is the currency in which the remittance transfer is funded.
31(b)(1)(vii) Amount Received
1. Amount received. The remittance transfer provider is required to
disclose the amount that will be received by the designated recipient
in the currency in which the funds will be received. The amount
received must reflect the exchange rate, all fees imposed and all taxes
collected on the remittance transfer by the remittance transfer
provider, as well as any covered third-party fees required to be
disclosed by Sec. 1005.31(b)(1)(vi). The disclosed
[[Page 30717]]
amount received must be reduced by the amount of any fee or tax--except
for a non-covered third-party fee or tax collected on the remittance
transfer by a person other than the provider--that is imposed on the
remittance transfer that affects the amount received even if that
amount is imposed or itemized separately from the transaction amount.
31(b)(1)(viii) Statement When Additional Fees and Taxes May Apply
1. Required disclaimer when non-covered third-party fees and taxes
collected by a person other than the provider may apply. If non-covered
third-party fees or taxes collected by a person other than the provider
apply to a particular remittance transfer or if a provider does not
know if such fees or taxes may apply to a particular remittance
transfer, Sec. 1005.31(b)(1)(viii) requires the provider to include
the disclaimer with respect to such fees and taxes. Required
disclosures under Sec. 1005.31(b)(1)(viii) may only be provided to the
extent applicable. For example, if the designated recipient's
institution is an agent of the provider and thus, non-covered third-
party fees cannot apply to the transfer, the provider must disclose all
fees imposed on the remittance transfer and may not provide the
disclaimer regarding non-covered third-party fees. In this scenario,
the provider may only provide the disclaimer regarding taxes collected
on the remittance transfer by a person other than the provider, as
applicable. See Model Form A-30(c).
2. Optional disclosure of non-covered third-party fees and taxes
collected by a person other than the provider. When a remittance
transfer provider knows the non-covered third-party fees or taxes
collected on the remittance transfer by a person other than the
provider that will apply to a particular transaction, Sec.
1005.31(b)(1)(viii) permits the provider to disclose the amount of such
fees and taxes. Section 1005.32(b)(3)-1 additionally permits a provider
to disclose an estimate of such fees and taxes, provided any estimates
are based on reasonable source of information. See comment 32(b)(3).
For example, a provider may know that the designated recipient's
institution imposes an incoming wire fee for receiving a transfer.
Alternatively, a provider may know that foreign taxes will be collected
on the remittance transfer by a person other than the remittance
transfer provider. In these examples, the provider may choose, at its
option, to disclose the amounts of the relevant recipient institution
fee and tax as part of the information disclosed pursuant to Sec.
1005.31(b)(1)(viii). The provider must not include that fee or tax in
the amount disclosed pursuant to Sec. 1005.31(b)(1)(vi) or
(b)(1)(vii). Fees and taxes disclosed under Sec. 1005.31(b)(1)(viii)
must be disclosed in the currency in which the funds will be received.
See comment 31(b)(1)(vi)-1. Estimates of any non-covered third-party
fees and any taxes collected on the remittance transfer by a person
other than the provider must be disclosed in accordance with Sec.
1005.32(b)(3).
* * * * *
31(c)(1) Grouping
1. Grouping. Information is grouped together for purposes of
subpart B if multiple disclosures are in close proximity to one another
and a sender can reasonably calculate the total amount of the
transaction and the amount that will be received by the designated
recipient. Model Forms A-30(a)-(d) through A-35 in Appendix A
illustrate how information may be grouped to comply with the rule, but
a remittance transfer provider may group the information in another
manner. For example, a provider could provide the grouped information
as a horizontal, rather than a vertical, calculation. A provider could
also send multiple text messages sequentially to provide the full
disclosure.
31(c)(4) Segregation
* * * * *
2. Directly related. * * *
* * * * *
xi. Disclosure of any non-covered third-party fees and any taxes
collected by a person other than the provider pursuant to Sec.
1005.31(b)(1)(viii).
