[Federal Register Volume 79, Number 184 (Tuesday, September 23, 2014)]
[Rules and Regulations]
[Pages 56631-56650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-22310]



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  Federal Register / Vol. 79, No. 184 / Tuesday, September 23, 2014 / 
Rules and Regulations  

[[Page 56631]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1090

[Docket No. CFPB-2014-0003]
RIN 3170-AA25


Defining Larger Participants of the International Money Transfer 
Market

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau or CFPB) 
amends the regulation defining larger participants of certain consumer 
financial product and service markets by adding a new section to define 
larger participants of a market for international money transfers. The 
Bureau is issuing this final rule pursuant to its authority, under the 
Dodd-Frank Wall Street Reform and Consumer Protection Act, to supervise 
certain nonbank covered persons for compliance with Federal consumer 
financial law and for other purposes. The Bureau has the authority to 
supervise nonbank covered persons of all sizes in the residential 
mortgage, private education lending, and payday lending markets. In 
addition, the Bureau has the authority to supervise nonbank ``larger 
participant[s]'' of markets for other consumer financial products or 
services, as the Bureau defines by rule. The Bureau has issued rules 
defining larger participants of markets for consumer reporting, 
consumer debt collection, and student loan servicing. This final rule 
identifies a market for international money transfers and defines 
``larger participants'' of this market that are subject to the Bureau's 
supervisory authority.

DATES: Effective December 1, 2014.

FOR FURTHER INFORMATION CONTACT: Edna Boateng, Senior Consumer 
Financial Protection Analyst, Office of Supervision Policy, (202) 435-
7697, Amanda Quester, Senior Counsel, Office of Regulations, (202) 365-
0702, or Brian Shearer, Attorney, Office of Supervision Policy, (202) 
435-7794.

SUPPLEMENTARY INFORMATION: On January 31, 2014, the Bureau published a 
notice of proposed rulemaking proposing to define larger participants 
of a market for international money transfers.\1\ The Bureau is issuing 
this final rule to define larger participants of the identified market 
(Final Rule).
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    \1\ 79 FR 5302 (Jan. 31, 2014).
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I. Overview

    Section 1024 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act), codified at 12 U.S.C. 5514,\2\ gives 
the Bureau supervisory authority over all nonbank covered persons \3\ 
offering or providing three enumerated types of consumer financial 
products or services: (1) Origination, brokerage, or servicing of 
consumer loans secured by real estate, and related mortgage loan 
modification or foreclosure relief services; (2) private education 
loans; and (3) payday loans.\4\ The Bureau also has supervisory 
authority over ``larger participant[s] of a market for other consumer 
financial products or services,'' as the Bureau defines by rule.\5\
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    \2\ Public Law 111-203, section 1024, 124 Stat. 1376, 1987 
(2010) (codified at 12 U.S.C. 5514).
    \3\ The provisions of 12 U.S.C. 5514 apply to certain categories 
of covered persons, described in subsection (a)(1), and expressly 
exclude from coverage persons described in 12 U.S.C. 5515(a) or 
5516(a). ``Covered persons'' include ``(A) any person that engages 
in offering or providing a consumer financial product or service; 
and (B) any affiliate of a person described [in (A)] if such 
affiliate acts as a service provider to such person.'' 12 U.S.C. 
5481(6).
    \4\ 12 U.S.C. 5514(a)(1)(A), (D), (E). The Bureau also has the 
authority to supervise any nonbank covered person that it ``has 
reasonable cause to determine, by order, after notice to the covered 
person and a reasonable opportunity . . . to respond . . . is 
engaging, or has engaged, in conduct that poses risks to consumers 
with regard to the offering or provision of consumer financial 
products or services.'' 12 U.S.C. 5514(a)(1)(C); see also 12 CFR 
part 1091 (prescribing procedures for making determinations under 12 
U.S.C. 5514(a)(1)(C)). In addition, the Bureau has supervisory 
authority over very large depository institutions and credit unions 
and their affiliates. 12 U.S.C. 5515(a). Furthermore, the Bureau has 
certain authorities relating to the supervision of other depository 
institutions and credit unions. 12 U.S.C. 5516(c)(1), (e). One of 
the Bureau's mandates under the Dodd-Frank Act is to ensure that 
``Federal consumer financial law is enforced consistently without 
regard to the status of a person as a depository institution, in 
order to promote fair competition.'' 12 U.S.C. 5511(b)(4).
    \5\ 12 U.S.C. 5514(a)(1)(B), (a)(2) see also 12 U.S.C. 5481(5) 
(defining ``consumer financial product or service''). The Final Rule 
describes one market for consumer financial products or services, 
which the rule labels ``international money transfers.'' The 
definition does not encompass all activities that could be 
considered international money transfers. Any reference herein to 
``the international money transfer market'' means only the 
particular market for international money transfers identified by 
the Final Rule.
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    The Bureau is authorized to supervise nonbank covered persons 
subject to 12 U.S.C. 5514 for purposes of: (1) Assessing compliance 
with Federal consumer financial law; (2) obtaining information about 
such persons' activities and compliance systems or procedures; and (3) 
detecting and assessing risks to consumers and consumer financial 
markets.\6\ The Bureau conducts examinations, of various scopes, of 
supervised entities. In addition, the Bureau may, as appropriate, 
request information from supervised entities without conducting 
examinations.\7\
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    \6\ 12 U.S.C. 5514(b)(1).
    \7\ See 12 U.S.C. 5514(b) (authorizing the Bureau both to 
conduct examinations and to require reports from entities subject to 
supervision).
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    The Bureau prioritizes supervisory activity among nonbank covered 
persons on the basis of risk, taking into account, among other factors, 
the size of each entity, the volume of its transactions involving 
consumer financial products or services, the size and risk presented by 
the market in which it is a participant, the extent of relevant State 
oversight, and any field and market information that the Bureau has on 
the entity. Such field and market information might include, for 
example, information from consumer complaints and any other information 
the Bureau has about risks to consumers.
    The specifics of how an examination takes place vary by market and 
entity. However, the examination process generally proceeds as follows. 
Bureau examiners contact the entity for an initial conference with 
management and often request records and other information. Bureau 
examiners will ordinarily also review the components of the supervised 
entity's compliance management system. Based on these discussions and a 
preliminary review of the information received, examiners determine the 
scope of an on-site examination and then coordinate with

[[Page 56632]]

the entity to initiate the on-site portion of the examination. While 
on-site, examiners spend a period of time holding discussions with 
management about the entity's policies, processes, and procedures; 
reviewing documents and records; testing transactions and accounts for 
compliance; and evaluating the entity's compliance management system. 
Examinations may involve issuing confidential examination reports, 
supervisory letters, and compliance ratings. In addition to the process 
described above, the Bureau may also conduct off-site examinations.
    The Bureau has published a general examination manual describing 
the Bureau's supervisory approach and procedures.\8\ As explained in 
the manual, the Bureau will structure examinations to address various 
factors related to a supervised entity's compliance with Federal 
consumer financial law and other relevant considerations. On October 
22, 2013, the Bureau released procedures specific to remittance 
transfers for use in the Bureau's examinations of entities within its 
supervisory authority.\9\ The Bureau plans to use those examination 
procedures (or an updated version, as appropriate) in supervising 
international money transfers. The procedures include instructions on 
examining for compliance with, among other laws and regulations, new 
requirements in subpart B of Regulation E relating to remittance 
transfers (Remittance Rule), which went into effect on October 28, 
2013.\10\
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    \8\ CFPB Supervision and Examination Manual (Oct. 1, 2012), 
available at http://www.consumerfinance.gov/guidance/supervision/manual/.
    \9\ CFPB Supervision and Examination Manual, Remittance Transfer 
Examination Procedures (Oct. 22, 2013), available at http://www.consumerfinance.gov/guidance/supervision/manual/. In a joint 
comment, several large money transmitters encouraged the Bureau to 
provide additional guidance regarding supervisory expectations, 
similar to the CFPB Dodd-Frank Mortgage Rules Readiness Guide. A 
compliance guide for the Remittance Rule, along with a webinar and 
other helpful materials, may be found at http://www.consumerfinance.gov/remittances-transfer-rule-amendment-to-regulation-e/. The Bureau also periodically publishes Supervisory 
Highlights to share general information about the Bureau's 
examination findings without identifying specific companies (except 
for companies subject to enforcement actions already made public).
    \10\ 77 FR 6194 (Feb. 7, 2012); 77 FR 40459 (July 10, 2012); 77 
FR 50244 (Aug. 20, 2012); 78 FR 6025 (Jan. 29, 2013); 78 FR 30662 
(May 22, 2013); 78 FR 49365 (Aug. 14, 2013) (codified at 12 CFR part 
1005, subpart B). On August 22, 2014, the Bureau released further 
amendments to the Remittance Rule, which are available at http://files.consumerfinance.gov/f/201408_cfpb_final-rule_intl-money-transfer-small-entity.pdf. For additional 
information about the Remittance Rule, see http://www.consumerfinance.gov/remittances-transfer-rule-amendment-to-regulation-e/.
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    The States have been active in regulation of money transmission, 
with forty-seven States and the District of Columbia requiring entities 
to obtain a license to engage in money transmission, as defined by 
applicable law. Many States actively examine money transmitters, and 
State money transmitter regulator associations have indicated that the 
State regulators look forward to collaborating with the Bureau in 
supervising international money transfer providers.\11\ In response to 
the proposal, industry commenters also emphasized the need to 
coordinate with the States in this market. The Bureau agrees that this 
collaboration is important and will coordinate with appropriate State 
regulatory authorities in examining larger participants of the 
international money transfer market.
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    \11\ In commenting on this proposal, the State regulator 
associations also recommended that the Bureau consider a risk-scoped 
approach to examining larger participants. Although the Bureau's 
examination approach is not the subject of this rulemaking, the 
Bureau prioritizes supervisory activity among nonbank covered 
persons on the basis of risk; conducts risk-focused examinations to 
direct resources toward areas with higher degrees of risk to 
consumers; and focuses on an institution's ability to detect, 
prevent, and correct practices that present a significant risk of 
violating the law and causing consumer harm. See generally CFPB 
Supervision and Examination Manual 9, 10, 15, 19-22 (Oct. 1, 2012), 
available at http://www.consumerfinance.gov/guidance/supervision/manual/.
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    This Final Rule establishes a category of nonbank covered persons 
that is subject to the Bureau's supervisory authority under 12 U.S.C. 
5514 by defining ``larger participants'' of a market for international 
money transfers.\12\ The Final Rule pertains only to that purpose and 
does not impose new substantive consumer protection requirements.\13\ 
Nonbank covered persons generally are subject to the Bureau's 
regulatory and enforcement authority and any applicable Federal 
consumer financial law, regardless of whether they are subject to the 
Bureau's supervisory authority.
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    \12\ The Bureau's supervisory authority also extends to service 
providers of those covered persons that are subject to supervision 
under 12 U.S.C. 5514(a)(1). 12 U.S.C. 5514(e); see also 12 U.S.C. 
5481(26) (defining ``service provider'').
    \13\ The Bureau received a comment requesting the Bureau to 
preempt State regulation of money transmission. As noted, the 
purpose of this rulemaking is to define larger participants of a 
market for consumer financial products or services that will be 
subject to the Bureau's supervisory authority. Preemption of State 
regulation of money transmission is not required for that purpose, 
is not intended by the Bureau, and is beyond the scope of this 
rulemaking.
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II. Background

    On January 31, 2014, the Bureau published a notice of proposed 
rulemaking proposing to define larger participants of a market for 
international money transfers (Proposed Rule).\14\ The Bureau requested 
public comment on the Proposed Rule. The Bureau received 16 comments 
from consumer advocates, industry participants, trade associations, 
State regulator associations, and individual consumers. The comments 
are discussed in more detail below.
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    \14\ 79 FR 5302 (Jan. 31, 2014).
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    The Proposed Rule included a test to assess whether a nonbank 
covered person is a larger participant of the international money 
transfer market. Under the proposed test, a nonbank covered person with 
at least one million aggregate annual international money transfers, as 
described in the Proposed Rule, would be a larger participant of the 
international money transfer market.

III. Summary of the Final Rule

    The Bureau's existing larger-participant rule, 12 CFR part 1090, 
prescribes various procedures, definitions, standards, and protocols 
that apply with respect to all markets in which the Bureau has defined 
larger participants.\15\ Those generally applicable provisions, which 
are codified in subpart A, also are applicable for the international 
money transfer market described by this Final Rule. The definitions in 
Sec.  1090.101 should be used, unless otherwise specified, when 
interpreting terms in this Final Rule.
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    \15\ 12 CFR 1090.100-.103.
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    The Bureau includes relevant market descriptions and larger-
participant tests, as it develops them, in subpart B.\16\ Accordingly, 
the Final Rule defining larger participants of the international money 
transfer market amends Part 1090 by adding Sec.  1090.107 in subpart B.
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    \16\ 12 CFR 1090.104 (consumer reporting); 12 CFR 1090.105 
(consumer debt collection); 12 CFR 1090.106 (student loan 
servicing).
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    The Bureau is finalizing the Proposed Rule largely as proposed. The 
Final Rule defines an international money transfer market that covers 
certain electronic transfers of funds sent by nonbanks that are 
international money transfer providers. To be included in this market, 
transfers must be requested by a sender in a State to be sent to a 
designated recipient in a foreign country. The Final Rule's definitions 
are modeled in part on the definitions of ``remittance transfer'' and 
related terms in the Electronic Fund Transfer Act (EFTA) and its 
implementing regulation, Regulation E, but are not co-extensive with 
those definitions.\17\ For example, transfers of $15 or less can be 
``international money transfers'' but not

[[Page 56633]]

``remittance transfers.'' \18\ The definitions in existing Sec.  
1090.101 apply for terms that the Final Rule does not define, such as 
``person'' and ``consumer.'' \19\
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    \17\ 15 U.S.C. 1693o-1(g); 12 CFR 1005.2, 1005.30.
    \18\ 12 CFR 1005.30(e)(2)(i).
    \19\ As a result, some terms may have different definitions for 
purposes of the Proposed Rule than they do for purposes of 
Regulation E. The definition of ``consumer'' in Sec.  1090.101 is 
``an individual or an agent, trustee, or representative acting on 
behalf of an individual,'' 12 CFR 1090.101, while the definition of 
``consumer'' in Regulation E is ``a natural person,'' 12 CFR 
1005.2(e). The definition of ``person'' in Sec.  1090.101 is ``an 
individual, partnership, company, corporation, association 
(incorporated or unincorporated), trust, estate, cooperative 
organization, or other entity,'' 12 CFR 1090.101, while the 
definition of ``person'' in Regulation E is ``a natural person or an 
organization, including a corporation, government agency, estate, 
trust, partnership, proprietorship, cooperative, or association,'' 
12 CFR 1005.2(j).
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    The Final Rule also sets forth a test to determine whether a 
nonbank covered person is a larger participant of the international 
money transfer market. An entity is a larger participant if it has at 
least one million aggregate annual international money transfers.\20\ 
As prescribed by existing Sec.  1090.102, any nonbank covered person 
that qualifies as a larger participant will remain a larger participant 
until two years after the first day of the tax year in which the person 
last met the applicable test.\21\
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    \20\ As the Bureau has explained in prior rulemakings, the 
criterion selected for one market in a larger-participant rulemaking 
is not necessarily appropriate for any other market that may be the 
subject of a future rulemaking. Instead, the Bureau tailors each 
test to the market to which it will be applied. 77 FR 42874, 42876 
(consumer reporting) (July 20, 2012); 77 FR 65775, 65778 (consumer 
debt collection) (Oct. 31, 2012); 78 FR 73383, 73384 n.16 (student 
loan servicing) (Dec. 6, 2013).
    \21\ 12 CFR 1090.102.
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    Pursuant to existing Sec.  1090.103, a person can dispute whether 
it qualifies as a larger participant in the international money 
transfer market. The Bureau will notify an entity when the Bureau 
intends to undertake supervisory activity; the entity will then have an 
opportunity to submit documentary evidence and written arguments in 
support of its claim that it is not a larger participant. Section 
1090.103(d) provides that the Bureau may require submission of certain 
records, documents, and other information for purposes of assessing 
whether a person is a larger participant of a covered market; this 
authority will be available to the Bureau to facilitate its 
identification of larger participants of the international money 
transfer market, just as in other markets.

