[Federal Register Volume 89, Number 75 (Wednesday, April 17, 2024)]
[Rules and Regulations]
[Pages 27357-27361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08007]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 89, No. 75 / Wednesday, April 17, 2024 /
Rules and Regulations
[[Page 27357]]
CONSUMER FINANCIAL PROTECTION BUREAU
12 CFR Part X
Consumer Financial Protection Circular 2024-02: Deceptive
Marketing Practices About the Speed or Cost of Sending a Remittance
Transfer
AGENCY: Consumer Financial Protection Bureau.
ACTION: Consumer financial protection circular.
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SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) has
issued Consumer Financial Protection Circular 2024-02, titled,
``Deceptive Marketing Practices About the Speed or Cost of Sending a
Remittance Transfer.'' In this circular, the Bureau responds to the
question, ``When do remittance transfer providers violate the
prohibition on deceptive acts or practices in the Consumer Financial
Protection Act (CFPA) in their marketing about the speed and cost of
sending a remittance transfer?''
DATES: The Bureau released this circular on its website on March 27,
2024.
ADDRESSES: Enforcers, and the broader public, can provide feedback and
comments to [email protected].
FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory
Implementation & Guidance Program Analyst, Office of Regulations, at
202-435-7700 or at: https://reginquiries.consumerfinance.gov/. If you
require this document in an alternative electronic format, please
contact [email protected].
SUPPLEMENTARY INFORMATION:
Question Presented
When do remittance transfer providers violate the prohibition on
deceptive acts or practices in the Consumer Financial Protection Act
(CFPA) in their marketing about the speed and cost of sending a
remittance transfer?
Response
Remittance transfer providers may be liable under the CFPA for
deceptive marketing about the speed or cost of sending a remittance
transfer. Providers may be liable under the CFPA for deceptive
marketing practices regardless of whether the provider is in compliance
with the disclosure requirements of the Remittance Rule. For example,
among other things, it may be deceptive to:
Market remittance transfers as being delivered within a
certain time frame, when transfers actually take longer to be made
available to recipients;
Market remittance transfers as ``no fee'' when in fact the
provider charges fees;
Market promotional fees or promotional exchange rates for
remittance transfers without sufficiently clarifying when an offer is
temporary or limited;
Market remittance transfers as ``free'' if they are not in
fact free.
Background
Remittance Transfer Speed and Costs
Pursuant to the CFPB's Remittance Rule,\1\ the term ``remittance
transfer'' includes most electronic transfers of funds sent by
consumers in the United States to recipients in other countries.
Consumers in the United States send hundreds of billions of dollars in
remittance transfers to recipients in foreign countries each year.\2\
Remittance transfers are often consumer-to-consumer transfers of money
by immigrants sending financial support to family and friends in other
countries. They also include other types of transfers, such as
transfers by consumers in the United States to Americans living
temporarily abroad, such as students. Consumers may send remittance
transfers regularly as an ongoing source of financial assistance or in
other circumstances, such as an occasional or emergency form of
support. Remittance transfers also include cross-border consumer-to-
business payments for goods or services.
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\1\ Reg. E, 12 CFR part 1005 et seq.
\2\ CFPB, Remittance Rule Assessment Report, at 7 (Revised Apr.
24, 2019), https://files.consumerfinance.gov/f/documents/bcfp_remittance-rule-assessment_report_corrected_2019-03.pdf.
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Consumers may choose among a range of bank, credit union, and non-
bank money transmitters when sending a remittance transfer. Non-bank
money transmitters have traditionally dominated the market for
remittance transfers from the United States. In recent years, new money
transmitters have emerged offering digital remittance transfer
services. Many established money transmitters have also added digital
services, in addition to in-person options for consumers to go to a
store or agent to send remittance transfers.\3\
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\3\ See Daivi Rodima-Taylor, The Uneven Path Toward Cheaper
Digital Remittances, Migration Information Source (June 22, 2023),
https://www.migrationpolicy.org/article/cheaper-digital-remittances;
Daniel Webber, Remittances' Shift to Digital: Driving Change in an
Industry Split Between Yesterday and Tomorrow, Forbes (Mar. 21,
2023), https://www.forbes.com/sites/danielwebber/2023/03/21/remittances-shift-to-digital-driving-change-in-an-industry-split-between-yesterday-and-tomorrow/?sh=77f07495341.