* * * * *
31(f) Accurate When Payment Is Made
1. No guarantee of disclosures provided before payment. Except as
provided in Sec. 1005.36(b), disclosures required by Sec. 1005.31(b)
or permitted by Sec. 1005.31(b)(1)(viii) must be accurate when a
sender makes payment for the remittance transfer. A remittance transfer
provider is not required to guarantee the terms of the remittance
transfer in the disclosures required or permitted by Sec. 1005.31(b)
for any specific period of time. However, if any of the disclosures
required by Sec. 1005.31(b) or permitted by Sec. 1005.31(b)(1)(viii)
are not accurate when a sender makes payment for the remittance
transfer, a provider must give new disclosures before accepting
payment.
* * * * *
Section 1005.32--Estimates
* * * * *
32(a) Temporary Exception for Insured Institutions
32(a)(1) General
1. Control. For purposes of this section, an insured institution
cannot determine exact amounts ``for reasons beyond its control'' when
a person other than the insured institution or with which the insured
institution has no correspondent relationship sets the exchange rate
required to be disclosed under Sec. 1005.31(b)(1)(iv) or imposes a
covered third-party fee required to be disclosed under Sec.
1005.31(b)(1)(vi). For example, if an insured institution has a
correspondent relationship with an intermediary financial institution
in another country and that intermediary institution sets the exchange
rate or imposes a fee for remittance transfers sent from the insured
institution to the intermediary institution, then the insured
institution must determine exact amounts for the disclosures required
under Sec. 1005.31(b)(1)(iv) or (vi), because the determination of
those amounts are not beyond the insured institution's control.
2. * * *
ii. Covered third-party fees. An insured institution cannot
determine the exact covered third-party fees to disclose under Sec.
1005.31(b)(1)(vi) if an intermediary institution with which the insured
institution does not have a correspondent relationship, imposes a
transfer or conversion fee.
3. * * *
ii. Covered third-party fees. An insured institution can determine
the exact covered third-party fees required to be disclosed under Sec.
1005.31(b)(1)(vi) if it has agreed upon the specific fees with an
intermediary correspondent institution, and this correspondent
institution is the only institution in the transmittal route to the
designated recipient's institution.
* * * * *
32(b) Permanent Exceptions
* * * * *
32(b)(2) Permanent Exceptions for Transfers Scheduled Before the Date
of Transfer
1. Fixed amount of foreign currency. The following is an example of
when and how a remittance transfer provider may disclose estimates for
remittance transfers scheduled five or more business days before the
date of transfer where the provider agrees to the sender's request to
fix the amount to be transferred in a currency in which the
[[Page 30718]]
transfer will be received and not the currency in which it was funded.
If on February 1, a sender schedules a 1000 Euro wire transfer to be
sent from the sender's bank account denominated in U.S. dollars to a
designated recipient on February 15, Sec. 1005.32(b)(2) allows the
provider to estimate the amount that will be transferred to the
designated recipient (i.e., the amount described in Sec.
1005.31(b)(1)(i)), any fees imposed or taxes collected on the
remittance transfer by the provider (if based on the amount
transferred) (i.e., the amount described in Sec. 1005.31(b)(1)(ii)),
and the total amount of the transaction (i.e., the amount described in
Sec. 1005.31(b)(1)(iii)). The provider may also estimate any covered
third-party fees if the exchange rate is also estimated and the
estimated exchange rate affects the amount of fees (as allowed by Sec.
1005.32(b)(2)(ii)).
32(b)(3) Permanent Exception for Optional Disclosure of Non-Covered
Third-Party Fees and Taxes Collected on the Remittance Transfer by a
Person Other Than the Provider
1. Reasonable sources of information. Pursuant to Sec.
1005.32(b)(3) a remittance transfer provider may estimate applicable
non-covered third-party fees and taxes collected on the remittance
transfer by a person other than the provider using reasonable sources
of information. Reasonable sources of information may include, for
example: information obtained from recent transfers to the same
institution or the same country or region; fee schedules from the
recipient institution; fee schedules from the recipient institution's
competitors; surveys of recipient institution fees in the same country
or region as the recipient institution; information provided or surveys
of recipient institutions' regulators or taxing authorities;
commercially or publicly available databases, services or sources; and
information or resources developed by international nongovernmental
organizations or intergovernmental organizations.