IV. Legal Authority and Procedural Matters

A. Rulemaking Authority

    The Bureau is issuing this Final Rule pursuant to its authority 
under: (1) 12 U.S.C. 5514(a)(1)(B) and (a)(2), which authorize the 
Bureau to supervise larger participants of markets for consumer 
financial products or services, as defined by rule; (2) 12 U.S.C. 
5514(b)(7), which, among other things, authorizes the Bureau to 
prescribe rules to facilitate the supervision of covered persons under 
12 U.S.C. 5514; and (3) 12 U.S.C. 5512(b)(1), which grants the Bureau 
the authority to prescribe rules as may be necessary or appropriate to 
enable the Bureau to administer and carry out the purposes and 
objectives of Federal consumer financial law, and to prevent evasions 
of such law.

B. Effective Date of Final Rule

    The Administrative Procedure Act generally requires that rules be 
published not less than 30 days before their effective dates.\22\ The 
Bureau proposed that the Final Rule would be effective no earlier than 
60 days after publication and received no comments relating to the 
effective date. The Bureau adopts December 1, 2014 as the effective 
date for the Final Rule, which is more than 60 days after publication.
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    \22\ 5 U.S.C. 553(d).
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V. Section-By-Section Analysis

Section 1090.107--International Money Transfer Market

    Proposed Sec.  1090.107 defined a market for international money 
transfers.\23\ The Bureau received some comments that supported the 
proposed market scope and other comments that suggested that the Bureau 
should expand the scope of the market definition to include domestic 
money transfers. For the reasons that follow, the Bureau has opted to 
include only international money transfers in the market definition for 
this Final Rule.
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    \23\ As noted above, the term ``international money transfer'' 
is very similar to the term ``remittance transfer'' as defined in 
the Remittance Rule, 12 CFR 1005.30(e), but differs in some 
substantive respects as specified below. Other definitions in this 
Final Rule are similarly based on Regulation E. Usage, or omission, 
of specific language from EFTA or Regulation E in the Final Rule is 
not an endorsement by the Bureau of any specific interpretation of 
EFTA or Regulation E.
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    As a general matter, international money transfers are electronic 
transfers of funds sent by nonbanks from consumers in the United States 
to persons or entities abroad.\24\ Consumers who send money abroad 
often do so through money transmitter companies that are nonbanks.\25\ 
Many money transmitters operate through closed networks, receiving and 
disbursing funds through their own outlets or through agents such as 
grocery stores, neighborhood convenience stores, or depository 
institutions. Some money transmitters may send transfers of any size, 
while others cap the size of transfers they send.
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    \24\ Although this Final Rule applies only to nonbank covered 
persons, similar services are also provided by depository 
institutions and credit unions, including those already subject to 
the Bureau's supervisory authority.
    \25\ CFPB, Report on Remittance Transfers 6 (July 20, 2011), 
available at http://www.consumerfinance.gov/wp-content/uploads/2011/07/Report_20110720_RemittanceTransfers.pdf. Federal 
law requires money transmitters that meet certain criteria to 
register as a ``money services business'' with the U.S. Department 
of the Treasury's Financial Crimes Enforcement Network (FinCEN). 31 
U.S.C. 5330; 31 CFR 1010.100(ff), 1022.380. Most States also have 
licensing requirements for similar types of entities.
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    For an international transfer conducted through a money 
transmitter, a consumer typically provides basic identifying 
information about himself and the recipient and often pays cash 
sufficient to cover the transfer amount and any fees charged by the 
money transmitter. The consumer may be provided a confirmation code, 
which the consumer relays to the recipient. The money transmitter sends 
an instruction to a specified payout location or locations in the 
recipient's country where the recipient may pick up the transferred 
funds, often in cash and local currency, upon presentation of the 
confirmation code and/or other identification on or after a specified 
date. These transfers generally are referred to as cash-to-cash 
transfers.
    Many money transmitters provide other types of transfers. For 
example, money transmitters may permit transfers to be initiated using 
credit cards, debit cards, or bank account debits and may use Web 
sites, agent locations, stand-alone kiosks, or telephone lines to do 
so. Abroad, money transmitters and their partners may allow funds to be 
deposited into recipients' bank accounts, distributed directly onto 
prepaid cards, or credited to mobile phone accounts. Funds also can be 
transferred among consumers' nonbank accounts identified by 
individuals' email addresses or mobile phone numbers. According to one 
survey of companies that send funds from the United States to Latin 
America and the Caribbean, 75 percent permit consumers to send 
transfers of funds that can be deposited directly into recipients' bank

[[Page 56634]]

accounts, including transfers initiated through the internet.\26\
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    \26\ Manuel Orozco et al., Inter-American Dialogue, The Market 
for Money Transfers: Ranking of Remittance Service Providers in 
Latin America and the Caribbean 4 (Oct. 23, 2012), available at 
http://www.thedialogue.org/uploads/Remittances_and_Development/LatAm_Final_120712.pdf. Like cash-to-cash transfers, 
some of the transfers to bank accounts rely on closed networks, 
though others rely on open networks (between an entity and non-
agents or non-affiliates) or reflect some characteristics of both 
open and closed network transactions.
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    International transfers play a critical role in the lives of many 
consumers in the United States. U.S. consumers send funds abroad for a 
number of reasons, including to assist family or friends with their 
expenses, to pay for purchases of goods, to pay the tuition of children 
studying abroad, or to purchase real estate. Data from the 2011 Current 
Population Survey (2011 CPS) show that more than 4 million households 
nationwide had used nonbanks to transfer funds to friends and family 
abroad in the preceding year, and more than 7 million households had 
used nonbanks to make such transfers at some time in the past.\27\
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    \27\ Fed. Deposit Ins. Corp., National Survey of Unbanked and 
Underbanked Households 32 (Sept. 2012), available at http://www.fdic.gov/householdsurvey/2012_unbankedreport.pdf (2011 
CPS Report) (stating that 3.7 percent of households used ``nonbank 
remittances'' as defined in the survey in the preceding year); id at 
142-43 (providing estimate of 120 million U.S. households in 2011 
for purposes of the survey); id. at 79 (estimating the number of 
households that have used ``nonbank remittances'' as defined in the 
survey at any time in the past).
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    Transferring money to international recipients can present unique 
challenges for consumers and providers, many of which are addressed in 
the Bureau's Remittance Rule. Pricing for transfers is complex and may 
depend not only on fees and taxes, but also on exchange rates. Because 
wholesale currency markets fluctuate constantly, the exchange rates 
applied to individual international transfers may change from day to 
day, or even over the course of the day, depending on how frequently 
providers update their retail rates. Providers may also vary their 
exchange rates and fees charged based on a range of other factors, such 
as the sending and receiving locations, and the size and speed of the 
transfer. Taxes may vary depending on the type of provider, the laws of 
the recipient country, and various other factors. As a result, 
determining how much money will actually be received and which provider 
offers the lowest price can be challenging for consumers, particularly 
when not provided with proper disclosures.\28\ In some cases, language 
barriers may further complicate consumers' ability to obtain and 
understand transaction information from providers and their agents.\29\
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    \28\ See CFPB, Report on Remittance Transfers 17-21 (July 20, 
2011); see also 77 FR 6194, 6199 (Feb. 7, 2012).
    \29\ See 77 FR 6194, 6199 (Feb. 7, 2012).
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    The Bureau believes that compliance with recent legislative and 
regulatory changes will significantly improve the predictability of 
remittances and provide consumers with better price information and 
recourse if they experience a problem with a transfer. Congress amended 
EFTA in the Dodd-Frank Act.\30\ The Bureau then implemented the 
amendments to EFTA by promulgating the Remittance Rule, which went into 
effect on October 28, 2013.\31\ Amendments to EFTA and the Remittance 
Rule created a comprehensive new system of consumer protections for 
remittance transfers sent by consumers in the United States to 
individuals and businesses in foreign countries. First, the Remittance 
Rule generally requires that information be disclosed prior to and at 
the time of payment by the sender for the remittance transfer.\32\ 
Second, under the Remittance Rule, consumers generally have thirty 
minutes after making payment to cancel a transfer.\33\ Third, the 
Remittance Rule increases consumer protections when transfers go awry 
by requiring providers to investigate disputes and remedy certain types 
of errors.\34\ The Remittance Rule applies to any institutions that 
send remittance transfers in the normal course of their business, 
including banks, credit unions, money transmitters, broker-dealers, and 
others. The Bureau and prudential regulators can examine depository 
institutions and credit unions within their supervisory authority for 
compliance with Regulation E, including the new Remittance Rule.
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    \30\ Public Law 111-203, section 1073, 124 Stat. 1376, 2060 
(2010).
    \31\ 77 FR 6194 (Feb. 7, 2012); 77 FR 40459 (July 10, 2012); 77 
FR 50244 (Aug. 20, 2012); 78 FR 6025 (Jan. 29, 2013); 78 FR 30662 
(May 22, 2013); 78 FR 49365 (Aug. 14, 2013) (codified at 12 CFR part 
1005, subpart B). On August 22, 2014, the Bureau released further 
amendments to the Remittance Rule, which are available at http://files.consumerfinance.gov/f/201408_cfpb_final-rule_intl-money-transfer-small-entity.pdf.
    \32\ Public Law 111-203, section 1073(a)(4), 124 Stat. 1376, 
2060 (2010) (codified at 15 U.S.C. 1693o-1(a)); 12 CFR 1005.31-.32.
    \33\ Public Law 111-203, section 1073(a)(4), 124 Stat. 1376, 
2060 (2010) (codified at 15 U.S.C. 1693o-1(d)(3)); 12 CFR 1005.34.
    \34\ Public Law 111-203, section 1073(a)(4), 124 Stat. 1376, 
2060 (2010) (codified at 15 U.S.C. 1693o-1(d)); 12 CFR 1005.33.
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    One objective of the Bureau's proposal was to bring nonbanks that 
are larger participants of the international money transfer market \35\ 
within the Bureau's supervisory jurisdiction in order to promote the 
Bureau's goal of enforcing Federal consumer financial law consistently 
without regard to whether a person is a depository institution.\36\ 
Supervision of larger participants of the international money transfer 
market will help to ensure that nonbank entities that provide a 
significant portion of the transactions to which the Remittance Rule 
applies are complying with these new and important consumer 
protections, as well as with other applicable requirements of Federal 
consumer financial law, including the prohibition on unfair, deceptive, 
or abusive acts or practices.
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    \35\ International money transfers are consumer financial 
products or services pursuant to the Dodd-Frank Act. See 12 U.S.C. 
5481(15)(A)(iv) (defining ``financial product or service'' to 
include ``engaging in deposit-taking activities, transmitting or 
exchanging funds, or otherwise acting as a custodian of funds or any 
financial instrument for use by or on behalf of a consumer''); 12 
U.S.C. 5481(5)(A) (defining ``consumer financial product or 
service'' to include financial products or services that are offered 
or provided for use by consumers primarily for personal, family, or 
household purposes); see also 12 U.S.C. 5481(15)(A)(v) (defining 
``financial product or service'' to include generally ``selling, 
providing, or issuing stored value or payment instruments,'' with 
specific exclusions); 12 U.S.C. 5481(15)(A)(vii) (defining 
``financial product or service'' to include generally ``providing 
payments or other financial data processing products or services to 
a consumer by any technological means,'' with specific exclusions).
    \36\ 12 U.S.C. 5511(b)(4).
---------------------------------------------------------------------------

    The Bureau lacks precise data on the international money transfer 
market and did not receive any comments that provided detailed 
information about the market. However, available data sources, 
including public information and confidential State supervisory data 
provided by three States, enabled the Bureau to conduct three analyses 
during the proposal stage to gain a general understanding of the basic 
contours of this nonbank market.\37\ These analyses produced rough 
estimates of (1) the overall number of nonbanks that provide 
international money transfers; (2) the dollar volume and number of 
international money transfers market-wide; and (3) the dollar volume 
and number of international money transfers provided by nonbanks that 
provide at least 500,000, one million, or three million transactions 
per year.\38\ The

[[Page 56635]]

Bureau did not receive any comments questioning or criticizing these 
analyses, which were described in the Bureau's proposal.
---------------------------------------------------------------------------

    \37\ For a description of the data sources used by the Bureau in 
deriving its estimates, see 79 FR 5302, 5305 n.34 (Jan. 31, 2014). 
The proposal identified several sources of uncertainty, which are 
discussed at 79 FR 5305-08.
    \38\ Prior to issuing its proposal, the Bureau conducted entity-
level analyses and produced highly approximated entity-by-entity 
estimates to inform its general understanding of the market and of 
the likely market coverage associated with potential activity 
thresholds. These entity-level approximations of dollar volume and 
number of transfers are not dispositive of whether the Bureau would 
ever seek to initiate supervisory activity or whether, in the event 
of a person's assertion that it is not a larger participant, the 
person would be found to be a larger participant.
---------------------------------------------------------------------------

    For its first analysis, the Bureau reviewed State licensing 
information and estimated that approximately 340 nonbanks provide 
international money transfers.\39\ The Bureau's second analysis, an 
extrapolation of confidential supervisory data from California to 
generate nationwide estimates, indicates that the nonbank market of 
international money transfers, as defined here, accounted for roughly 
$50 billion transferred and 150 million individual transfers in 
2012.\40\
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    \39\ The Bureau's review of State licensing information is 
described at 79 FR 5302, 5306 n.36 (Jan. 31, 2014). As with its 
other market estimates for this rulemaking, the Bureau emphasizes 
that the estimate of 340 international money transfer providers 
could be either high or low due to limitations in the data utilized.
    \40\ For a description of how the Bureau used the California 
data to generate nationwide estimates and the assumptions made by 
the Bureau in doing the extrapolation, see 79 FR 5302, 5306-07 n.37 
(Jan. 31, 2014).
---------------------------------------------------------------------------

    The Bureau's third analysis developed entity-specific estimates of 
the number of international money transfers sent in 2012. Estimates 
were mostly derived using confidential supervisory data obtained from 
California, New York, and Ohio pursuant to memoranda of understanding. 
Using this analysis, the Bureau generated the following highly 
approximated estimates for the year 2012: (1) The highest tier of the 
market consists of about 10 nonbanks that each sent over 3 million 
international money transfers and together accounted for about three-
fourths of all international money transfers; (2) The second tier of 
the market consists of about 15 nonbanks that each sent between 1 and 3 
million international money transfers, accounting collectively for 
about one-sixth of all international money transfers; (3) Very few 
nonbanks sent between 500,000 and 1 million international money 
transfers, accounting collectively for about 1.5 percent of all 
international money transfers; and (4) The limited remaining market 
share is divided among a few hundred nonbanks that each sent less than 
500,000 transfers in 2012.\41\ These estimates do not include providers 
that are not licensed in California, New York, or Ohio, but as 
explained in the proposal, the Bureau's market research and review of 
licensing data suggest that most entities that provide over 500,000 
international money transfers per year are licensed in at least one of 
those three States.\42\
---------------------------------------------------------------------------

    \41\ For a description of how the Bureau conducted this analysis 
and potential sources of inaccuracy, see 79 FR 5302, 5307 n.38 (Jan. 
31, 2014).
    \42\ 79 FR 5302, 5307 n.39 (Jan. 31, 2014).
---------------------------------------------------------------------------

    The Bureau's proposal defined a nonbank market consisting solely of 
international money transfers. While a number of commenters expressed 
support for the Bureau's proposed definitions and approach to defining 
the market, several requested that the Bureau expand this larger-
participant rule to include domestic transfers.\43\ Those advocating 
for inclusion of domestic transfers offered differing reasons, 
including that (1) domestic and international money transfers are 
similar and are often treated similarly by State regulators, (2) 
including domestic transfers in this Final Rule could encourage 
providers to voluntarily apply the Remittance Rule requirements to 
domestic transfers even though such application is not required by the 
Remittance Rule, (3) it would be difficult to determine whether mobile 
payments are domestic or international money transfers, and (4) the 
benefits of supervision should be made available to consumers of 
domestic transfers as well.\44\
---------------------------------------------------------------------------

    \43\ In a joint comment, a group of industry participants also 
asked the Bureau to clarify that the market definition in this Final 
Rule has no antitrust implications. The Bureau neither defines 
markets for purposes of antitrust law, nor intends the market 
definition in this Final Rule to be used for any purpose other than 
determining larger-participant status.
    \44\ Industry participants cited to the volume of complaints 
relating to domestic transfers in the Bureau's consumer complaint 
database, to support their assertion that the benefits of 
supervision should be spread to consumers of domestic transfers. In 
addition to complaints about international money transfers, the 
Bureau has received consumer complaints about domestic transfers and 
a variety of other consumer financial products and services. The 
existence of complaints about other products and services does not, 
however, change the Bureau's view that it is appropriate to treat 
international money transfers as a distinct market for purposes of 
this larger-participant rule.
---------------------------------------------------------------------------