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When sending remittance transfers, consumers may consider a number
of key factors when deciding among different providers, including the
speed of the transfer and its cost as well as convenience, security,
reliability, and trust.\4\
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\4\ See 2012 Final Rule, 77 FR 6194, 6199 (Feb. 7, 2012). See
also Annette LoVoi, Sending Money: The Path Forward, Appleseed, at
12 (May 2016), http://www.ctappleseed.org/wp-content/uploads/2016/04/Immigrant-Finances-Final-Appleseed-Report-on-Remittance-Use-Sending-Money-Home-5.26.16.pdf; ICF Macro, Summary of Findings:
Design and Testing of Remittance Disclosures, Report to the Board of
Governors of the Federal Reserve System, at 2-4 (Apr. 20, 2011),
https://www.federalreserve.gov/econresdata/bcreg20110512_ICF_Report_Remittance_Disclosures_(FINAL).pdf.
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The speed of a remittance transfer varies depending on the type of
transfer and provider. The World Bank Remittance Prices Worldwide
database illustrates that a range of transfer speeds can exist within a
given remittance corridor, with some providers, for example, offering
delivery in less than an hour, and others offering delivery in three to
five days.\5\
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\5\ See The World Bank, Remittance Prices Worldwide: Making
Markets More Transparent, https://remittanceprices.worldbank.org/
The database also reflects that a range of costs exist for sending a
remittance transfer in a given corridor.
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Costs can also vary significantly within a remittance corridor.
Remittance transfer costs include fees charged by the remittance
transfer provider including, if applicable, their agents and third
parties. Costs also include any exchange rate costs applied by the
provider to the currency conversion and governmental taxes. The
exchange rate offered to consumers
[[Page 27358]]
often reflects a spread--meaning, a percentage difference between the
retail exchange rate offered to the consumer and some wholesale
exchange rate.\6\ Remittance transfer providers utilize different
pricing strategies when determining the fees and exchange rate they
charge to consumers for remittance transfers.
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\6\ See 2012 Final Rule, 77 FR 6194 at 6196 (discussing the
exchange rate as a component of cost). See also CFPB, Report on
Remittance Transfers, at 12-13 (July 20, 2011), https://www.consumerfinance.gov/wp-content/uploads/2011/07/Report_20110720_RemittanceTransfers.pdf (discussing the ``well-
recognized'' concept of exchange rate spread in the remittance
transfer industry).
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Transparency Concerns Around Remittance Transfer Speed and Costs
Prior to the passage of the Dodd-Frank Wall Street Reform and
Consumer Financial Protection Act (Dodd-Frank Act), Federal consumer
protection laws generally did not apply to remittances, and remittance
transfer providers were not consistently required to disclose
applicable fees, exchange rates, transfer speeds, and the amount to be
received in a transaction. Consumers thus did not always know how much
money would be received on the other end and were not able to easily
comparison shop among providers.
With the Dodd-Frank Act's amendments to the Electronic Fund
Transfer Act and the promulgation of the Remittance Rule, remittance
transfer providers are now generally required to disclose certain
information to consumers before the consumer pays for a transfer and
also when payment is made.\7\ Before the consumer pays for a transfer,
the information a remittance transfer provider must disclose includes
(but is not limited to): as applicable, the amount that will be
transferred to the designated recipient in the currency in which the
remittance transfer is funded; any fees imposed and any taxes collected
on the remittance transfer; the total amount of the transaction, which
is the sum of the amount that will be transferred and any fees imposed
and any taxes collected, in the funding currency; the exchange rate
used by the provider for the remittance transfer; any covered third-
party fees; and the amount that will be received by the designated
recipient in the currency in which the funds will be received. The
receipt that consumers generally receive when payment is made must
contain the same information. In addition, the receipt must disclose
the date in the foreign country on which funds will be available to the
designated recipient.
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\7\ Reg. E, 12 CFR 1005.31.