* * * * *
32(c)(3) Covered Third-Party Fees
* * * * *
Section 1005.33--Procedures for Resolving Errors
33(a) Definition of Error
* * * * *
3. * * *
ii. A consumer requests to send funds to a relative in Colombia to
be received in local currency. The remittance transfer provider
provides the sender a receipt stating an amount of currency that will
be received by the designated recipient, which does not reflect the
additional foreign taxes that will be collected in Colombia on the
transfer but does include the statement required by Sec.
1005.31(b)(1)(viii). If the designated recipient will receive less than
the amount of currency disclosed on the receipt due solely to the
additional foreign taxes that the provider was not required to
disclose, no error has occurred.
iii. Same facts as in ii., except that the receipt provided by the
remittance transfer provider does not reflect additional fees that are
imposed by the receiving agent in Colombia on the transfer. Because the
designated recipient will receive less than the amount of currency
disclosed in the receipt due to the additional covered third-party
fees, an error has occurred.
* * * * *
vi. A sender requests that his bank send US$120 to a designated
recipient's account at an institution in a foreign country. The foreign
institution is not an agent of the provider. Only US$100 is deposited
into the designated recipient's account because the recipient
institution imposed a US$20 incoming wire fee and deducted the fee from
the amount transferred. Because this fee is a non-covered third-party
fee that the provider is not required to disclose under Sec.
1005.31(b)(1)(vi), no error has occurred if the provider provided the
disclosure required by Sec. 1005.31(b)(1)(viii).
4. Incorrect amount of currency received--extraordinary
circumstances. Under Sec. 1005.33(a)(1)(iii)(B), a remittance transfer
provider's failure to make available to a designated recipient the
amount of currency disclosed pursuant to Sec. 1005.31(b)(1)(vii) and
stated in the disclosure provided pursuant to Sec. 1005.31(b)(2) or
(3) for the remittance transfer is not an error if such failure was
caused by extraordinary circumstances outside the remittance transfer
provider's control that could not have been reasonably anticipated.
Examples of extraordinary circumstances outside the remittance transfer
provider's control that could not have been reasonably anticipated
under Sec. 1005.33(a)(1)(iii)(B) include circumstances such as war or
civil unrest, natural disaster, garnishment or attachment of some of
the funds after the transfer is sent, and government actions or
restrictions that could not have been reasonably anticipated by the
remittance transfer provider, such as the imposition of foreign
currency controls or foreign taxes unknown at the time the receipt or
combined disclosure is provided under Sec. 1005.31(b)(2) or (3).
* * * * *
7. Sender account number or recipient institution identifier error.
The exception in Sec. 1005.33(a)(1)(iv)(D) applies where a sender
gives the remittance transfer provider an incorrect account number or
recipient institution identifier and all five conditions in Sec.
1005.33(h) are satisfied. The exception does not apply, however, where
the failure to make funds available is the result of a mistake by a
provider or a third party or due to incorrect or insufficient
information provided by the sender other than an incorrect account
number or recipient institution identifier, such as an incorrect name
of the recipient institution.
8. Account number or recipient institution identifier. For purposes
of the exception in Sec. 1005.33(a)(1)(iv)(D), the terms account
number and recipient institution identifier refer to alphanumerical
account or institution identifiers other than names or addresses, such
as account numbers, routing numbers, Canadian transit numbers,
International Bank Account Numbers (IBANs), Business Identifier Codes
(BICs)) and other similar account or institution identifiers used to
route a transaction. In addition and for purposes of this exception,
the term designated recipient's account in Sec. 1005.30(h)(2) refers
to an asset account, regardless of whether it is a consumer asset
account, established for any purpose and held by a bank, savings
association, credit union, or equivalent institution. A designated
recipient's account does not, however, include a credit card, prepaid
card, or a virtual account held by an Internet-based or mobile
telephone company that is not a bank, savings association, credit union
or equivalent institution.