    While transfers of money to domestic and international locations 
have some similar characteristics, several consumer advocacy group 
commenters recognized that international money transfers present 
challenges to providers and consumers that distinguish international 
money transfers from other transactions, such as domestic money 
transfers. As the Bureau noted in its proposal, these challenges can 
include, for example, foreign exchange rates, foreign taxes, and legal, 
administrative, and language complexities related to the fact that the 
funds are transferred to a foreign country. Many international money 
transfers are also subject to new protections under the Remittance 
Rule.\45\ In light of these differences, the Bureau continues to 
believe it is appropriate to treat the international money transfer 
market as a separate market for purposes of this larger-participant 
rule.
---------------------------------------------------------------------------

    \45\ In light of the close similarity between the Remittance 
Rule's definition of ``remittance transfer'' and the international 
money transfer market, the Bureau expects that most transfers in the 
international money transfer market would be subject to the 
Remittance Rule. However, some transfers that are in the 
international money transfer market under the Final Rule are not 
``remittance transfers,'' as discussed in the section-by-section 
discussion of Sec.  1090.107(a)'s ``international money transfer'' 
definition below.
---------------------------------------------------------------------------

    The Bureau also does not deem it appropriate to adjust the scope of 
the larger-participant rule based on the assertion that doing so might 
encourage entities to apply Remittance Rule standards to transactions 
that are not subject to the Remittance Rule. The larger-participant 
rule does not impose any new business conduct obligations. 
Specifically, it does not change or expand the application of the 
Remittance Rule. Accordingly, the Bureau has no reason to believe that 
expanding the scope of this rule beyond what the Bureau has proposed 
would cause entities to apply Remittance Rule standards to their 
domestic transfers.
    Another commenter expressed concern that mobile payment providers 
may not be able to determine whether their mobile payments are 
international money transfers or domestic transfers. Whether a 
transfer, including a mobile payment, is an international money 
transfer depends, in part, on whether it is sent by a ``sender'' to a 
``designated recipient'' as those terms are defined in Sec.  
1090.107(a). As explained in the section-by-section discussion below, 
the Bureau intends that ``designated recipient'' and ``sender'' in the 
Final Rule will be interpreted in a manner consistent with the way the 
same terms in the Remittance Rule are interpreted. The commentary to 
the Remittance Rule interpreting ``designated recipient'' and 
``sender'' provides relevant guidance and examples to help covered 
entities distinguish which transfers originate from a consumer in a 
State and which are to be received at a location physically outside of 
any State. This commentary should assist money transfer providers in 
determining whether their mobile payments are international money 
transfers for

[[Page 56636]]

purposes of this larger-participant rule.\46\
---------------------------------------------------------------------------

    \46\ See Official Interpretations to Regulation E, 12 CFR part 
1005, Supp. I, comment 30(c)(2)-1 to -3 and comment 30(g). Providers 
should already be applying this commentary to determine whether 
their mobile payments comply with the Remittance Rule.
---------------------------------------------------------------------------

    In light of the distinguishing characteristics of international 
money transfers and the other reasons set forth above, the Bureau 
declines to include domestic transfers in the market for which this 
Final Rule defines larger participants.\47\ As the Bureau has 
explained, this larger-participant rulemaking is only one in a series. 
Nothing in this Final Rule precludes the Bureau from considering in 
future larger-participant rulemakings other markets for consumer 
financial products or services that might include domestic money 
transfers or other money services.
---------------------------------------------------------------------------

    \47\ The Bureau's decision to define a market consisting solely 
of international money transfers will not prevent it from examining 
other consumer financial products or services offered by entities 
that qualify as larger participants of that market. If a larger 
participant of the international money transfer market offers 
domestic money transfer services to consumers, the Bureau can 
examine those transfers as part of its mission to assess compliance 
with Federal consumer financial law and to detect risks to consumers 
or to markets for consumer financial products and services. 12 
U.S.C. 5514(b); 77 FR 42874, 42880 (July 20, 2012).
---------------------------------------------------------------------------

Section 1090.107(a)--Market-Related Definitions

    Unless otherwise specified, the definitions in Sec.  1090.101 
should be used when interpreting terms in the Final Rule. Proposed 
Sec.  1090.107(a) defined additional terms relevant to the 
international money transfer market. These terms include 
``international money transfer,'' which delineates the scope of the 
identified market; ``designated recipient,'' ``international money 
transfer provider,'' ``sender,'' and ``State,'' which help to clarify 
the meaning of ``international money transfer''; and ``aggregate annual 
international money transfers,'' which is the criterion for assessing 
larger-participant status. The Bureau is adopting the definitions as 
proposed with the exception that it is streamlining the definition of 
``aggregate annual international money transfer'' to facilitate 
application of the larger-participant test.
    In the proposal, the Bureau noted that it had used the definition 
of ``remittance transfer'' and related definitions from Regulation E as 
a model in drafting the definitions applicable in this larger-
participant rulemaking because remittance transfers make up a very 
substantial portion of the market activity in the international money 
transfer market that the Bureau sought to define. Additionally, the 
Remittance Rule definitions are familiar to industry and the Bureau. As 
explained in the proposal and below, the Bureau believes it is 
appropriate to deviate from the Remittance Rule definitions in specific 
ways to reflect the distinct needs of this larger-participant 
rulemaking.
    Several industry commenters expressed support for the Bureau's 
general approach in developing definitions, while State regulator 
associations and one industry commenter suggested that greater 
conformity to the Remittance Rule would be preferable. The deviations 
that the Bureau proposed to make from the Remittance Rule definitions 
stem in part from the fact that the Remittance Rule imposes substantive 
consumer protection requirements, while the larger-participant rule 
differentiates larger participants from other participants in the 
international money transfer market in order to establish a supervisory 
program. To account for the different regulatory purposes and the 
specific needs of this rulemaking, the Bureau continues to believe that 
the proposed differences between the definitions in the Proposed Rule 
and the Regulation E definitions are necessary, as discussed below.\48\
---------------------------------------------------------------------------

    \48\ As noted above and in the Bureau's proposal, some terms may 
have different definitions for purposes of the Final Rule than they 
do for purposes of Regulation E due to the larger-participant rule 
definitions in 12 CFR 1090.101. The definition of ``consumer'' in 
Sec.  1090.101 is ``an individual or an agent, trustee, or 
representative acting on behalf of an individual,'' 12 CFR 1090.101, 
while the definition of ``consumer'' in Regulation E is ``a natural 
person,'' 12 CFR 1005.2(e). The definition of ``person'' in Sec.  
1090.101 is ``an individual, partnership, company, corporation, 
association (incorporated or unincorporated), trust, estate, 
cooperative organization, or other entity,'' 12 CFR 1090.101, while 
the definition of ``person'' in Regulation E is ``a natural person 
or an organization, including a corporation, government agency, 
estate, trust, partnership, proprietorship, cooperative, or 
association,'' 12 CFR 1005.2(j). One commenter asserted that using 
different definitions than are used in Regulation E could cause 
confusion. The Bureau believes that having multiple definitions for 
the same term within 12 CFR part 1090 would cause more confusion 
than having different definitions for the same term in Regulation E 
and 12 CFR part 1090.
---------------------------------------------------------------------------

Aggregate Annual International Money Transfers
    The Bureau proposed aggregate annual international money transfers 
as the criterion that would be used in assessing whether an entity is a 
larger participant of the international money transfer market. The 
proposed definition of ``aggregate annual international money 
transfers'' was informed by the method of calculating ``annual 
receipts'' used by the Bureau in prior larger-participant rulemakings, 
which in turn is modeled in part on the method used by the U.S. Small 
Business Administration (SBA) in calculating ``annual receipts'' to 
determine whether an entity is a small business.\49\ Proposed Sec.  
1090.107(a) defined the term ``aggregate annual international money 
transfers'' as the ``annual international money transfers'' of a 
nonbank covered person, aggregated with the ``annual international 
money transfers'' of its affiliated companies. Commenters generally 
expressed support for the substance of this definition, but some 
commenters expressed concern that the definition was confusing. For the 
reasons described below, the Bureau is streamlining the definition by 
counting transfers from the preceding year as opposed to using an 
average over up to three years, making corresponding technical changes, 
and otherwise adopting the definition as proposed.
---------------------------------------------------------------------------

    \49\ 12 CFR 1090.104(a) (Consumer Reporting Rule); 12 CFR 
1090.105(a) (Debt Collection Rule); 13 CFR 121.104 (SBA).
---------------------------------------------------------------------------

    Calculating annual international money transfers. The Bureau 
proposed that ``annual international money transfers'' of a nonbank 
covered person would be calculated in one of two ways depending on how 
long a person had been in business. The proposed definition annualized 
the number of transfers over the shorter of three years or the period 
an entity had been in business. One commenter stated that it seemed 
logical to use an average over several years but questioned whether the 
complexity of the proposed calculations was necessary. The commenter 
noted that the more complex the calculations, the greater the chance 
for error.
    The Bureau agrees that a simpler approach is preferable for 
calculating annual international money transfers. The proposed approach 
would have smoothed out year-to-year fluctuations in an entity's 
transaction volume but would have resulted in more involved 
calculations, especially for affiliated companies. Because affiliated 
companies may be in business for varying lengths of time, the annual 
international money transfers of affiliated companies in some instances 
would have been calculated over different time periods using different 
calculation methods.\50\
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    \50\ The Proposed Rule provided that the annual international 
money transfers of each affiliated company of a nonbank covered 
person would be calculated separately prior to the aggregation, 
treating the affiliated company as if it were an independent nonbank 
covered person for purposes of the calculation. The Bureau is 
finalizing this aspect of the rule as proposed, as discussed below.

---------------------------------------------------------------------------

[[Page 56637]]

    The Bureau has weighed the benefits of the proposed multi-year 
approach against the additional complexity it entails and concludes 
that it is preferable to calculate annual international money transfers 
in the Final Rule based on international money transfers sent in the 
preceding year. Because the criterion directly measures the number of 
transfers in the market, it should not be subject to temporary 
fluctuations that are unrelated to an entity's market 
participation.\51\ The Bureau believes that the single-year approach 
will make the Final Rule's definitions easier to apply, which should 
facilitate application of the detailed agent and affiliate-aggregation 
principles described below and alleviate the concern expressed by some 
commenters about the overall complexity of the definition of 
``aggregate annual international money transfers.'' The Final Rule 
therefore provides that annual international money transfers of a 
nonbank covered person means the international money transfers provided 
by the nonbank covered person during the preceding calendar year.
---------------------------------------------------------------------------

    \51\ Additionally, existing Sec.  1090.102 provides that a 
person qualifying as a larger participant under this rule will 
remain a larger participant for at least two years after the 
beginning of the tax year in which it last met the larger-
participant test. This provision will ensure that the Bureau has 
sufficient time to undertake and complete supervisory activities 
relating to a larger participant, even if the participant's market 
activity declines unexpectedly.
---------------------------------------------------------------------------

    Transfers involving agents. The proposed definition specified how 
to count transfers provided with the assistance of an agent. Under the 
proposal, the annual international money transfers of a nonbank covered 
person included international money transfers in which an agent acts on 
that person's behalf. The annual international money transfers of a 
nonbank covered person did not include international money transfers in 
which another person provided the international money transfers and the 
nonbank covered person performed activities as an agent on behalf of 
that other person.\52\ For purposes of this part of the definition, the 
Bureau proposed to define an ``agent'' to include an agent or 
authorized delegate, as defined under State or other applicable law, or 
an affiliated company of a person that provides international money 
transfers when such agent, authorized delegate, or affiliated company 
acts for that person.\53\ Comments from industry and a consumer 
advocacy group generally supported this approach. For the reasons that 
follow, the Bureau is finalizing the approach to agents as proposed.
---------------------------------------------------------------------------

    \52\ In other words, an international money transfer provided by 
an international money transfer provider with the help of an agent 
acting on the provider's behalf would count towards the annual 
international money transfers of the provider but not the agent. 
However, a nonbank covered person's aggregate annual international 
money transfers may include transfers in which the nonbank covered 
person acted as an agent on behalf of an affiliated company that 
provided the transfer. This is because such transfers are included 
in the annual international money transfers of the affiliated 
company and a nonbank covered person's aggregate annual 
international money transfers include the annual international money 
transfers of each of its affiliated companies due to the affiliate-
aggregation requirement discussed below.
    \53\ The definition of ``affiliated company'' is found in 12 CFR 
1090.101.
---------------------------------------------------------------------------

    Including transactions conducted by an agent in calculating a 
provider's annual international money transfers is consistent with the 
Remittance Rule, which places liability on the remittance transfer 
provider for violations by an agent when the agent is acting for the 
provider.\54\ Not counting transactions conducted solely as an agent 
for a provider in assessing the agent's annual international money 
transfers is also consistent with the Bureau's determination that, for 
purposes of the Remittance Rule, agents acting on behalf of a 
remittance transfer provider are not, in doing so, themselves acting as 
remittance transfer providers.\55\ Although entities that act solely as 
agents are not normally larger participants of the market under the 
Final Rule, the Bureau has the authority to supervise service providers 
to larger participants.\56\ Accordingly, where an agent acts as a 
service provider to a larger participant, the Bureau has the authority 
to supervise the agent's performance of services for the larger 
participant.\57\ In light of these considerations, the Bureau believes 
it is appropriate to count transactions in which an agent acts on 
behalf of a provider towards the annual international money transfers 
of that provider, and not towards the annual international money 
transfers of the agent itself.
---------------------------------------------------------------------------

    \54\ 12 CFR 1005.35. This is also consistent with the data 
analyzed by the Bureau prior to issuing the proposal, which 
generally include transactions conducted by agents on behalf of a 
provider in the transaction total for the provider.
    \55\ See Official Interpretations to Regulation E, 12 CFR part 
1005, Supp. I, comment 30(f)-1.
    \56\ 12 U.S.C. 5514(e); see also 12 U.S.C. 5481(26)(A) (defining 
service provider).
    \57\ The Bureau also has the authority to supervise any nonbank 
covered person that it ``has reasonable cause to determine, by 
order, after notice to the covered person and a reasonable 
opportunity . . . to respond . . . is engaging, or has engaged, in 
conduct that poses risks to consumers with regard to the offering or 
provision of consumer financial products or services.'' 12 U.S.C. 
5514(a)(1)(C).
---------------------------------------------------------------------------

    Several commenters expressed support for this approach to handling 
transactions provided with the assistance of agents. One commenter 
stated that it agreed with including transfers by an agent when 
determining whether a provider is covered and agreed that transfers 
that an agent conducts for other providers should not be included in 
determining coverage. This commenter nevertheless urged the Bureau to 
simplify the specification of which transfers by agents are included in 
the calculation, without providing a specific suggestion. The Bureau is 
concerned that any such simplification could alter how transactions 
involving agents are handled, which the Bureau believes the commenter 
did not intend. In light of the important role that agents play in the 
international money transfer market, the Bureau has not changed this 
aspect of the definition but believes that streamlining the definition 
in the manner described above will simplify application of the agent 
provision as well.
    One commenter supported the Bureau's approach to defining 
``agent,'' noting that it is consistent with the approach taken in 
other applications, such as the Remittance Rule. Another commenter 
stated that, to the extent agency relationships are not already well-
defined, the Bureau should offer a definition of ``agent'' that takes 
modern methods of money transmission into account. Rather than creating 
a self-contained definition of ``agent,'' the Bureau believes it is 
appropriate to define the term ``agent'' for purposes of this larger-
participant rule by reference to the law of agency from the States and 
other applicable sources, which will continue to develop and evolve as 
the market changes. The Bureau is thus finalizing the proposed 
definition of ``agent'' and the approach to handling transfers provided 
with the assistance of an agent as proposed.
    Affiliate aggregation. Under the Dodd-Frank Act, the activities of 
affiliated companies are to be aggregated for purposes of computing 
activity levels for rules under 12 U.S.C. 5514(a)(1).\58\ The Proposed 
Rule laid out an approach for affiliate aggregation that was consistent 
with the dual methods proposed for calculating annual international 
money transfers described above. Several commenters expressed support 
for affiliate aggregation, though some requested clarification 
regarding

[[Page 56638]]

the aggregation method in the Proposed Rule.
---------------------------------------------------------------------------

    \58\ 12 U.S.C. 5514(a)(3)(B).
---------------------------------------------------------------------------