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Compliance with the Remittance Rule disclosure requirements does
not obviate the obligation to refrain from misleading marketing
practices. In particular, remittance transfer providers must ensure
their marketing practices do not violate the prohibition of unfair,
deceptive, or abusive acts or practices in the CFPA.\8\
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\8\ 12 U.S.C. 5531. The CFPB has taken public action against
multiple remittance transfer providers to enforce various provisions
of the CFPA and the Remittance Rule. See Chime, Inc. d/b/a Sendwave,
No. 2023-CFPB-0012 (CFPB filed Oct. 17, 2023); Servicio UniTeller,
Inc., No. 2022-CFPB-0012 (CFPB filed Dec. 22, 2022); Choice Money
Transfer, Inc. d/b/a Small World Money Transfer, No. 2022-CFPB-0009
(CFPB filed Oct. 4, 2022); CFPB v. MoneyGram International, Inc.,
No. 22-cv-3256 (S.D.N.Y. filed Apr. 21, 2022) (pending); Envios de
Valores la Nacional Corp., No. 2020-BCFP-0025 (CFPB filed Dec. 21,
2020); Sigue Corporation, et al., No 2020-BCFP-0011 (CFPB filed Aug.
31, 2020); Trans-Fast Remittance LLC, also doing business as New
York Bay Remittance, No. 2020-BCFP-0010 (CFPB filed Aug. 31, 2020);
Maxitransfers Corp., No. 2019-BCFP-0008 (CFPB filed Aug. 27, 2019).
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The CFPB has identified problems with transparency and accuracy in
marketing practices about the speed of a remittance transfer in its
supervision of remittance transfer providers and enforcement of the
CFPA's prohibition against deceptive acts or practices. In the CFPB's
Spring 2022 Supervisory Highlights, the CFPB discussed examiners'
findings that remittance transfer providers made false and misleading
representations about the speed of remittance transfers.\9\ In October
2023, the CFPB issued a consent order against Chime Inc., d/b/a
Sendwave, finding that the remittance transfer provider made misleading
statements in advertisements about the speed and cost of its services,
in violation of the CFPA's prohibition on deceptive acts or
practices.\10\ This provider claimed in social media marketing that
remittance transfers would be delivered ``instantly,'' in ``30
seconds'' or ``within seconds,'' and would incur ``no fees,'' when in
fact transfers often took much longer, and the provider charged a
fee.\11\
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\9\ CFPB, Supervisory Highlights, 87 FR 26727, 26734 (May 5,
2022).
\10\ Chime, Inc. d/b/a Sendwave, No. 2023-CFPB-0012 (Oct. 17,
2023) (consent order).
\11\ Id. at 8. The CFPB also found deceptive acts or practices
in actions against Trans-Fast Remittances LLC and Maxitransfers
Corp. See Trans-Fast Remittance LLC, also doing business as New York
Bay Remittance, No. 2020-BCFP-0010 (CFPB filed Aug. 31, 2020)
(consent order); Maxitransfers Corp., No. 2019-BCFP-0008 (CFPB filed
Aug. 27, 2019) (consent order).
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In addition, consumers have reported, and the CFPB has observed,
problems with price transparency in the marketing practices of
remittance transfer providers, resulting in consumers encountering
unexpected costs.\12\ The CFPB has received consumer complaints about
promotional pricing by remittance transfer providers who do not
sufficiently inform consumers that the advertised fee or exchange rate
is only a limited scope or temporary offer. The CFPB has also observed
marketing claims by remittance transfer providers that may mislead
consumers about the scope or duration of a temporary low or ``no fee''
offer or promotional exchange rate.
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\12\ See, e.g., Consumer Complaint 7007332, https://www.consumerfinance.gov/data-research/consumer-complaints/search/detail/7007332; Consumer Complaint 6845292, https://www.consumerfinance.gov/data-research/consumer-complaints/search/detail/6845292; Consumer Complaint 1972064, https://www.consumerfinance.gov/data-research/consumer-complaints/search/detail/1972064.
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The CFPB has also received consumer complaints about marketing that
omits or obscures the cost of a remittance transfer. Marketing claims
by remittance transfer providers may fail to communicate the full cost
of a remittance transfer, such as advertising that transfers are
``free'' or advertising that prominently emphasizes zero fees while
only including a vaguely worded statement that additional costs related
to the exchange rate may apply. Some of these statements use technical
jargon or feature confusing language.
The CFPB has also received consumer complaints about companies that
market ``free'' remittance transfers through digital wallet and other
prepaid products, but that fail to sufficiently disclose costs for
currency conversion or for withdrawing funds from the product.