* * * * *
10. Change from disclosure made in reliance on sender information.
Under the commentary accompanying Sec. 1005.31, the remittance
transfer provider may rely on the sender's representations in making
certain disclosures. See, e.g., comments 31(b)(1)(iv)-1 and
31(b)(1)(vi)-1. For example, suppose a sender requests U.S. dollars to
be deposited into an account of the designated recipient and represents
that the account is U.S. dollar-denominated. If the designated
recipient's account is actually denominated in local currency and the
recipient account-holding institution must convert the remittance
transfer into local currency in order to deposit
[[Page 30719]]
the funds and complete the transfer, the change in currency does not
constitute an error pursuant to Sec. 1005.33(a)(2)(iv).
* * * * *
33(c) Time Limits and Extent of Investigation
* * * * *
2. Incorrect or insufficient information provided for transfer. The
remedy in Sec. 1005.33(c)(2)(iii) applies if a remittance transfer
provider's failure to make funds in connection with a remittance
transfer available to a designated recipient by the disclosed date of
availability occurred because the sender provided incorrect or
insufficient information in connection with the transfer, such as by
erroneously identifying the designated recipient's address or by
providing insufficient information such that the entity distributing
the funds cannot identify the correct designated recipient. A sender is
not considered to have provided incorrect or insufficient information
for purposes of Sec. 1005.33(c)(2)(iii) if the provider discloses the
incorrect location where the transfer may be picked up, gives the wrong
confirmation number/code for the transfer, or otherwise miscommunicates
information necessary for the designated recipient to pick-up the
transfer. The remedies in Sec. 1005.33(c)(2)(iii) do not apply if the
sender provided an incorrect account number or recipient institution
identifier and the provider has met the requirements of Sec.
1005.33(h) because under Sec. 1005.33(a)(1)(iv)(D) no error would have
occurred. See Sec. 1005.33(a)(1)(iv)(D) and comment 33(a)-7.
3. Designation of requested remedy. Under Sec. 1005.33(c)(2)(ii),
the sender may generally choose to obtain a refund of funds that were
not properly transmitted or delivered to the designated recipient or,
request redelivery of the amount appropriate to correct the error at no
additional cost unless the error is determined to have occurred because
the sender provided incorrect or insufficient information. Upon
receiving the sender's request, the remittance transfer provider shall
correct the error within one business day, or as soon as reasonably
practicable, applying the same exchange rate, fees, and taxes stated in
the disclosure provided under Sec. 1005.31(b)(2) or (3), if the sender
requests delivery of the amount appropriate to correct the error and
the error did not occur because the sender provided incorrect or
insufficient information. The provider may also request that the sender
indicate the preferred remedy at the time the sender provides notice of
the error although if provider does so, it should indicate that the if
the sender chooses a resend at the time, the remedy may be unavailable
if the error occurred because the sender provided incorrect or
insufficient information. However, if the sender does not indicate the
desired remedy at the time of providing notice of error, the remittance
transfer provider must notify the sender of any available remedies in
the report provided under Sec. 1005.33(c)(1) or (d)(1) if the provider
determines an error occurred.
4. Default remedy. Unless the sender provided incorrect or
insufficient information and Sec. 1005.33(c)(2)(iii) applies, the
remittance transfer provider may set a default remedy that the provider
will provide if the sender does not designate a remedy within a
reasonable time after the sender receives the report provided under
Sec. 1005.33(c)(1). A provider that permits a sender to designate a
remedy within 10 days after the provider has sent the report provided
under Sec. 1005.33(c)(1) or (d)(1) before imposing the default remedy
is deemed to have provided the sender with a reasonable time to
designate a remedy. In the case a default remedy is provided, the
provider must correct the error within one business day, or as soon as
reasonably practicable, after the reasonable time for the sender to
designate the remedy has passed, consistent with Sec. 1005.33(c)(2).