    In light of the adjustments described above regarding the method of 
calculating annual international money transfers, the Bureau is making 
some corresponding modifications to the method for affiliate 
aggregation in the Final Rule. Consistent with the Proposed Rule, the 
Final Rule provides that the annual international money transfers of 
each affiliated company of a nonbank covered person are calculated 
separately in accordance with paragraphs (i) and (ii) of the 
definition, treating the affiliated company as if it were an 
independent nonbank covered person for purposes of the calculation. As 
explained above, paragraphs (i) and (ii) of the definition in the Final 
Rule provide that annual international money transfers are the 
international money transfers provided in the preceding year. To 
aggregate the annual international money transfers of affiliated 
companies, the Final Rule provides that the annual international money 
transfers of a nonbank covered person must be aggregated with the 
annual international money transfers of any person that was an 
affiliated company of the nonbank covered person at any time during the 
preceding calendar year. The Final Rule further provides that the 
annual international money transfers of the nonbank covered person and 
its affiliated companies are aggregated for the entire preceding 
calendar year, even if the affiliation did not exist for the entire 
calendar year. Because annual international money transfers will in all 
cases be calculated over the preceding year, the Bureau is finalizing 
the rule without the provisions in the Proposed Rule that explained how 
to aggregate affiliated companies' annual international money transfers 
if calculations were done over different time periods. These 
adjustments further clarify and streamline the ``aggregate annual 
international money transfer'' definition, while accomplishing the 
statutory requirement of affiliate aggregation.
    In their joint comment, two State regulator associations requested 
clarification regarding the operation of the proposed ``aggregate 
annual international money transfer'' definition. They noted that many 
banks utilize nonbank providers for remittance transfers and suggested 
that issues could arise if international transfers are aggregated 
between affiliates and agents without regard to the source of the 
transfers. They also expressed concern that there may be an issue with 
double counting or artificially inflating the size of measured 
entities, if business customers, consumers, bank-to-bank account 
transactions, and authorization agents are all counted together.
    The Bureau has crafted the Final Rule's definitions to ensure that 
the term ``aggregate annual international money transfers'' only 
includes certain transfers. Transactions for business customers are not 
part of the criterion because the rule only counts transactions 
initiated by a consumer primarily for personal, family, or household 
purposes.\59\ With respect to bank transactions, the rule as proposed 
and finalized operates as follows: First, only nonbank covered persons 
can be larger participants under the test in Sec.  1090.107(b).\60\ 
Second, if a larger participant has an affiliate that is an insured 
depository institution or insured credit union, that affiliate is not 
subject to the affiliate-aggregation requirements of part (iii) of the 
definition of ``aggregate annual international money transfers.'' \61\ 
Third, if a bank is operating as an agent on behalf of an international 
money transfer provider for some international money transfers, those 
transfers would be included in the provider's count pursuant to the 
agent provisions in part (ii) of the definition. The Bureau expects 
that the Final Rule's streamlined definition of ``aggregate annual 
international money transfers'' will make these aspects of the rule 
easier to understand and apply.
---------------------------------------------------------------------------

    \59\ As discussed below, ``sender'' is defined to mean ``a 
consumer in a State who primarily for personal, family, or household 
purposes requests an international money transfer provider to send 
an international money transfer to a designated recipient.'' The 
Bureau recently provided further guidance in the Remittance Rule 
commentary relating to when senders are considered to be requesting 
a transfer primarily for personal, family, or household purposes, 
which may help to clarify the meaning of the same terms in Sec.  
1090.107(a). 12 CFR part 1005, Supp. I, comment 30(g)-2 and 30(g)-3, 
available at http://files.consumerfinance.gov/f/201408_cfpb_final-rule_intl-money-transfer-small-entity.pdf.
    \60\ Pursuant to the definition in Sec.  1090.101, a nonbank 
covered person does not include any persons described in 12 U.S.C. 
5515(a) and 5516(a).
    \61\ This is because the affiliate-aggregation requirement only 
applies to ``affiliated companies,'' and the definition of 
``affiliated company'' in 12 CFR 1090.101 specifically excludes 
insured depository institutions and insured credit unions.
---------------------------------------------------------------------------

    The Bureau also received a joint comment from a group of money 
services providers requesting guidance on how the Bureau plans to 
conduct examinations of smaller affiliated companies that would not be 
larger participants but for their affiliation with larger companies. 
The Bureau may supervise these smaller affiliated companies as part of 
an examination of the larger affiliated company or independently. 
Although the Bureau's approach to examinations is not the subject of 
this rulemaking, the Bureau will exercise its supervisory authority 
with respect to affiliated companies using a risk-based approach and 
will coordinate with appropriate State regulators, just as it does with 
respect to other supervised nonbank entities.
    In light of the considerations described above, the Bureau is 
finalizing the definition of ``aggregate annual international money 
transfers'' largely as proposed. As noted, the Final Rule includes a 
revised calculation method based on the preceding year's transfers with 
corresponding changes in the affiliate-aggregation approach.
Designated Recipient
    The Bureau proposed to define ``designated recipient'' in Sec.  
1090.107(a) as any person specified by the sender as the authorized 
recipient of an international money transfer to be received at a 
location in a foreign country. This proposed definition was based on 
the definition of ``designated recipient'' in the Remittance Rule,\62\ 
but replaced ``remittance transfer'' with ``international money 
transfer'' and incorporated the larger-participant definition of 
``person'' from Sec.  1090.101. The Bureau intends the term 
``designated recipient'' to be interpreted based on the interpretation 
of the term in the Remittance Rule, including its commentary,\63\ to 
the extent appropriate given the different regulatory contexts of the 
definitions. The Bureau did not receive any comments that specifically 
addressed the definition of ``designated recipient'' and is adopting 
the definition of ``designated recipient'' as proposed.
---------------------------------------------------------------------------

    \62\ 12 CFR 1005.30(c).
    \63\ See Official Interpretations to Regulation E, 12 CFR part 
1005, Supp. I, comment 30(c). The Bureau recently added to comment 
30(c) in the Remittance Rule commentary, which is available at 
http://files.consumerfinance.gov/f/201408_cfpb_final-rule_intl-money-transfer-small-entity.pdf. The Bureau intends that this additional commentary 
and any future amendments to the Remittance Rule commentary will be 
used when interpreting the definition of ``designated recipient'' in 
this Final Rule, to the extent appropriate given the different 
regulatory contexts.
---------------------------------------------------------------------------

International Money Transfer
    Proposed Sec.  1090.107(a) defined the term ``international money 
transfer'' to mean the electronic transfer of funds requested by a 
sender that is sent by an international money transfer provider to a 
designated recipient. As proposed, the term applied regardless of 
whether the sender holds an account with the international money 
transfer provider, and regardless of whether the transaction also is an 
``electronic fund transfer,'' as defined in Regulation E, 12

[[Page 56639]]

CFR 1005.3(b). The proposed definition did not include certain 
transfers related to the purchase or sale of a security or commodity 
that are excluded from the definition of ``electronic fund transfer'' 
under 12 CFR 1005.3(c)(4). The Bureau received several comments 
discussing the relationship of the term ``international money 
transfer'' to the term ``remittance transfer'' in the Remittance Rule, 
as well as one comment that requested clarification about the Proposed 
Rule's impact on broker-dealers. For the reasons set forth below, the 
Bureau is finalizing the definition of ``international money transfer'' 
as proposed.
    The proposed definition of ``international money transfer'' tracked 
the Remittance Rule's definition of ``remittance transfer,'' \64\ 
except in two respects. First, the proposed definition substituted 
``international money transfer provider'' in each place where the term 
``remittance transfer provider'' appears in 12 CFR 1005.30(e). Second, 
the Proposed Rule defined ``international money transfer'' without 
regard to the amount of the transfer, unlike the Remittance Rule, which 
excludes transfers of $15 or less from the definition of ``remittance 
transfer.'' \65\
---------------------------------------------------------------------------

    \64\ 12 CFR 1005.30(e).
    \65\ 12 CFR 1005.30(e)(2)(i).
---------------------------------------------------------------------------

    The Bureau received several comments on the proposed definition of 
``international money transfer.'' These commenters generally agreed 
with the approach of basing the definition of ``international money 
transfer'' on the definition of ``remittance transfer'' in the 
Remittance Rule, and some expressed support for the specific changes in 
the Proposed Rule. One commenter encouraged the Bureau to use the 
definition of ``remittance transfer'' in the Remittance Rule without 
any changes, on the ground that the proposed changes would needlessly 
invite confusion and disparate interpretations by courts and other 
officials. Another commenter recommended that the Bureau exclude 
transfers of $15 or less in order to be consistent with the Remittance 
Rule, expressing concern that not doing so would cause confusion and 
inconsistent application of standards in examinations because examiners 
will be examining for compliance with the Remittance Rule.
    The Bureau does not agree that the differences between the Proposed 
Rule's definition of ``international money transfer'' and the 
definition of ``remittance transfer'' are needless or that it would be 
clearer to use the term ``remittance transfer'' in this rule. The 
Remittance Rule includes an exclusion for transfers of $15 or less \66\ 
because the Dodd-Frank Act's definition of ``remittance transfer'' does 
not include transfers ``in an amount that is equal to or lesser than 
the amount of a small-value transaction determined, by rule, to be 
excluded from the requirements under section 906(a) [of EFTA].'' \67\ 
While the Dodd-Frank Act's definition of ``remittance transfer'' is 
applicable to the Remittance Rule, it is not applicable to the Bureau's 
authority to supervise larger participants in markets for consumer 
financial products or services. The Bureau proposed to include small-
value transactions as ``international money transfers'' on the ground 
that small-value transactions comprise part of the same market as 
larger transactions and the number of international money transfers 
provided by an international money transfer provider reflects the 
extent of a provider's market participation. The comments did not 
provide new information to the contrary. Because the scope of transfers 
covered by the term ``international money transfer'' differs from the 
scope of the term ``remittance transfer,'' \68\ the Bureau believes it 
is appropriate to use a different name than ``remittance transfer.''
---------------------------------------------------------------------------

    \66\ Id.
    \67\ 15 U.S.C. 1693o-1(g)(2)(B). The Board of Governors of the 
Federal Reserve System previously determined by rule that financial 
institutions are not subject to the EFTA section 906(a) requirement 
to provide electronic terminal receipts for small-value transfers of 
$15 or less. 12 CFR 1005.9(e).
    \68\ For example, as noted above transfers of $15 or less may be 
international money transfers but are not remittance transfers. 
Additionally, transfers that are sent by depository institutions may 
be remittance transfers but cannot be international money transfers 
because, as explained below, an international money transfer 
provider must be a nonbank covered person.
---------------------------------------------------------------------------

    The Bureau does not believe that different definitions in the 
Remittance Rule and this rule will create significant confusion or 
result in inconsistent application of standards in the examination 
process because the two rules serve different purposes. The definition 
of ``international money transfer'' will be used to identify the 
transfers to be counted when assessing whether an entity is large 
enough to be subject to Bureau supervision as a larger participant. It 
does not determine the scope of any substantive consumer protection 
requirement, nor does it determine the limits of the Bureau's 
examination authority over entities that are larger participants. If an 
entity is determined to be a larger participant, the Bureau may examine 
the entire entity for compliance with all Federal consumer financial 
law and assess and detect risks to consumers or to markets for consumer 
financial products and services posed by any activity of the entity, 
not just the activities that initially rendered the entity subject to 
Bureau supervision.\69\ By contrast, the definition of ``remittance 
transfer'' in the Remittance Rule determines which transfers are 
subject to the substantive requirements of the Remittance Rule. In 
light of the different functions of these two definitions, the Bureau 
believes that the differences in the definitions are warranted and 
unlikely to result in significant confusion.\70\
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    \69\ 12 U.S.C. 5514(b); 77 FR 42874, 42880 (July 20, 2012).
    \70\ The commenters did not identify any significant 
administrative challenges that would make it difficult to include 
small-value transactions when counting the total number of 
international money transfers provided by a nonbank covered person. 
Indeed, as the Bureau mentioned in the Proposed Rule, the State 
supervisory data obtained by the Bureau for this rulemaking include 
transfers of $15 or less.
---------------------------------------------------------------------------

    The Bureau also does not expect the difference in definitions 
between ``remittance transfer'' and ``international money transfer'' to 
cause courts or others to misinterpret the term ``international money 
transfer.'' As the Bureau stated in its proposal, the Bureau intends 
the term ``international money transfer'' to be interpreted in the same 
manner as the term ``remittance transfer,'' with the terms ``electronic 
transfer of funds'' and ``sent by an international money transfer 
provider'' interpreted based on the interpretation of parallel terms in 
Regulation E,\71\ to the extent appropriate given the definitions' 
different regulatory contexts. Of course, where the definitions differ 
(as, for example, with the small-value transaction exclusion), 
differing interpretations would be appropriate. The Bureau therefore 
declines to make any changes based on the comments received.
---------------------------------------------------------------------------

    \71\ See Official Interpretations to Regulation E, 12 CFR part 
1005, Supp. I, comment 30(e).
---------------------------------------------------------------------------

    In addition to the comments that specifically addressed the 
definition of ``international money transfers,'' the Bureau also 
received a comment from a trade association working group made up of 
broker-dealers that provide remittance transfer services. The group 
noted that the Bureau's Proposed Rule does not specifically discuss 
broker-dealers regulated by the Securities and Exchange Commission 
(SEC). The group cited Dodd-Frank Act section 1027(i)(1), which 
provides that ``[t]he Bureau shall have no authority to exercise any 
power to enforce this title with respect to a

[[Page 56640]]

person regulated by the Commission.'' \72\ It asked the Bureau to 
acknowledge this statutory exclusion in the Final Rule itself on the 
ground that this would alleviate any potential confusion or 
misinterpretation among broker-dealers. The commenter did not suggest 
how the Proposed Rule might contravene the limitations on the Bureau's 
authority to exercise its power to enforce title X with respect to 
persons regulated by the Commission, and the Bureau does not believe 
that the Proposed Rule is inconsistent with these limitations. 
Moreover, the Final Rule does not require persons to take any action 
except in response to the initiation of supervisory activity by the 
Bureau, and the Bureau does not initiate supervisory activity if it 
believes that doing so would exceed its authority under the Dodd-Frank 
Act, or any other applicable law. Accordingly, the Bureau does not 
believe that it is necessary to recite the section 1027(i) exclusion or 
any other statutory exclusion in the Final Rule.
---------------------------------------------------------------------------

    \72\ 12 U.S.C. 5481(21) defines ``person regulated by the 
Commission'' as a person who is:
    (A) a broker or dealer that is required to be registered under 
the Securities Exchange Act of 1934;
    (B) an investment adviser that is registered under the 
Investment Advisers Act of 1940;
    (C) an investment company that is required to be registered 
under the Investment Company Act of 1940, and any company that has 
elected to be regulated as a business development company under that 
Act;
    (D) a national securities exchange that is required to be 
registered under the Securities Exchange Act of 1934;
    (E) a transfer agent that is required to be registered under the 
Securities Exchange Act of 1934;
    (F) a clearing corporation that is required to be registered 
under the Securities Exchange Act of 1934;
    (G) any self-regulatory organization that is required to be 
registered with the Commission;
    (H) any nationally recognized statistical rating organization 
that is required to be registered with the Commission;
    (I) any securities information processor that is required to be 
registered with the Commission;
    (J) any municipal securities dealer that is required to be 
registered with the Commission;
    (K) any other person that is required to be registered with the 
Commission under the Securities Exchange Act of 1934; and
    (L) any employee, agent, or contractor acting on behalf of, 
registered with, or providing services to, any person described in 
any of subparagraphs (A) through (K), but only to the extent that 
any person described in any of subparagraphs (A) through (K), or the 
employee, agent, or contractor of such person, acts in a regulated 
capacity.
---------------------------------------------------------------------------

    The Bureau notes that like the Remittance Rule and Regulation E 
generally, the proposed definition of ``international money transfer'' 
already excludes a transfer of funds if the primary purpose of the 
transfer was the purchase or sale of a security or commodity regulated 
by the Commission, or purchased or sold through a broker-dealer 
regulated by the Commission.\73\ The broker-dealer trade association 
working group did not address this proposed exclusion in its comment, 
and the Bureau did not receive any other comments relating to this 
particular exception.
---------------------------------------------------------------------------

    \73\ This is because the proposed definition excludes any 
transfer that is excluded from the definition of ``electronic fund 
transfer'' under 12 CFR 1005.3(c)(4).
---------------------------------------------------------------------------

    The Bureau has limited information about the volume of broker-
dealers' transactions that are international money transfers under the 
Proposed Rule because the primary data sources used by the Bureau in 
this rulemaking do not include any broker-dealers registered with the 
Commission and the trade group commenter and other commenters did not 
provide any data. However, the Bureau is not aware of any broker-dealer 
registered with the Commission that would meet the threshold of one 
million aggregate annual international money transfers under the 
definitions as proposed, and no commenter identified any.\74\ The 
Proposed Rule incorporates an exclusion from Regulation E that 
encompasses those broker-dealer transactions that the Bureau believes 
should be excluded from the international money transfer market. 
Accordingly, the Bureau is finalizing the definition of ``international 
money transfer'' as proposed.
---------------------------------------------------------------------------