5. Form of refund. For a refund provided under Sec.
1005.33(c)(2)(i)(A), (c)(2)(ii)(A)(1), (c)(2)(ii)(B), or (c)(2)(iii), a
remittance transfer provider may generally, at its discretion, issue a
refund either in cash or in the same form of payment that was initially
provided by the sender for the remittance transfer. For example, if the
sender originally provided a credit card as payment for the transfer,
the remittance transfer provider may issue a credit to the sender's
credit card account in the appropriate amount. However, if a sender
initially provided cash for the remittance transfer, a provider may
issue a refund by check. For example, if the sender originally provided
cash as payment for the transfer, the provider may mail a check to the
sender in the amount of the payment.
* * * * *
11. Procedure for sending a new remittance transfer after a sender
provides incorrect or insufficient information. Section
1005.33(c)(2)(iii) generally requires a remittance transfer provider to
refund the transfer amount to the sender even if the sender's
previously designated remedy was a resend or if the provider's default
remedy in other circumstances is a resend. However, if before the
refund is processed, the sender receives notice pursuant to Sec.
1005.33(c)(1) or (d)(1) that an error occurred because the sender
provided incorrect or insufficient information and then requests that
the provider send the remittance transfer again, and the provider
agrees to that request, Sec. 1005.33(c)(2)(iii) requires that the
request be treated as a new remittance transfer and the provider must
provide new disclosures in accordance with Sec. 1005.31 and all other
applicable provisions of subpart B. However, Sec. 1005.33(c)(2)(iii)
does not obligate the provider to agree to a sender's request to send a
new remittance transfer.
12. Determining amount of refund. Section 1005.33(c)(2)(iii)
permits the provider to deduct from the amount refunded, or applied
towards a new transfer, any fees or taxes actually deducted from the
transfer amount by a person other than the provider as part of the
first unsuccessful remittance transfer attempt or that were deducted in
the course of returning the transfer amount to the provider following a
failed delivery. However, a provider may not deduct those fees and
taxes that will ultimately be refunded to the provider. When the
provider deducts fees or taxes from the amount refunded pursuant to
Sec. 1005.33(c)(2)(iii), the provider must inform the sender of the
deduction as part of the notice required by either Sec. 1005.33(c)(1)
or (d)(1) and the reason for the deduction. The following examples
illustrate these concepts.
i. A sender instructs a remittance transfer provider to send US$100
to a designated recipient in local currency, for which the provider
charges a transfer fee of US$10 and its correspondent imposes a fee of
US$15. The sender provides incorrect or insufficient information that
results in non-delivery of the remittance transfer as requested. Once
the provider determines that an error occurred because the sender
provided incorrect or insufficient information, the provider must
provide the report required by Sec. 1005.33(c)(1) or (d)(1) and inform
the sender, pursuant to Sec. 1005.33(c)(1) or (d)(1), that it will
refund US$85 to the sender within three business days unless the sender
chooses to apply the US$85 towards a new remittance transfer. The
provider is required to refund its own $10 fee but not the US$15 fee
imposed by the correspondent (unless the $15 will be
[[Page 30720]]
refunded to the provider by the correspondent).