    \74\ In a letter sent outside this rulemaking, one industry 
trade association working group indicated that its broker-dealer 
members send an average of approximately 43,000 wires annually per 
firm. Letter from Manisha Kimmel, Executive Director, Financial 
Information Forum, to David Blass, Chief Counsel, SEC Division of 
Trading and Markets (Dec. 12, 2012), available at http://www.sec.gov/divisions/marketreg/mr-noaction/2012/financial-information-forum-121412-rege.pdf. While this figure reflects only 
wires sent by the group's members, the low average suggests that 
most broker-dealers do not send anywhere near the proposed threshold 
of one million aggregate annual international money transfers per 
year. Further, the average could include some transfers that would 
not be annual international money transfers as that term is defined 
in the Proposed Rule. For example, a primary purpose of a portion of 
broker-dealers' transfers could be the purchase or sale of a 
security or commodity regulated by the SEC, or purchased or sold 
through a broker-dealer regulated by the SEC. Still other broker-
dealer transfers could be transfers that are not sent primarily for 
personal, family, or household purposes. Further, it is possible 
that the figure includes some domestic wire transfers.
---------------------------------------------------------------------------

International Money Transfer Provider
    Proposed Sec.  1090.107(a) defined the term ``international money 
transfer provider'' to mean any nonbank covered person that provides 
international money transfers for a consumer, regardless of whether the 
consumer holds an account with such person. Consistent with the 
Proposed Rule's definition of ``international money transfer,'' the 
proposed definition of ``international money transfer provider'' 
tracked the definition of ``remittance transfer provider'' in the 
Remittance Rule closely,\75\ with the following exceptions. First, the 
proposed definition replaced ``remittance transfer'' with 
``international money transfer.'' Second, for consistency with the rest 
of the larger-participant rule, the proposed definition replaced the 
first reference to ``person'' with ``nonbank covered person'' \76\ and 
incorporated the larger-participant rule's definition of ``consumer'' 
rather than the Regulation E definition. Third, the Bureau did not 
incorporate the ``remittance transfer provider'' definition's 
requirement that transfers be provided ``in the normal course of 
business.'' \77\ The Bureau explained that such a limitation is 
unnecessary in the definition of ``international money transfer 
provider'' because the Proposed Rule would not impose any new business 
conduct obligations and would require that an international money 
transfer provider have at least one million aggregate annual 
international money transfers to be a larger participant.
---------------------------------------------------------------------------

    \75\ 12 CFR 1005.30(f).
    \76\ ``Nonbank covered person'' includes (1) any person that 
engages in offering or providing a consumer financial product or 
service; and (2) any affiliate of a person that engages in offering 
or providing a consumer product or service if such affiliate acts as 
a service provider to such person, but does not include any persons 
described in 12 U.S.C. 5515(a) and 5516(a). 12 CFR 1090.101.
    \77\ 12 CFR 1005.30(f).
---------------------------------------------------------------------------

    The Bureau received several comments expressing support and no 
comments raising concerns regarding this proposed definition and adopts 
the definition as proposed. As the Bureau explained in the proposal, 
the Bureau intends the commentary to the Remittance Rule \78\ to be 
used to guide in interpreting the term ``international money transfer 
provider'' in Sec.  1090.107(a), to the extent appropriate given the 
definitions' different regulatory contexts.
---------------------------------------------------------------------------

    \78\ Official Interpretations to Regulation E, 12 CFR part 1005, 
Supp. I, comment 30(f).
---------------------------------------------------------------------------

Sender
    Proposed Sec.  1090.107(a) defined the term ``sender'' to mean a 
consumer in a State who primarily for personal, family, or household 
purposes requests an international money transfer provider to send an 
international money transfer to a designated recipient. This proposed 
definition largely tracked the definition of ``sender'' in the 
Remittance Rule, but replaced ``remittance transfer'' with 
``international money transfer'' and

[[Page 56641]]

``remittance transfer provider'' with ``international money transfer 
provider.'' \79\ The Proposed Rule also incorporated the definition of 
``consumer'' from the larger-participant rule rather than the 
definition from Regulation E, and the Bureau has decided to finalize 
this aspect of the proposal to minimize confusion and maintain 
consistency with the rest of the larger-participant rule. The Bureau 
did not receive any comments that specifically addressed the proposed 
definition of ``sender'' and adopts the definition as proposed. The 
Bureau intends the term ``sender'' to be interpreted in the same manner 
as the term ``sender'' in the Remittance Rule,\80\ to the extent 
appropriate given the definitions' different regulatory contexts.
---------------------------------------------------------------------------

    \79\ 12 CFR 1005.30(g).
    \80\ Official Interpretations to Regulation E, 12 CFR part 1005, 
Supp. I, comment 30(g).
---------------------------------------------------------------------------

State
    Proposed Sec.  1090.107(a) defined the term ``State'' to mean any 
State, territory, or possession of the United States; the District of 
Columbia; the Commonwealth of Puerto Rico; or any political subdivision 
thereof. This proposed definition was drawn from the definition of 
``State'' in Regulation E subpart A,\81\ and the Bureau intends for it 
to be interpreted accordingly. The Bureau did not receive any comments 
that specifically addressed the proposed definition of ``State'' and 
adopts the definition as proposed.
---------------------------------------------------------------------------

    \81\ The Bureau proposed adopting the definition in Regulation E 
with minor stylistic changes to the last clause of the definition. 
Cf. 12 CFR 1005.2(l) (`` `State' means any State, territory, or 
possession of the United States; the District of Columbia; the 
Commonwealth of Puerto Rico; or any political subdivision of the 
thereof in this paragraph (l).'') (emphasis added).
---------------------------------------------------------------------------

1090.107(b)--Test To Define Larger Participants

Criterion
    The Bureau noted in its proposal that it was considering a number 
of possible criteria that could be used alone or in combination to 
assess whether a nonbank covered person is a larger participant of the 
market for international money transfers, including aggregate annual 
international money transfers, annual receipts, and annual transmitted 
dollar volume. The Bureau proposed to use aggregate annual 
international money transfers as the criterion and invited comment on 
the proposed criterion, the alternatives identified in the proposal, 
and any other possible criteria that commenters believed might be 
superior. In addition to the comments discussed above regarding whether 
the market should include domestic transfers and how ``aggregate annual 
international money transfer'' should be defined,\82\ the Bureau 
received some comments supporting its proposed criterion and one 
comment advocating the use of two criteria rather than a single 
criterion. For the reasons that follow, the Bureau has decided to adopt 
``aggregate annual international money transfers'' as the sole 
criterion in the Final Rule, with the definitional modifications 
described above.
---------------------------------------------------------------------------

    \82\ As noted above, some commenters suggested that the Bureau 
should expand the market to include domestic transfers, an issue 
discussed in the section-by-section discussion of Sec.  1090.107 
above. Other commenters discussed the proposed definitions of 
``aggregate annual international money transfer'' and related terms 
such as ``international money transfer.'' Those comments and the 
changes the Bureau has made to those definitions are discussed in 
the section-by-section analysis of Sec.  1090.107(a) above.
---------------------------------------------------------------------------

    Several commenters expressed support for the Bureau's proposed 
criterion. A consumer advocacy group indicated that it was pleased that 
the proposed criterion counts all transfers, regardless of amount. This 
commenter noted that as mobile technologies advance and other market 
innovations take place, more consumers may choose to send smaller, more 
frequent payments abroad.
    Another commenter expressed concern that using aggregate annual 
international money transfers could prompt providers to encourage 
consumers to restructure their transactions in order to avoid 
supervision. The commenter speculated, for example, that it would not 
be surprising if some money transfer providers offered discounts to 
consumers who send fewer transfers in order to stay below the 
threshold. To avoid this, the commenter suggested that the Bureau 
should use two criteria--dollar volume and aggregate annual 
international money transfers--and treat an entity as a larger 
participant if it meets the threshold set for either of two criteria.
    The Bureau does not believe that a second criterion is necessary in 
this market and is not inclined to add one due to the complexity it 
would entail for the Bureau and any industry participants who seek to 
assess whether they are larger participants. The Bureau believes that 
market conditions and consumer preferences are more likely to drive how 
transactions are structured than a desire to evade supervision. 
Moreover, the Bureau has an array of tools available if it learns that 
entities are in fact restructuring their transactions in an effort to 
evade supervision as larger participants.\83\
---------------------------------------------------------------------------

    \83\ For example, the Bureau could revisit the criterion 
decision for this larger-participant rule or could establish 
supervisory authority over particular entities that pose risks to 
consumers based on a reasonable-cause determination pursuant to the 
Bureau's risk determination rule, 12 CFR part 1091. It could also 
use non-supervisory approaches, including initiating enforcement 
investigations where appropriate.
---------------------------------------------------------------------------

    As the Bureau explained in the Proposed Rule, the Bureau believes 
that aggregate annual international money transfers is an appropriate 
criterion by itself because it measures, in several meaningful ways, 
the nonbank provider's level of participation in the market and impact 
on consumers. First, the number of transfers reflects the extent of 
interactions an international money transfer provider has with 
consumers because each transfer represents a single interaction with at 
least one consumer. Second, the number of transfers is a relatively 
durable metric in the face of changing market conditions such as 
fluctuating exchange rates or inflation. Third, because international 
money transfer providers often are paid, in part, on a per-transfer 
basis, the number of transfers is related to the revenue received, 
another indicator of market participation.
    The Bureau anticipates that the streamlined definition of 
``aggregate annual international money transfers'' described above will 
be relatively straightforward and objective for an international money 
transfer provider to calculate, should the occasion to do so arise.\84\ 
Adding an alternative criterion of dollars transmitted would 
significantly increase the complexity of the rule, by requiring 
additional definitions, data, and calculations. The Bureau declines to 
complicate the test for defining larger participants in this market by 
adding a second criterion with its own threshold. In light of all of 
the considerations described above, the

[[Page 56642]]

Bureau has adopted ``aggregate annual international money transfers'' 
as the sole criterion, as proposed.
---------------------------------------------------------------------------

    \84\ The Bureau expects that many market participants already 
assemble data generally related to the number of international 
transactions that they provide for internal business purposes, 
particularly because many providers are compensated on a per-
transfer basis. Moreover, many providers are required to report 
transaction data to State regulators. The Bureau believes that these 
existing practices will help providers to estimate their aggregate 
annual international money transfers, and no commenters suggested 
otherwise. The Bureau expects that some market participants may 
choose to track the number of remittance transfers they provide each 
year, which could provide another source for estimates of aggregate 
annual international money transfers because the definition of the 
criterion roughly tracks the definition of ``remittance transfer'' 
used in the Remittance Rule. Accordingly, the Bureau believes that 
many market participants interested in doing so already have 
sufficient data to estimate whether their aggregate annual 
international money transfers exceed a given transaction threshold.
---------------------------------------------------------------------------

Threshold
    Under the Proposed Rule, a nonbank covered person would be a larger 
participant of the international money transfer market if the nonbank 
covered person has at least one million aggregate annual international 
money transfers. The Bureau proposed to apply a single threshold 
regardless of where the provider operates in the United States or where 
the recipient is located outside of the United States. The Bureau 
received comments supporting the Bureau's proposed approach, as well as 
comments advocating a higher or lower threshold or suggesting that the 
Bureau should add regional or localized alternative tests. For the 
reasons that follow, the Bureau has decided to finalize the single 
threshold of one million aggregate annual international money transfers 
as proposed.
    The Bureau's estimates described above indicate that a threshold of 
one million aggregate annual international money transfers will bring 
within the Bureau's supervisory authority approximately 25 
international money transfer providers that collectively provided about 
140 million transfers in 2012, with a total volume of about $40 
billion.\85\ These nonbanks consist of both entities that send money to 
most of the countries in the world and entities that focus on sending 
money to particular recipient countries or regions.
---------------------------------------------------------------------------

    \85\ 79 FR 5302, 5307 n.38, 5311 & n.67 (Jan. 31, 2014) 
(explaining methodology used and its potential limitations). 
According to the Bureau's estimates, these 25 providers constitute 
less than 10 percent of all participants in this nonbank market. Id. 
at 5306 n.36, 5307 n.38, 5311 n.69.
---------------------------------------------------------------------------

    Some commenters expressed support for the proposed threshold.\86\ 
One noted that it agreed with the Bureau that the threshold would 
further the Bureau's goal of supervising market participants that 
represent a substantial portion of the market and have a significant 
impact on consumers.
---------------------------------------------------------------------------

    \86\ While agreeing with the proposed threshold, one of these 
commenters encouraged the Bureau to monitor smaller nonbank market 
participants and to use its authority under 12 U.S.C. 5514(a)(1)(c), 
which authorizes the Bureau to supervise entities that pose risks to 
consumers based on a reasonable-cause determination.
---------------------------------------------------------------------------

    Other commenters encouraged the Bureau to lower the threshold to 
500,000 aggregate annual international money transfers. In a joint 
comment, five large money transmitters suggested that lowering the 
threshold would extend the benefits of supervision to more entities. 
Relying on Bureau estimates, these commenters also noted that even with 
this lower threshold there would be more larger participants in the 
consumer debt collection market than there would be in the 
international money transfer market. A comment from a consumer advocacy 
group asserted that there may be a natural dividing line at 500,000 
transfers because the Bureau's data suggest that there are a small 
number of entities that have between 500,000 and 1,000,000 aggregate 
annual international money transfers and a much larger number of 
entities with less than 500,000 aggregate annual international money 
transfers.
    A trade association representing banks urged the Bureau to adopt an 
even lower threshold of 100,000 transfers. It argued that this would 
further the Bureau's goal of parity between banks and nonbanks and be 
more consistent with the 100-transfer safe harbor that the Bureau 
established in the Remittance Rule definition of ``remittance transfer 
provider'' for purposes of determining whether an entity provides 
transfers in the ``normal course of business''.\87\
---------------------------------------------------------------------------

    \87\ 12 CFR 1005.30(f)(2)(i) creates a safe harbor with respect 
to the phrase ``normal course of business'' in the definition of 
``remittance transfer provider,'' which determines whether a person 
is required to comply with the Remittance Rule. Pursuant to Sec.  
1005.30(f)(2)(i), a person is deemed not to be providing remittance 
transfers for a consumer in the normal course of its business if the 
person provided 100 or fewer remittance transfers in the previous 
calendar year, and provides 100 or fewer remittance transfers in the 
current calendar year. A person that sends more than 100 remittance 
transfers in a calendar year does not necessarily provide remittance 
transfers for consumers in the normal course of business. Rather, 
whether such a person provides remittance transfers in the normal 
course of business depends on the facts and circumstances, including 
the total number and frequency of remittance transfers sent by the 
provider. See Official Interpretations to Regulation E, 12 CFR part 
1005, Supp. I, comment 30(f)-2.
---------------------------------------------------------------------------

    The Bureau does not agree that 500,000 or 100,000 aggregate annual 
international money transfers would be a more appropriate or natural 
threshold than one million in this market at this time. According to 
the Bureau's estimates, over 90 percent of market activity is conducted 
by entities with over one million aggregate international money 
transfers, and cutting the proposed threshold in half or reducing it by 
an even larger factor would only marginally increase the proportion of 
market activity covered by the rule, while extending coverage to 
companies that are substantially smaller in size.\88\
---------------------------------------------------------------------------

    \88\ 79 FR 5302, 5307 n.38, 5311 & n.68 (Jan. 31, 2014) 
(explaining methodology used and its potential limitations). The 
Bureau estimates that the nonbanks that send between 500,000 and 1 
million international money transfers per year account collectively 
for only about 1.5 percent of all international money transfers. Id. 
at 5307 & n.38.
---------------------------------------------------------------------------

    The Bureau also does not agree with one commenter's suggestion that 
the number of larger participants in this market should align with the 
number in the consumer debt collection market. There is no reason to 
expect that the number of larger participants in this market would be 
the same as the number in any other market because the Bureau tailors 
the criterion and threshold to the specific characteristics of each 
distinct market.
    Similarly, there is no reason to think that the threshold for this 
larger-participant rule should in any way resemble the number of 
transfers that disqualifies an entity from claiming a safe harbor when 
assessing whether the entity is providing transfers in the ``normal 
course of business'' for purposes of the Remittance Rule's definition 
of ``remittance transfer provider''.\89\ The two provisions serve 
different purposes: One determines which entities are larger 
participants in the international money transfer market, while the 
other helps to determine which entities are exempt from the substantive 
requirements of the Remittance Rule because they do not provide 
remittance transfers in the normal course of their business. The 
commenter that cited the Remittance Rule's ``normal course of 
business'' safe harbor as a basis for lowering the larger-participant 
threshold also implied that the safe harbor applies only to banks. In 
fact, the Remittance Rule and its ``normal course of business'' safe 
harbor apply to both banks and nonbanks.
---------------------------------------------------------------------------

    \89\ Like the proposal, the Final Rule's definition of 
``international money transfer provider'' does not incorporate the 
``normal course of business'' language from the Remittance Rule's 
definition of ``remittance transfer provider,'' for the reasons 
explained in the section-by-section analysis of the definition of 
``international money transfer provider'' above.
---------------------------------------------------------------------------

    Although it is true that a lower threshold could bring more 
entities under the Bureau's supervisory authority, that is not a reason 
by itself to lower the threshold. The Bureau has a variety of tools 
that it can use should concerns emerge regarding nonbank market 
participants that have less than one million aggregate annual 
international money transfers. The Bureau could, for example, establish 
supervisory authority over a particular company that poses risks to 
consumers based on a reasonable-cause determination pursuant to the 
Bureau's risk determination rule, 12 CFR part 1091. It could also use 
non-supervisory approaches where appropriate, such as initiating 
enforcement investigations, coordinating with State regulators, State 
attorneys general, and the Federal Trade

[[Page 56643]]

Commission, and engaging in research and monitoring. In light of all of 
the considerations described above, the Bureau declines to lower the 
threshold.
    In contrast to the comments received from industry and consumer 
groups, two State regulator associations suggested raising the 
threshold to three million aggregate annual international money 
transfers due to the States' supervisory activity in the market. The 
State regulator associations suggested that three million transfers 
would be more in line with the larger-participant thresholds that the 
Bureau has set in other markets.
    As noted above, the Bureau tailors the threshold in each market to 
the specific characteristics of the particular market. According to the 
Bureau's estimates, raising the threshold from one to three million 
aggregate annual international money transfers in this market would 
remove from the rule's coverage more than half of the nonbanks covered 
by the proposal (approximately 15 out of 25 entities) and would 
significantly decrease the proportion of market activity covered by the 
rule.\90\ The Bureau recognizes the important role that State 
regulators play in this market. As indicated in the Proposed Rule, the 
Bureau will coordinate with appropriate State regulatory authorities 
and will consider the extent of State supervisory activity when 
prioritizing individual examinations. The Bureau does not, however, 
believe it is appropriate to remove entities with between one and three 
million aggregate annual international money transfers categorically 
from supervision as larger participants, given the significant role 
that these entities play in the market.
---------------------------------------------------------------------------

    \90\ According to the Bureau's estimates, the entities that 
would be removed from coverage if this shift were made are 
collectively responsible for roughly one-sixth of all international 
money transfers. 79 FR 5302, 5307 & n.38 (Jan. 31, 2014).
---------------------------------------------------------------------------

    One commenter suggested that the Bureau should supervise all 
providers, regardless of size, while others suggested that the Bureau 
should include all publicly-traded providers in its larger-participant 
definition. The Bureau does not believe that including a category of 
providers regardless of size would be consistent with 12 U.S.C. 
5514(a)(1)(B), which authorizes the Bureau to define ``larger 
participants'' of other markets for consumer financial products or 
services.\91\ The Bureau therefore declines to make the changes 
suggested by these commenters.
---------------------------------------------------------------------------

    \91\ As noted above, nonbank covered persons generally are 
subject to the Bureau's regulatory and enforcement authority and any 
applicable Federal consumer financial law, regardless of whether 
they are subject to the Bureau's supervisory authority.
---------------------------------------------------------------------------

    The Bureau proposed a single threshold regardless of the 
destination of a provider's transfers but also indicated that it was 
considering, as an alternative, establishing different thresholds based 
on destination region. In their joint comment five large money 
transmitters encouraged the Bureau to supplement the Bureau's proposed 
test with an alternative test that focuses on providers that send 
transfers to key geographic corridors. In support, they explained that 
providers focusing on specific destination regions can have a large 
impact on particular consumer segments. Another banking industry 
commenter took the opposite view, arguing that using different 
thresholds would add too much complexity.
    The Bureau agrees that using different thresholds would further 
complicate the rule and would make it much more difficult to 
administer. The Bureau is not aware of, and commenters did not 
identify, any existing data compilation that would provide the 
information necessary to establish corridor-specific thresholds.\92\ 
Furthermore, even if data could be collected to support corridor 
segmentation, it would be extremely difficult and time-consuming to 
define all of the corridors, assess corresponding volumes, and set and 
maintain corridor-specific thresholds over time, as corridors could be 
defined in a wide variety of ways and corridor volumes could shift in 
response to any number of factors. While using different thresholds for 
different destination corridors might increase the number of larger 
participants that focus on specific destination regions, the Bureau's 
analysis and market research indicates that the threshold of one 
million aggregate annual international money transfers already defines 
a number of entities that focus on specific destination regions as 
larger participants. The Bureau is therefore finalizing the rule 
without adding any corridor-specific thresholds.
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    \92\ The Bureau noted in its proposal that it was not aware of 
data sources that would support regional segmentation of this 
nature. In addressing this issue, the large money transmitter 
commenters suggested that the Bureau might be able to request 
transactional data from individual companies and/or from State 
regulators, but indicated that they did not themselves have such 
information available.
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    The Bureau also received comments from three consumer groups 
requesting that the Bureau supervise major regional or local money 
transmitters that dominate certain submarkets within the United States 
even if such transmitters do not have a nationwide presence. These 
commenters suggested that the Bureau could consider a company's market 
share (e.g., revenues or volume of transactions) relative to the 
population density of the area of the United States in which it 
operates. They suggested that a money transfer company located in a 
highly urbanized area doing 300,000 transactions annually would not be 
considered a major participant in that market, but that a money 
transfer company in a more rural area doing the same volume of 
transactions could be the predominant transmitter in the community.
    The challenges associated with assessing regional or local 
dominance in the United States are similar to those posed by setting 
multiple thresholds for different destination regions. In addition to 
volume information for market participants, the Bureau would need to 
gather data on each market participant's area(s) of operation and 
population information for each identified area. Each of these factors 
could change over time, making it very difficult to assess which 
entities would be larger participants. The Bureau believes that such an 
approach would be burdensome and that it is reasonable instead to 
identify larger participants in this market by considering the overall 
number of international money transfers that each international money 
transfer provider sends from the entire United States.\93\ The Bureau 
is therefore adopting a single threshold of one million aggregate 
annual international money transfers, as proposed.
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    \93\ As noted above, the Bureau has other tools that it could 
use to address these entities, should they raise concerns, including 
(1) establishing supervision authority over a particular company 
based on a reasonable-cause determination pursuant to the Bureau's 
risk determination rule, 12 CFR part 1091; (2) enforcement 
investigations where warranted; (3) coordination with State 
regulators, State attorneys general, and the Federal Trade 
Commission; and (4) research and monitoring.
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VI. Section 1022(b)(2)(A) of the Dodd-Frank Act

A. Overview

    The Bureau considered potential benefits, costs, and impacts of the 
Final Rule.\94\ The Proposed Rule set forth a

[[Page 56644]]

preliminary analysis of these effects, and the Bureau requested and 
received comments on the topic. In addition, the Bureau has consulted 
with or offered to consult with the Federal Trade Commission, the Board 
of Governors of the Federal Reserve System, the Federal Deposit 
Insurance Corporation, the Office of the Comptroller of the Currency, 
the National Credit Union Administration, and the Securities and 
Exchange Commission regarding, among other things, consistency with any 
prudential, market, or systemic objectives administered by such 
agencies.
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    \94\ Specifically, 12 U.S.C. 5512(b)(2)(A) 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 12 U.S.C. 5516, and the 
impact on consumers in rural areas. In addition, 12 U.S.C. 
5512(b)(2)(B) directs the Bureau to consult, before and during the 
rulemaking, with appropriate prudential regulators or other Federal 
agencies, regarding consistency with objectives those agencies 
administer. The manner and extent to which the provisions of 12 
U.S.C. 5512(b)(2) apply to a rulemaking of this kind that does not 
establish standards of conduct are unclear. Nevertheless, to inform 
this rulemaking more fully, the Bureau performed the analysis and 
consultations described in those provisions of the Dodd-Frank Act.
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    The Final Rule defines a category of nonbanks that would be subject 
to the Bureau's nonbank supervision program pursuant to 12 U.S. C. 
5514(a)(1)(B). The category includes ``larger participants'' of a 
market for ``international money transfers'' described in the Final 
Rule. Whether an entity is a larger participant in this market will be 
measured on the basis of aggregate annual international money 
transfers. If a nonbank covered person's aggregate annual international 
money transfers equal or exceed one million, it will be a larger 
participant.

B. Potential Benefits and Costs to Consumers and Covered Persons

    This analysis considers the benefits, costs, and impacts of the key 
provisions of the Final Rule against a baseline that includes the 
Bureau's existing rules defining larger participants in certain 
markets.\95\ Many States have supervisory programs relating to money 
transfers, which may consider aspects of Federal consumer financial 
law. However, at present, there is no Federal program for supervision 
of nonbanks that are international money transfer providers with 
respect to Federal consumer financial law. The Final Rule extends the 
Bureau's supervisory authority over international money transfer 
providers that are larger participants of the international money 
transfer market. This includes the authority to supervise for 
compliance with EFTA and the Remittance Rule.
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    \95\ The Bureau has discretion in any rulemaking to choose an 
appropriate scope of analysis with respect to potential benefits and 
costs and an appropriate baseline. The Bureau, as a matter of 
discretion, has chosen to describe a broader range of potential 
effects to inform the rulemaking more fully.
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    As the Bureau noted in the Proposed Rule, limited data are 
available with which to quantify the potential benefits, costs, and 
impacts of the Final Rule. For example, although the Bureau has 
confidential supervisory data from California, New York, and Ohio from 
which it can estimate the number and size of international money 
transfer providers, the Bureau lacks detailed or comprehensive 
information about their rates of compliance or noncompliance with 
Federal consumer financial law and about the range of, and costs of, 
compliance mechanisms used by market participants.
    In light of these data limitations, this analysis generally 
provides a qualitative discussion of the benefits, costs, and impacts 
of the Final Rule. General economic principles, together with the 
limited data that are available, provide insight into these benefits, 
costs, and impacts. Where possible, the Bureau has made quantitative 
estimates based on these principles and data as well as on its 
experience of undertaking supervision in other markets.
    The discussion below describes three categories of potential 
benefits and costs. First, the Final Rule authorizes the Bureau's 
supervision of larger participants of the international money transfer 
market. Larger participants of the proposed market might respond to the 
possibility of supervision by changing their systems and conduct, and 
those changes might result in costs, benefits, or other impacts. 
Second, if the Bureau undertakes supervisory activity at specific 
larger participants, those entities would incur costs from responding 
to supervisory activity, and the results of these individual 
supervisory activities might also produce benefits and costs. Third, 
the Bureau analyzes the costs that might be associated with entities' 
efforts to assess whether they qualify as larger participants under the 
rule.
1. Benefits and Costs of Responses to the Possibility of Supervision
    The Final Rule will subject larger participants of the 
international money transfer market to the possibility of Bureau 
supervision. That the Bureau will be authorized to undertake 
supervisory activities with respect to a nonbank covered person that 
qualifies as a larger participant does not necessarily mean the Bureau 
will in fact undertake such activities regarding that covered person in 
the near future. Rather, supervision of any particular larger 
participant as a result of this rulemaking is probabilistic in nature. 
For example, the Bureau will examine certain larger participants on a 
periodic or occasional basis. The Bureau's decisions about supervision 
will be informed, as applicable, by the factors set forth in 12 U.S.C. 
5514(b)(2), relating to the size and transaction volume of individual 
participants, the risks their consumer financial products and services 
pose to consumers, the extent of State consumer protection oversight, 
and other factors the Bureau may determine are relevant. Each entity 
that believes it qualifies as a larger participant will know that it 
may be supervised and may gauge, given its circumstances, the 
likelihood that the Bureau will initiate an examination or other 
supervisory activity.
    The prospect of potential supervisory activity could create an 
incentive for larger participants to allocate additional resources and 
attention to compliance with Federal consumer financial law, 
potentially leading to an increase in the level of compliance. They 
might anticipate that by doing so (and thereby decreasing risk to 
consumers), they could decrease the likelihood of their actually being 
subject to supervisory activities as the Bureau evaluates the factors 
outlined above. In addition, an actual examination will be likely to 
reveal any past or present noncompliance, which the Bureau could seek 
to correct through supervisory activity or, in some cases, enforcement 
actions. Larger participants might therefore judge that the prospect of 
supervision increases the potential consequences of noncompliance with 
Federal consumer financial law, and they might seek to decrease that 
risk by taking steps to identify and cure or mitigate any 
noncompliance.
    The Bureau believes it is likely that many market participants will 
increase compliance in response to the Bureau's supervisory activity 
authorized by the Final Rule. However, because the Final Rule itself 
does not require any larger participant to alter its performance of 
international money transfers, any estimate of the amount of increased 
compliance would be both an estimate of current compliance levels and a 
prediction of market participants' behavior in response to the Final 
Rule. The data that the Bureau currently has do not support a specific 
quantitative estimate or prediction. But, to the extent larger 
participants allocate resources to increasing their compliance in 
response to the Final Rule, that response would result in both benefits 
and costs.\96\
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    \96\ Another approach to considering the benefits, costs, and 
impacts of the Final Rule would be to focus almost entirely on the 
supervision-related costs for larger participants and omit a broader 
consideration of the benefits and costs of increased compliance. As 
noted above, the Bureau has, as a matter of discretion, chosen to 
describe a broader range of potential effects to inform the 
rulemaking more fully.

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[[Page 56645]]

a. Benefits From Increased Compliance
    Increased compliance with Federal consumer financial laws by larger 
participants in the international money transfer market will be 
beneficial to consumers who send international money transfers. The 
number of American consumers who could potentially be affected is 
significant. As noted above, data from the 2011 CPS show that more than 
4 million U.S. households had used nonbanks to send money abroad to 
friends and family in the preceding year.\97\ Increasing the rate of 
compliance with Federal consumer financial laws will benefit consumers 
and the consumer financial market by providing more of the protections 
mandated by those laws.
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    \97\ 2011 CPS Report 32, 142-43.
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    EFTA and the Remittance Rule offer substantial consumer protections 
for consumers sending remittance transfers. Together, EFTA and the 
Remittance Rule clarify the remittance process for consumers by, among 
other things, requiring the provision of standardized disclosures about 
pricing and increasing consumer protections when transfers do not go as 
planned. For consumers, this should increase the transparency of 
remittance prices and facilitate dispute resolution when errors occur.
    More broadly, the Bureau will be examining for compliance with 
other Federal consumer financial laws, including whether larger 
participants of the international money transfer market engage in 
unfair, deceptive, or abusive acts or practices (UDAAPs).\98\ Conduct 
that does not violate an express prohibition of another Federal 
consumer financial law may nonetheless constitute a UDAAP.\99\ To the 
extent that any larger participant is currently engaged in any UDAAPs, 
the cessation of the unlawful act or practice would benefit consumers. 
Larger participants might improve policies and procedures in response 
to possible supervision in order to avoid engaging in UDAAPs.
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    \98\ 12 U.S.C. 5531.
    \99\ The CFPB Supervision and Examination Manual provides 
further guidance on how the UDAAP prohibition applies to supervised 
entities and is available at http://www.consumerfinance.gov/guidance/supervision/manual.
---------------------------------------------------------------------------