ii. A sender instructs a remittance transfer provider to send
US$100 to a designated recipient in a foreign country, for which the
provider charges a transfer fee of US$10 (and thus the sender pays the
provider US$110) and an intermediary institution charges a lifting fee
of US$5, such that the designated recipient is expected to receive only
US$95, as indicated in the receipt. If an error occurs because the
sender provides incorrect or insufficient information that results in
non-delivery of the remittance transfer by the date of availability
stated in the disclosure provided to the sender for the remittance
transfer under Sec. 1005.31(b)(2) or (3), the provider is required to
refund, or reapply if requested and the provider agrees, $105 unless
the intermediary institution refunds to the provider the US$5 fee. If
the sender requests to have the transfer amount applied to a new
remittance transfer pursuant to Sec. 1005.33(c)(2)(iii) and provides
the corrected or additional information, and the remittance transfer
provider agrees to a resend remedy, the remittance transfer provider
may charge the sender another transfer fee of US$10 to send the
remittance transfer again with the corrected or additional information
necessary to complete the transfer. Insofar as the resend is an
entirely new remittance transfer, the provider must provide a
prepayment disclosure and receipt or combined disclosure in accordance
with, among other provisions, the timing requirements of Sec.
1005.31(f) and the cancellation provision of Sec. 1005.34(a).
iii. In connection with a remittance transfer, a provider imposes a
$15 tax that it then remits to a State taxing authority. An error
occurs because the sender provided incorrect or insufficient
information that resulted in non-delivery of the transfer to the
designated recipient. The provider may deduct $15 from the amount it
refunds to the sender pursuant to Sec. 1005.33(c)(2)(iii) unless the
relevant tax law will result in the $15 tax being refunded to the
provider by the State taxing authority because the transfer was not
completed.
* * * * *
33(h) Incorrect Account Number Supplied
1. Reasonable methods of verification. When a sender provides an
incorrect recipient institution identifier, Sec. 1005.33(h)(2) limits
the exception in Sec. 1005.33(a)(1)(iv)(D) to situations where the
provider used reasonably available means to verify that the recipient
institution identifier provided by the sender did correspond to the
recipient institution name provided by the sender. Reasonably available
means may include accessing a directory of Business Identifier Codes
and verifying that the code provided by the sender matches the provided
institution name, and, if possible, the specific branch or location
provided by the sender. Providers may also rely on other commercially
available databases or directories to check other recipient institution
identifiers. If reasonable verification means fail to identify that the
recipient institution identifier is incorrect, the exception in Sec.
1005.33(a)(1)(iv)(D) will apply, assuming that the provider can satisfy
the other conditions in Sec. 1005.33(h). Similarly, if no reasonably
available means exist to verify the accuracy of the recipient
institution identifier, Sec. 1005.33(h)(2) would be satisfied and thus
the exception in Sec. 1005.33(a)(1)(iv)(D) also will apply, again
assuming the provider can satisfy the other conditions in Sec.
1005.33(h). However, where a provider does not employ reasonably
available means to verify a recipient institution identifier, Sec.
1005.33(h)(2) is not satisfied and the exception in Sec.
1005.33(a)(1)(iv)(D) will not apply.
2. Reasonable efforts. Section 1005.33(h)(5) requires a remittance
transfer provider to use reasonable efforts to recover the amount that
was to be received by the designated recipient. Whether a provider has
used reasonable efforts does not depend on whether the provider is
ultimately successful in recovering the amount that was to be received
by the designated recipient. Under Sec. 1005.33(h)(5), if the
remittance transfer provider is requested to provide documentation or
other supporting information in order for the pertinent institution or
authority to obtain the proper authorization for the return of the
incorrectly credited amount, reasonable efforts to recover the amount
include timely providing any such documentation to the extent that it
is available and permissible under law. The following are examples of
reasonable efforts:
i. The remittance transfer provider promptly calls or otherwise
contacts the institution that received the transfer, either directly or
indirectly through any correspondent(s) or other intermediaries or
service providers used for the particular transfer, to request that the
amount that was to be received by the designated recipient be returned,
and if required by law or contract, by requesting that the recipient
institution obtain a debit authorization from the holder of the
incorrectly credited account.
ii. The remittance transfer provider promptly uses a messaging
service through a funds transfer system to contact institution that
received the transfer, either directly or indirectly through any
correspondent(s) or other intermediaries or service providers used for
the particular transfer, to request that the amount that was to be
received by the designated recipient be returned, in accordance with
the messaging service's rules and protocol, and if required by law or
contract, by requesting that the recipient institution obtain a debit
authorization from the holder of the incorrectly credited account.
3. Promptness of Reasonable Efforts. Section 1005.33(h)(5) requires
that a remittance transfer provider act promptly in using reasonable
efforts to recover the amount that was to be received by the designated
recipient. Whether a provider acts promptly to use reasonable efforts
depends on the facts and circumstances. For example, if, before the
date of availability disclosed pursuant to Sec. 1005.31(b)(2)(ii), the
sender informs the provider that the sender provided a mistaken account
number, the provider will have acted promptly if it attempts to contact
the recipient's institution before the date of availability.
* * * * *
Section 1005.36--Transfers Scheduled Before the Date of Transfer
* * * * *
36(a) Timing
36(a)(2) Subsequent Preauthorized Remittance Transfers
1. Changes in Disclosures. When a sender schedules a series of
preauthorized remittance transfers, the provider is generally not
required to provide a pre-payment disclosure prior to the date of each
subsequent transfer. However, Sec. 1005.36(a)(1)(i) requires the
provider to provide a pre-payment disclosure and receipt for the first
in the series of preauthorized remittance transfers in accordance with
the timing requirements set forth in Sec. 1005.31(e). While certain
information in those disclosures is expressly permitted to be estimated
(see Sec. 1005.32(b)(2)), other information is not permitted to be
estimated, or is limited in how it may be estimated. When any of the
information on the most recent receipt provided pursuant to Sec.
1005.36(a)(1)(i) or (a)(2)(i), other than the temporal disclosures
required by Sec. 1005.31(b)(2)(ii) and (b)(2)(vii), is no longer
accurate with respect to a
[[Page 30721]]
subsequent preauthorized remittance transfer for reasons other than as
permitted by Sec. 1005.32, the provider must provide, within a
reasonable time prior to the scheduled date of the next preauthorized
remittance transfer, a receipt that complies with Sec. 1005.31(b)(2)
and which discloses, among the other disclosures required by Sec.
1005.31(b)(2), the changed terms. For example, if the provider
discloses in the pre-payment disclosure for the first in the series of
preauthorized remittance transfers that its fee for each remittance
transfer is $20 and, after six preauthorized remittance transfers, the
provider increases its fee to $30 (to the extent permitted by contract
law), the provider must provide the sender a receipt that complies with
Sec. Sec. 1005.31(b)(2) and 1005.36(b)(2) within a reasonable time
prior to the seventh transfer. Barring a further change, this receipt
will apply to transfers after the seventh transfer. Or, if, after the
sixth transfer, a tax collected by the provider increases from 1.5% of
the amount that will be transferred to the designated recipient to 2.0%
of the amount that will be transferred to the designated recipient, the
provider must provide the sender a receipt that complies with
Sec. Sec. 1005.31(b)(2) and 1005.36(b)(2) within a reasonable time
prior to the seventh transfer. In contrast, Sec. 1005.36(a)(2)(i) does
not require an updated receipt where an exchange rate, estimated as
permitted by Sec. 1005.32(b)(2), changes.
* * * * *
Appendix A--Model Disclosure Clauses and Forms
* * * * *
2. Use of forms. The appendix contains model disclosure clauses for
optional use by financial institutions and remittance transfer
providers to facilitate compliance with the disclosure requirements of
Sec. Sec. 1005.5(b)(2) and (3), 1005.6(a), 1005.7, 1005.8(b),
1005.14(b)(1)(ii), 1005.15(d)(1) and (2), 1005.18(c)(1) and (2),
1005.31, 1005.32 and 1005.36. The use of appropriate clauses in making
disclosures will protect a financial institution and a remittance
transfer provider from liability under sections 916 and 917 of the act
provided the clauses accurately reflect the institution's EFT services
and the provider's remittance transfer services, respectively.