    The possibility of supervision also may help make incentives to 
comply with Federal consumer financial laws more consistent between the 
likely larger participants and banks and credit unions, which are 
already subject to Federal supervision with respect to Federal consumer 
financial laws. Although some nonbanks are already subject to State 
supervision, introducing the possibility of Federal supervision could 
encourage nonbanks that are likely larger participants to devote 
additional resources to compliance. It could also help ensure that the 
benefits of Federal oversight reach consumers who do not have ready 
access to bank- or credit union-provided international transfers. In 
2011, approximately one-sixth of individuals who sent money abroad to 
friends and family through a nonbank did not have a bank or credit 
union account.\100\
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    \100\ Bureau estimate based on 2011 CPS data, which are 
available at http://thedataweb.rm.census.gov/ftp/cps_ftp.html and described at http://www.census.gov/prod/techdoc/cps/cpsjun11.pdf.
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b. Costs of Increased Compliance
    To the extent that nonbank larger participants decide to increase 
resources dedicated to compliance in response to the possibility of 
increased supervision, the entities will bear any direct cost of any 
changes to their systems, protocols, or personnel. Any such increase in 
costs could be passed on in part to consumers. Whether and to what 
extent entities increase resources dedicated to compliance and/or pass 
those costs to consumers will depend not only on the entities' current 
practices and the changes they decide to make, but also on market 
conditions. The Bureau lacks detailed information with which to predict 
what portion of any cost of any increased compliance will be borne by 
larger participants or passed on to consumers. When or if such a cost 
were borne by consumers, consumers might respond by changing the 
frequency or amount of international money transfers sent.
    In considering any potential price effect of the Final Rule, it is 
important to take into account the fact that nonbanks below the larger-
participant threshold will not be subject to supervision as a result of 
this rule. In the Proposed Rule, the Bureau stated that because the 
costs incurred by nonbanks below the larger-participant threshold would 
be unaffected by the rule, their pricing should also not be affected. 
The Bureau stated that the competition from these smaller entities 
could reduce the likelihood that larger participants would choose to 
increase their prices in response to the rule.
    One commenter disagreed, stating that (1) costs incurred by a 
larger participant could be passed down to a smaller provider if there 
is a relationship between the larger participant and the smaller 
provider, (2) smaller providers might increase fees to take advantage 
of market factors including an increase in prices charged by larger 
participants, and (3) other factors including compliance obligations 
imposed by laws and regulations other than this larger-participant rule 
could result in increasing prices. The commenter did not specify what 
it meant by a relationship between the larger and smaller provider, or 
how exactly costs would be passed between providers. The Bureau's 
market research suggests that there are hundreds of international money 
transfer providers that will not be subject to supervision under the 
Final Rule. In noting that smaller entities will not be subject to 
supervision as larger participants under this rule, the Bureau merely 
identified one factor that may make it less likely that larger 
participants will increase their prices. Even if some smaller entities 
are indirectly affected by the rule (together with larger 
participants), the Bureau believes that competition from unaffected 
smaller entities could still reduce the likelihood that any market 
participants would choose to increase their prices in response to the 
rule. To the extent other laws and regulations, or any other factors, 
affect prices, those are beyond the scope of this analysis under 
section 1022 of the Dodd-Frank Act, which is focused on the costs and 
benefits of this individual rule.
2. Benefits and Costs of Individual Supervisory Activities
    In addition to the responses of market participants anticipating 
supervision, the possible consequences of the Final Rule include the 
responses to and effects of individual examinations or other 
supervisory activities that the Bureau might conduct in the 
international money transfer market.
a. Benefits of Supervisory Activities
    Supervisory activity could provide several types of benefits. For 
example, as a result of supervisory activity, the Bureau and an entity 
might uncover deficiencies in the entity's policies and procedures. The 
Bureau's examination manual calls for the Bureau generally to prepare a 
report of each examination, to assess the strength of the entity's 
compliance mechanisms, and to assess the risks the entity poses to 
consumers, among other things. The Bureau shares examination findings 
with the examined entity because one purpose of supervision is to 
inform the entity of problems detected by examiners. Thus, for example, 
an examination might find evidence of widespread noncompliance with 
Federal consumer financial law, or it might identify specific areas 
where an entity has inadvertently failed to comply. These examples are 
only

[[Page 56646]]

illustrative of the kinds of information an examination might uncover.
    Detecting and informing entities about such problems should be 
beneficial to consumers. When the Bureau notifies an entity about risks 
associated with an aspect of its activities, the entity is expected to 
adjust its practices to reduce those risks. That response may result in 
increased compliance with Federal consumer financial law, with benefits 
like those described above. Or it may avert a violation that would have 
occurred had Bureau supervision not detected the risk promptly. The 
Bureau may also inform entities about risks posed to consumers that 
fall short of violating the law. Action to reduce those risks would 
also be a benefit to consumers.
    Given the obligations international money transfer providers have 
under Federal consumer financial law and the existence of efforts to 
enforce such law, the results of supervision also may benefit larger 
participants by detecting compliance problems early. When an entity's 
noncompliance results in litigation or an enforcement action, the 
entity must face both the costs of defending its actions and the 
penalties for noncompliance, including potential liability for damages 
to private plaintiffs. The entity must also adjust its systems to 
ensure future compliance. Changing practices that have been in place 
for long periods of time can be expected to be relatively difficult 
because the practices may be severe enough to represent a serious 
failing of an entity's systems. Supervision may detect flaws at a point 
when correcting them would be relatively inexpensive. Catching problems 
early can, in some situations, forestall costly litigation. To the 
extent early correction limits the amount of consumer harm caused by a 
violation, it can help limit the cost of redress. In short, supervision 
might benefit larger participants by, in the aggregate, reducing the 
need for other more expensive activities to achieve compliance.\101\
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    \101\ Further potential benefits to consumers, covered persons, 
or both might arise from the Bureau's gathering of information 
during supervisory activities. The goals of supervision include 
informing the Bureau about activities of market participants and 
assessing risks to consumers and to markets for consumer financial 
products and services. The Bureau may use this information to 
improve regulation of consumer financial products and services and 
to improve enforcement of Federal consumer financial law, in order 
to better serve its mission of ensuring consumers' access to fair, 
transparent, and competitive markets for such products and services. 
Benefits of this type will depend on what the Bureau learns during 
supervision and how it uses that knowledge. For example, because the 
Bureau will examine a number of covered persons in the international 
money transfer market, the Bureau will build an understanding of how 
effective compliance systems and processes function in that market.
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b. Costs of Supervisory Activities
    The potential costs of actual supervisory activities arise in two 
categories. The first involves any costs to individual larger 
participants of increasing compliance in response to the Bureau's 
findings during supervisory activity and to supervisory actions. These 
costs are similar in nature to the possible compliance costs, described 
above, that larger participants in general might incur in anticipation 
of possible supervisory actions. This analysis will not repeat that 
discussion. The second category is the cost of supporting supervisory 
activity.
    Supervisory activity may involve requests for information or 
records, on-site or off-site examinations, or some combination of these 
activities. For example, in an on-site examination, Bureau examiners 
generally contact the entity for an initial conference with management. 
That initial contact is often accompanied by a request for information 
or records. Based on the discussion with management and an initial 
review of the information received, examiners determine the scope of 
the on-site exam. While on-site, examiners spend some time in further 
conversation with management about the entity's policies, procedures, 
and processes. The examiners also review documents, records, and 
accounts to assess the entity's compliance and evaluate the entity's 
compliance management system. As with the Bureau's other examinations, 
examinations of nonbank larger participants in the international money 
transfer market could involve issuing confidential examination reports 
and compliance ratings. The Bureau's examination manual describes the 
supervision process and indicates what materials and information an 
entity could expect examiners to request and review, both before they 
arrive and during their time on-site.
    The primary cost an entity will face in connection with an 
examination is the cost of employees' time to collect and provide the 
necessary information. The frequency and duration of examinations of 
any particular entity would depend on a number of factors, including 
the size of the entity, the compliance or other risks identified, 
whether the entity has been examined previously, and the demands on the 
Bureau's supervisory resources imposed by other entities and markets. 
Nevertheless, some rough estimates may be useful to provide a sense of 
the magnitude of potential staff costs that entities might incur.
    The cost of supporting supervisory activity may be calibrated using 
prior Bureau experience in supervision. The Bureau considers its 
nonbank payday lender examinations as a reasonable proxy for the 
duration and labor intensity of future international money transfer 
provider examinations. Although there are many differences, the nonbank 
payday lending market is more like the nonbank market for international 
money transfers than other nonbank markets the Bureau currently 
supervises because both markets involve point-of-sale transactions 
involving similar dollar amounts.
    The average duration of the on-site portion of Bureau nonbank 
payday exams is approximately 8 weeks.\102\ Assuming that each exam 
requires 2 weeks of preparation time by international money transfer 
provider staff prior to the exam as well as on-site assistance by staff 
throughout the duration of the exam, the Bureau assumes that the 
typical examination in this nonbank market would require 10 weeks of 
staff time. The Bureau has not suggested that counsel or any particular 
staffing level is required during an examination. However, for purposes 
of this analysis, the Bureau assumes, conservatively, that an entity 
might dedicate the equivalent of one full-time compliance officer and 
one-tenth of a full-time attorney to the exam. The average hourly wage 
of a compliance officer in a nonbank entity that operates in activities 
related to credit intermediation is $30.66, and the average hourly wage 
of a lawyer in the same industry is $80.95.\103\ Assuming that wages 
account for 67.5 percent of total compensation,\104\ the total labor 
cost of an examination would be about

[[Page 56647]]

$23,000.\105\ The Bureau estimates that the cost for an entity that 
sends 1 million transfers per year, with an average transfer amount of 
$200, would be approximately 0.18 percent of total revenue from such 
transfers for that year.\106\ Note that this is a conservative estimate 
in several respects because it reflects revenue only from this line of 
business and uses a relatively small average international money 
transfer size as well as the minimum number of transactions that a 
larger participant would provide.\107\
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    \102\ This estimate was derived using confidential supervisory 
Bureau data on the duration of on-site payday loan examinations at 
nonbanks. For purposes of this calculation, the Bureau counted its 
payday loan examinations for which the on-site portion had been 
completed. The Bureau counted only the on-site portion of an 
examination, which included time during the on-site period of the 
examination that examiners spent while off-site for travel or 
holidays. However, the Bureau did not count time spent scoping an 
examination before the on-site portion of the examination or 
summarizing findings or preparing reports of examination afterwards.
    \103\ Bureau of Labor Statistics Occupational Employment 
Statistics (OES) Survey, May 2013 estimates for NAICS code 522300, 
available at http://www.bls.gov/oes/current/naics4_522300.htm.
    \104\ Bureau of Labor Statistics series CMU2025220000000D, 
Quarter 2 2013, available at http://data.bls.gov/timeseries/CMU2025220000000D?data_tool=XGtable.
    \105\ Assuming that individuals are compensated for 40 hour work 
weeks, this is calculated as follows: [(0.1*80.95+30.66)/
0.675]*40*10.
    \106\ This assumption is based on research on remittances 
suggesting that the average price of sending money abroad from the 
United States is roughly 6.42 percent of the total amount sent. 
World Bank, Remittance Prices Worldwide, An Analysis of Trends in 
the Average Total Cost of Migrant Remittance Services (Sept. 2013), 
11 (percentage is average price of $200 transfers in Q3 2013), 
available at https://remittanceprices.worldbank.org/sites/default/files/RPW_Report_Sep2013.pdf. The Bureau measured 
proportion of revenues using the following equation: Proportion of 
revenues={[(0.1*80.95+30.66)/0.675]*40*10{time} /
{1,000,000*200*0.0642{time} .
    \107\ A $200 average transfer size is a conservative estimate. 
Review of the CA Extrapolation figures ($49 billion total market 
dollar volume and 152 million total market transfers) suggests that 
the average transaction size is just over $300. For entities 
reporting to California, New York, and Ohio that sent over 500,000 
transfers, the Analysis of State Supervisory Data suggests that the 
average transfer size is about $300. Using a $300 average transfer 
size, the cost of supervision would be approximately 0.12 percent of 
total revenues for an entity that sends 1 million transfers per 
year. Other sources from 2005 and 2008 also suggest a higher average 
transfer size. Ole E. Andreassen, Remittance Service Providers in 
the United States: How Remittance Firms Operate and How They 
Perceive Their Business Environment 15-16 (June 2006), available at 
http://siteresources.worldbank.org/INTPAYMENTREMMITTANCE/Resources/BusinessmodelsFSEseries.pdf ($550); Bendixen & Amandi, Survey of 
Latin American Immigrants in the United States 23 (Apr. 30, 2008), 
available at idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35063818 ($325).
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    One banking industry association commenter stated that it suspects 
that this estimate grossly understates the time and effort that a 
covered entity will need to prepare for an examination. That commenter 
identified the employee time needed to provide data and information to 
examiners, as well as the time needed to support the Bureau's 
examination teams, as sources of costs. The commenter did not offer an 
alternative estimate on the amount of staff time an examination would 
require. Based on its experience with similar exams, the Bureau has 
estimated the total cost for international money transfer providers, 
including the staff time necessary to prepare for an examination as 
well as the staff time necessary to support the Bureau's examination 
team once examiners arrive on site. Depending on the circumstances, the 
amount may be an underestimate or overestimate for some supervisory 
activities. But even if an examination required twice as much 
compliance officer time as the Bureau estimated, based on the 
assumptions mentioned above, the cost would still only be approximately 
0.3 percent of annual revenue from one million transfers.
    The overall costs of supervision in the international money 
transfer market will depend on the frequency and extent of Bureau 
examinations. Industry commenters suggested that it would be helpful if 
the Bureau provided some expectations or guidance as to frequency and 
timing of examinations and recommended that no covered institution be 
examined more frequently than once every two years.\108\ Neither the 
Dodd-Frank Act nor the Final Rule specifies a particular level or 
frequency of examinations.\109\ The frequency of examinations will 
depend on a number of factors, including the Bureau's understanding of 
the conduct of market participants and the specific risks they pose to 
consumers; the responses of larger participants to prior examinations; 
and the demands that other markets make on the Bureau's supervisory 
resources. These factors can be expected to change over time, and the 
Bureau's understanding of these factors may change as it gathers more 
information about the market through its supervision and by other 
means. The Bureau therefore declines to predict, at this point, 
precisely how many examinations in the international money transfer 
market it will undertake in a given year or how often it will examine 
any particular entity.
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    \108\ Industry commenters also requested guidance as to scope of 
examinations. As noted above, the Bureau typically determines the 
scope of each examination based on initial review of the information 
received and discussions with management.
    \109\ The Bureau declines to predict at this time precisely how 
many examinations it would undertake at each larger participant. 
However, if the Bureau were to examine each larger participant of 
the international money transfer market once every two years, the 
expected annual labor cost of supervision per larger participant 
would be approximately $11,500 (the cost of one examination, divided 
by two). This would account for 0.09 percent of the international 
money transfer revenue of an entity that sends one million transfers 
in a year, assuming an average transaction amount of $200.
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3. Costs of Assessing Larger-Participant Status
    The Final Rule does not require nonbanks to assess whether they are 
larger participants. However, the Bureau acknowledges that in some 
cases international money transfer providers might decide to incur 
costs to assess whether they qualify as larger participants or 
potentially dispute their status.
    One banking industry commenter stated that the Bureau's proposed 
analysis of costs did not include costs for determining whether an 
entity is a larger participant under the rule. This commenter stated 
that nonbanks will be likely to make this determination because it will 
be an important element of the nonbank's strategic plan and budget. In 
the proposal, the Bureau acknowledged that some nonbanks may choose to 
incur the cost of assessing whether they are larger participants even 
though the rule does not require them to do so. The Bureau discussed 
this cost qualitatively rather than quantitatively, because the data 
that the Bureau had did not support a detailed estimate of how many 
international money transfer providers would choose to incur this cost 
or how much they would spend. The commenter did not provide any 
additional data that the Bureau could use for a quantitative analysis, 
and the Bureau has not acquired additional data from other sources. 
Therefore, in this final analysis as in the proposed analysis, the 
Bureau has chosen to address this possible cost qualitatively. No 
commenters objected to the other elements of the qualitative analysis 
presented in the Proposed Rule, and repeated below, including the 
Bureau's assumption that international money transfer providers are 
unlikely to incur substantially greater costs to determine their 
larger-participant status than they expect to incur from Bureau 
supervision.
    Larger-participant status depends on a nonbank's aggregate annual 
international money transfers. As noted above, the Bureau expects that 
many market participants already assemble general data related to the 
number of international transactions that they provide for internal 
business purposes. Moreover, many providers are required to report 
transaction data to State regulators. Further, the definition of the 
criterion in this rule roughly tracks the definition of ``remittance 
transfer'' used in the Remittance Rule, and the Bureau expects that 
some market participants may choose to track the number of remittance 
transfers they provide each year. These preexisting activities could 
assist entities in estimating whether they are larger participants.
    To the extent that some international money transfer providers do 
not already know whether their transactions exceed the threshold, such 
nonbanks might, in