* * * * *
4. Model forms for remittance transfers. The Bureau will not review
or approve disclosure forms for remittance transfer providers. However,
this appendix contains 15 model forms for use in connection with
remittance transfers. These model forms are intended to demonstrate
several formats a remittance transfer provider may use to comply with
the requirements of Sec. 1005.31(b). Model Forms A-30 through A-32
demonstrate how a provider could provide the required disclosures for a
remittance transfer exchanged into local currency. Model Forms A-30(a),
(b), (c), and (d) demonstrate four options regarding model language
related to the required disclaimer, where applicable, of non-covered
third-party fees and taxes on the remittance transfer collected by a
person other than the provider under Sec. 1005.31(b)(1)(viii). Model
forms 30(b) through (d) also include language that may be used if a
provider elects to estimate either these non-covered third-party fees
or taxes collected by a person other than the provider as part of the
disclaimer. Model Forms A-33 through A-35 demonstrate how a provider
could provide the required disclosures for dollar-to-dollar remittance
transfers. These forms also demonstrate disclosure of the required
content, in accordance with the grouping and proximity requirements of
Sec. 1005.31(c)(1) and (2), in both a register receipt format and an
8.5 inch by 11 inch format. Model Form A-36 provides long form model
error resolution and cancellation disclosures required by Sec.
1005.31(b)(4), and Model Form A-37 provides short form model error
resolution and cancellation disclosures required by Sec.
1005.31(b)(2)(iv) and (vi). Model Forms A-38 through A-41 provide
language for Spanish language disclosures.
i. The model forms contain information that is not required by
subpart B, including a confirmation code, the sender's name and contact
information, and the optional disclosure of the estimated amount of
these non-covered third-party fees and taxes collected by a person
other than the provider as part of the disclaimer. Additional
information not required by subpart B may be presented on the model
forms as permitted by Sec. 1005.31(b)(1)(viii) and (c)(4). Any
additional information must be presented consistent with a remittance
transfer provider's obligation to provide required disclosures in a
clear and conspicuous manner.
ii. Use of the model forms is optional. A remittance transfer
provider may change the forms by rearranging the format or by making
modifications to the language of the forms, in each case without
modifying the substance of the disclosures. Any rearrangement or
modification of the format of the model forms must be consistent with
the form, grouping, proximity, and other requirements of Sec.
1005.31(a) and (c). Providers making revisions that do not comply with
this section will lose the benefit of the safe harbor for appropriate
use of Model Forms A-30 to A-41.
iii. Permissible changes to the language and format of the model
forms include, for example:
A. Substituting the information contained in the model forms that
is intended to demonstrate how to complete the information in the model
forms--such as names, addresses, and Web sites; dates; numbers; and
State-specific contact information--with information applicable to the
remittance transfer. In addition, if the applicable non-covered third-
party fees are imposed by an institution other than a bank, a provider
could modify the disclaimer accordingly.
B. Eliminating disclosures that are not applicable to the transfer,
as described under Sec. 1005.31(b). For example, if only covered
third-party fees are imposed, a provider would not use a disclaimer
related to additional fees that may apply because all applicable fees
are covered and included in the disclosure as required under Sec.
1005.31(b)(1)(vi).
C. Correcting or updating telephone numbers, mailing addresses, or
Web site addresses that may change over time.
D. Providing the disclosures on a paper size that is different from
a register receipt and 8.5 inch by 11 inch formats.
E. Adding a term substantially similar to ``estimated'' in close
proximity to the specified terms in Sec. 1005.31(b)(1) and (2), as
required under Sec. 1005.31(d).
F. Providing the disclosures in a foreign language, or multiple
foreign languages, subject to the requirements of Sec. 1005.31(g).
G. Substituting cancellation language to reflect the right to a
cancellation made pursuant to the requirements of Sec. 1005.36(c).
iv. Changes to the model forms that are not permissible include,
for example, adding information that is not segregated from the
required disclosures, other than as permitted by Sec. 1005.31(c)(4).
Dated: April 30, 2013.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2013-10604 Filed 5-21-13; 8:45 am]
BILLING CODE 4810-AM-P