[[Page 56648]]

response to the Final Rule, develop new systems to count their 
transactions in accordance with the definition of ``international money 
transfer.'' The data that the Bureau currently has do not support a 
detailed estimate of how many international money transfer providers 
will engage in such development or how much they would spend. 
Regardless, international money transfer providers are unlikely to 
spend significantly more on specialized systems to count transactions 
than their expected cost of being supervised by the Bureau as larger 
participants. It bears emphasizing that even if expenditures on a 
counting system successfully proved that an international money 
transfer provider was not a larger participant, it would not 
necessarily follow that the entity could not be supervised. The Bureau 
can supervise specific international money transfer providers whose 
conduct the Bureau determines, pursuant to 12 U.S.C. 5514(a)(1)(C), 
poses risks to consumers. Thus, an international money transfer 
provider choosing to spend significant amounts on an accounting system 
directed toward the larger-participant test could not be sure it would 
not be subject to Bureau supervision notwithstanding those expenses. 
The Bureau therefore believes very few if any international money 
transfer providers would undertake such expenditures.
4. Consideration of Alternatives
    The Bureau considered two major alternatives: Using a measure other 
than number of international money transfers to define the market and 
choosing a different threshold to define larger participants.
    First, the Bureau considered various other criteria for assessing 
larger-participant status, including annual receipts from international 
money transfers and annual transmitted dollar volume. Calculating 
either of those metrics could be more involved than calculating the 
number of international money transfers. If so, a given nonbank might 
face greater costs for evaluating or disputing whether it qualified as 
a larger participant should the occasion to do so arise. The Bureau 
expects that for both annual receipts and annual transmitted dollar 
volume it could choose a suitable threshold for which the number of 
larger participants, among those nonbanks participating in the market 
today, would be the same as the number of nonbanks expected to qualify 
under the Final Rule. Consequently, the costs, benefits, and impacts of 
supervisory activities should not depend on which criterion the Bureau 
uses.
    The second possible alternative the Bureau considered is selecting 
a different threshold. One alternative would be to set the threshold 
substantially higher--for example at three million aggregate annual 
international money transfers as two commenters suggested--and cover 
only the very largest nonbanks in the market. Under such an 
alternative, the benefits of supervision to both consumers and covered 
persons would likely be reduced because entities impacting a 
substantial number of consumers and/or consumers in particular market 
segments might be omitted. Conversely, lowering the threshold as other 
commenters suggested would subject more entities to the Bureau's 
supervisory authority. Raising or lowering the threshold could decrease 
or increase, respectively, some potential costs to covered persons if 
fewer or more entities were defined as larger participants and thus 
were subject to the Bureau's supervisory authority on that basis. 
However, the total direct costs for actual supervisory activity might 
not change substantially because the Bureau conducts exams on a risk 
basis and would not necessarily examine more or fewer entities if the 
rule's coverage were broader or narrower.\110\
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    \110\ Another alternative under consideration is setting 
different thresholds for each global region in which transfers are 
received. As alluded to earlier, international money transfer 
submarkets tend to be segmented by corridor: Individuals wishing to 
send remittances to El Salvador, for example, cannot easily 
substitute transfers to Moldova. The Bureau could define a larger-
participant threshold for different geographic regions so that the 
entities that provide the most transfers to a given region could be 
supervised. Given the paucity of data on region-specific 
transactions, however, any definition of these thresholds might be 
more difficult to establish and to administer over time. The Bureau 
also considered a similar suggestion by commenters that the Bureau 
consider a company's market share relative to the population density 
of the area of the United States in which it operates. The Bureau 
declined to use this approach, again due to concerns about data 
availability and ease of administration over time.
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C. Potential Specific Impacts of the Final Rule

1. Depository Institutions and Credit Unions With $10 Billion or Less 
in Total Assets, as Described in Dodd-Frank Act Section 1026
    The Final Rule does not apply to depository institutions or credit 
unions of any size. However, it might have some impact on depository 
institutions or credit unions that provide international transfers. For 
example, if the relative price of nonbanks' international money 
transfers were to increase due to increased costs related to 
supervision, then depository institutions or credit unions of any size 
might benefit by the relative change in costs. The Bureau believes 
these effects, if any, would likely be small.
2. Impact of the Provisions on Consumers in Rural Areas
    Because the Final Rule applies uniformly to international money 
transfers of both rural and non-rural consumers, the rule should not 
have a unique impact on rural consumers. The Bureau did not receive and 
is not aware of any evidence suggesting that rural consumers have been 
disproportionately harmed by international money transfer providers' 
failure to comply with Federal consumer financial law.

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small not-for-profit organizations.\111\ The RFA defines a ``small 
business'' as a business that meets the size standard developed by the 
Small Business Administration pursuant to the Small Business Act.\112\
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    \111\ 5 U.S.C. 601 et seq. The term `` `small organization' 
means any not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field, unless an agency 
establishes [an alternative definition after notice and comment].'' 
Id. at 601(4). The term `` `small governmental jurisdiction' means 
governments of cities, counties, towns, townships, villages, school 
districts, or special districts, with a population of less than 
fifty thousand, unless an agency establishes [an alternative 
definition after notice and comment].'' Id. at 601(5). The Bureau is 
not aware of any small governmental units or small not-for-profit 
organizations to which the Final Rule will apply.
    \112\ 5 U.S.C. 601(3). The Bureau may establish an alternative 
definition after consultation with SBA and an opportunity for public 
comment.
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    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) of any proposed rule subject to 
notice-and-comment rulemaking requirements, unless the agency certifies 
that the proposed rule would not have a significant economic impact on 
a substantial number of small entities.\113\ The Bureau also is subject 
to certain additional procedures under the RFA involving the convening 
of a panel to consult with small entity representatives prior to 
proposing a rule for which an IRFA is required.\114\
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    \113\ 5 U.S.C. 605(b).
    \114\ 5 U.S.C. 609.
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    The undersigned certified that the Proposed Rule, if adopted, would 
not have a significant economic impact on

[[Page 56649]]

a substantial number of small entities and that an IRFA was therefore 
not required. The Bureau did not receive any comments objecting to the 
Bureau's certification. The Final Rule adopts the Proposed Rule, with 
some modifications that do not lead to a different conclusion. 
Therefore, a final regulatory flexibility analysis is not required.
    The Final Rule defines a class of international money transfer 
providers as larger participants of the international money transfer 
market and thereby authorizes the Bureau to undertake supervisory 
activities with respect to those nonbanks. The rule adopts a threshold 
for larger-participant status of one million aggregate annual 
international money transfers. Under what the Bureau believes was the 
most relevant SBA size standard at the time the Proposed Rule was 
issued, an international money transfer provider qualified as a small 
business only if its annual receipts were below $19 million.\115\ Of 
the approximately 25 potential larger participants identified by the 
Bureau among the California, New York, and Ohio licensees, the Bureau 
estimated there were approximately 10 providers with annual receipts 
under $19 million.\116\ Since the Proposed Rule was issued, the SBA 
increased this size standard from $19 million to $20.5 million, but 
this adjustment would not change the Bureau's estimate of the number of 
potential larger participants that qualify as small businesses.\117\
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    \115\ 78 FR 37409, 37416 (June 20, 2013) (NAICS code 522390), 
later amended by 79 FR 33647 (June 12, 2014). The Bureau believes 
that larger participants in the proposed international money 
transfer market are likely to be classified in North American 
Industry Classification System (NAICS) code 522390, ``Other 
Activities Related to Credit Intermediation.'' NAICS lists ``[m]oney 
transmission services'' as an index entry corresponding to this 
code. See http://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=522390&search=2012 NAICS Search. The Bureau requested 
comment on whether this or any other NAICS code is most appropriate 
for this market and did not receive any comments. The Bureau is 
aware that a nonbank larger participant of the proposed 
international money transfer market might be classified in a NAICS 
code other than the one that includes money transmission services. 
For example, some larger participants may be classified under NAICS 
code 522320 for financial transactions processing, reserve, and 
clearing house activities. NAICS lists ``[e]lectronic funds transfer 
services'' as an index entry corresponding to code 522320. See 
http://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=522320&search=2012.
    \116\ 79 FR 5302, 5316 n.93 (Jan. 31, 2014).
    \117\ The SBA issued an Interim Final Rule increasing many of 
its small business standards to account for inflation, which became 
effective on July 14, 2014. 79 FR 33647 (June 12, 2014). The size 
standard for NAICS code 522390 increased from $19 million to $20.5 
million. This does not, however, affect the Bureau's analysis 
because according to the Bureau's estimates, the same number of 
potential larger participants have under $20.5 million as have under 
$19 million in annual receipts. Likewise, even if the relevant NAICS 
code were instead 522320, the same number of potential larger 
participants would qualify under that code's new size standard of 
$38.5 million as under the prior standard of $35.5 million that the 
Bureau considered in the proposal.
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    According to the 2007 Economic Census, there are more than 5,000 
small firms in the North American Industry Classification System 
(NAICS) industry the Bureau believes is applicable to most 
international money transfer providers.\118\ Therefore, according to 
the Bureau's analysis, this rule impacts less than one percent of the 
small businesses in the industry.\119\ For these reasons, the Final 
Rule will not have a significant impact on a substantial number of 
small entities.\120\
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    \118\ U.S. Census Bureau, 2007 Economic Census, American 
FactFinder, Finance and Insurance: Subject Series--Estab. and Firm 
Size: Summary Statistics by Revenue Size of Firms for the United 
States, available at http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2007_US_52SSSZ4&prodType=table (NAICS code 522390).
    \119\ 79 FR 5302, 5316 n.95 (Jan. 31, 2014).
    \120\ Because the Bureau has not assessed the affiliations of 
potential larger participants, the Bureau's estimate of small entity 
larger participants may include some larger participants that are 
not in fact small entities due to the receipts of their affiliates, 
which are counted towards an entity's annual receipts for purposes 
of assessing whether an entity is a small business concern under the 
SBA's definition. 13 CFR 121.104(d). Conversely, it is possible 
there are additional small firms that have less than one million 
annual international money transfers on their own, but that would 
meet the proposed threshold of one million aggregate annual 
international money transfers when their transfers are aggregated 
with their affiliated companies' transfers. However, the Bureau 
anticipates no more than a very few such cases, if any, in the 
international money transfer market.
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    Additionally, and in any event, the Bureau believes that the Final 
Rule will not result in a ``significant impact'' on any small entities 
that could be affected. The rule does not itself impose any business 
conduct obligations. As previously noted, when and how often the Bureau 
would in fact engage in supervisory activity, such as an examination, 
with respect to a larger participant (and, if so, the extent of such 
activity) will depend on a number of considerations, including the 
Bureau's allocation of resources and the application of the statutory 
factors set forth in 12 U.S.C. 5514(b)(2). Given the Bureau's finite 
supervisory resources, and the range of industries over which it has 
supervisory responsibility for consumer financial protection, when and 
how often a given larger participant will be supervised is uncertain. 
Moreover, when supervisory activity occurred, the costs that result 
from such activity are expected to be minimal in relation to the 
overall activities of a larger participant.\121\
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    \121\ As discussed above, the Bureau estimates that the cost of 
participating in an examination would be approximately 0.18 percent 
of annual revenue from international money transfers for an entity 
at the threshold of 1 million aggregate annual international money 
transfers. If an examination required double the compliance officer 
time estimated by the Bureau, the Bureau's estimates suggest that it 
would still only require about 0.3 percent of annual revenue from 
international money transfers for an entity at the threshold of 1 
million aggregate annual international money transfers.
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    Finally, 12 U.S.C. 5514(e) authorizes the Bureau to supervise 
service providers to nonbank covered persons encompassed by 12 U.S.C. 
5514(a)(1), which includes larger participants. Because the Final Rule 
does not address service providers, effects on service providers need 
not be discussed for purposes of this RFA analysis. Even were such 
effects relevant, the Bureau believes that it would be very unlikely 
that any supervisory activities with respect to the service providers 
to the approximately 25 larger participants of the nonbank market for 
international money transfers would result in a significant economic 
impact on a substantial number of small entities.\122\
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    \122\ The Bureau is aware that there are likely thousands of 
service providers to larger participants of the international money 
transfer market. Many of these service providers might be considered 
to be in the industry with NAICS code 522390 for other activities 
related to credit intermediation. As discussed above, according to 
the 2007 Economics Census, there are more than 5,000 small firms in 
the industry. Other service providers may be classified in NAICS 
code 522320 for financial transactions processing, reserve, and 
clearing house activities, which includes at least 1,800 small 
firms. Still other service providers, including many retail agents, 
are likely to be considered in other NAICS codes corresponding to 
the service provider's primary business activities. As noted above 
with respect to larger participants themselves, the frequency and 
duration of examinations that would be conducted at any particular 
service provider would depend on a variety of factors. However, it 
is implausible that in any given year the Bureau would conduct 
examinations of a substantial number of the more than 5,000 small 
firms in NAICS code 522390, the more than 1,800 small firms in NAICS 
code 522320, or the small firm service providers that happen to be 
in any other NAICS code. Moreover, the impact of supervisory 
activities, including examinations, at such small firm service 
providers can be expected to be less, given the Bureau's exercise of 
its discretion in supervision, than at the larger participants 
themselves.
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    Accordingly, the Bureau adheres to the certification, in the 
Proposed Rule, that the Final Rule will not have a significant economic 
impact on a substantial number of small entities.

VIII. Paperwork Reduction Act

    The Bureau determined that the Proposed Rule would not impose any 
new recordkeeping, reporting, or disclosure requirements on covered 
entities or members of the public that

[[Page 56650]]

would constitute collections of information requiring approval under 
the Paperwork Reduction Act, 44 U.S.C. 3501, et seq. The Bureau did not 
receive any comments regarding this conclusion, to which the Bureau 
adheres. The Bureau concludes that the Final Rule, which adopts the 
Proposed Rule in relevant respects, also imposes no new information 
collection requirements subject to the Paperwork Reduction Act.

List of Subjects in 12 CFR Part 1090

    Consumer protection, Credit.

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau amends 12 CFR 
part 1090, subpart B, as follows:

PART 1090--DEFINING LARGER PARTICIPANTS OF CERTAIN CONSUMER 
FINANCIAL PRODUCT AND SERVICE MARKETS

0
1. The authority citation for part 1090 continues to read as follows:

    Authority: 12 U.S.C. 5514(a)(1)(B); 12 U.S.C. 5514(a)(2); 12 
U.S.C. 5514(b)(7)(A); and 12 U.S.C. 5512(b)(1).


0
2. Add Sec.  1090.107 to subpart B to read as follows:


Sec.  1090.107  International Money Transfer Market.

    (a) Market-related definitions. As used in this subpart:
    Aggregate annual international money transfers means the sum of the 
annual international money transfers of a nonbank covered person and 
the annual international money transfers of each of the nonbank covered 
person's affiliated companies.
    (i) Annual international money transfers. Annual international 
money transfers of a nonbank covered person means the international 
money transfers provided by the nonbank covered person during the 
preceding calendar year.
    (ii) Agents. (A) Annual international money transfers of a nonbank 
covered person include international money transfers in which another 
person acts as an agent on behalf of the nonbank covered person.
    (B) Annual international money transfers of a nonbank covered 
person do not include international money transfers in which another 
person provided the international money transfers and the nonbank 
covered person performed activities as an agent on behalf of that other 
person.
    (C) For purposes of this paragraph (ii), agent means an agent or 
authorized delegate, as defined under State or other applicable law, or 
affiliated company of a person that provides international money 
transfers when such agent, authorized delegate, or affiliated company 
acts for that person.
    (iii) Aggregating the annual international money transfers of 
affiliated companies. (A) The annual international money transfers of 
each affiliated company of a nonbank covered person are calculated 
separately in accordance with paragraphs (i) and (ii) of this 
definition, treating the affiliated company as if it were an 
independent nonbank covered person for purposes of the calculation.
    (B) The annual international money transfers of a nonbank covered 
person must be aggregated with the annual international money transfers 
of any person that was an affiliated company of the nonbank covered 
person at any time during the preceding calendar year. The annual 
international money transfers of the nonbank covered person and its 
affiliated companies are aggregated for the entire preceding calendar 
year, even if the affiliation did not exist for the entire calendar 
year.
    Designated recipient means any person specified by the sender as 
the authorized recipient of an international money transfer to be 
received at a location in a foreign country.
    International money transfer means the electronic transfer of funds 
requested by a sender to a designated recipient that is sent by an 
international money transfer provider. The term applies regardless of 
whether the sender holds an account with the international money 
transfer provider, and regardless of whether the transaction is also an 
electronic fund transfer, as defined in Sec.  1005.3(b) of this 
chapter. The term does not include any transfer that is excluded from 
the definition of ``electronic fund transfer'' under Sec.  1005.3(c)(4) 
of this chapter.
    International money transfer provider means any nonbank covered 
person that provides international money transfers for a consumer, 
regardless of whether the consumer holds an account with such person.
    Sender means a consumer in a State who primarily for personal, 
family, or household purposes requests an international money transfer 
provider to send an international money transfer to a designated 
recipient.
    State means any State, territory, or possession of the United 
States; the District of Columbia; the Commonwealth of Puerto Rico; or 
any political subdivision thereof.
    (b) Test to define larger participants. A nonbank covered person is 
a larger participant of the international money transfer market if the 
nonbank covered person has at least one million aggregate annual 
international money transfers.

    Dated: September 9, 2014.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2014-22310 Filed 9-22-14; 8:45 am]
BILLING CODE 4810-AM-P