Companies that offer remittance transfers through digital wallets and
other prepaid products often market them as a faster and cheaper way to
send remittance transfers. Certain companies' websites market ``free
account-to-account transfers'' or that ``receiving money from a
friend'' is free. Providers may disclose only in fine print, however,
that these transfers are only free when there is no currency
conversion, and that for the recipient to withdraw and use funds in
their local currency, they must pay a currency conversion fee. In
addition, some digital wallet providers may not make clear that
recipients of a remittance transfer must pay a fee to withdraw funds
from the digital wallet or other prepaid product. Examples of such fees
include fees to transfer funds to an external bank account, credit
card, or prepaid card. Consumers have complained to the CFPB that these
fees are unexpected when they convert currencies and withdraw funds
[[Page 27359]]
transmitted through digital wallets and other prepaid products.\13\
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\13\ See, e.g., Consumer Complaint 2994206, https://www.consumerfinance.gov/data-research/consumer-complaints/search/detail/2994206.
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Analysis
Under the CFPA, it is unlawful for a provider of consumer financial
products or services to engage in deceptive acts or practices.\14\ A
representation, omission, act, or practice is deceptive if it misleads
or is likely to mislead the consumer; the consumer's interpretation is
reasonable under the circumstances; and the misleading representation,
omission, act, or practice is material.\15\
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\14\ 12 U.S.C. 5531, 5536.
\15\ See FTC Policy Statement on Deception (Oct. 14, 1983),
https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
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It is deceptive to market remittance transfers as being delivered
within a certain time frame, when transfers actually take longer to be
made available to recipients.
Remittance transfer providers violate the CFPA's prohibition on
deceptive acts or practices if they market remittance transfers as
being delivered within a certain time frame, when transfers actually
take longer to reach recipients. The CFPB ``presumes that express
claims are material.'' \16\ Furthermore, as noted above, the speed of a
remittance transfer is often a crucial consideration for consumers
sending remittance transfers.\17\ Recipients may rely on remittance
transfers for day-to-day expenses or for time-sensitive emergencies.
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\16\ See id.
\17\ See 2012 Final Rule, 77 FR 6194 at 6199.
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As illustrated in the CFPB's action against Chime Inc., d/b/a
Sendwave, marketing claims about the speed of remittance transfers may
violate the prohibition on deceptive acts or practices under the CFPA
when the actual time for delivery is longer than advertised.
In the Sendwave case, the provider told consumers that transfers
would be delivered ``instantly,'' ``in 30 seconds,'' or ``within
seconds.'' These statements were false and misleading because, although
a reasonable customer might expect delivery within the time frame
advertised, in many instances, transfers were not actually delivered
instantly or within seconds for many consumers.\18\ In addition, as an
express marketing statement regarding a central characteristic of the
product--when funds would be available to a recipient--the misleading
representation was material.\19\
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\18\ Chime, Inc. d/b/a Sendwave, No. 2023-CFPB-0012, at 8-9
(Oct. 17, 2023) (consent order).
\19\ See FTC, Policy Statement on Deception (Oct. 14, 1983).
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Providers must thus take care not to engage in deceptive acts or
practices in their marketing claims about the speed of a remittance
transfer.
It is deceptive to market transfers as ``no fee'' when in fact the
remittance transfer provider charges consumers fees to send the
remittance transfer.
Remittance transfer providers violate the CFPA's prohibition on
deceptive acts or practices if they market remittance transfers as
having ``no fee,'' when in fact the remittance transfer provider
charges consumers fees to send the remittance transfer. The cost of
sending a remittance transfer is a central consideration for
consumers,\20\ and, as discussed above, fees are an important component
of the cost of a remittance transfer.\21\ Expressly misleading price
claims violate the prohibition on deceptive practices.\22\
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\20\ See Kangni Kpodar, Patrick Amir Imam, How Do Transaction
Costs Influence Remittances? World Development Vol. 177 (May 2024),
https://doi.org/10.1016/j.worlddev.2024.106537.
\21\ See 2012 Final Rule, 77 FR 6194 at 6199.
\22\ See FTC, Policy Statement on Deception (Oct. 14, 1983).
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For example, as alleged in the CFPB's action against Chime Inc., d/
b/a Sendwave, from at least 2021 to 2022, Sendwave's website advertised
that consumers could transfer funds from the United States to Nigeria
``with no fees.'' In fact, consumers were charged fees on all transfers
from the United States to Nigeria, despite Sendwave continuing to
promote its product as having ``no fees'' on its website with no
qualification or disclaimer.\23\
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\23\ Chime, Inc. d/b/a Sendwave, No. 2023-CFPB-0012, at 8 (Oct.
17, 2023) (consent order).
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The CFPB found that Sendwave's representations were likely to
mislead the consumer and that the consumer's interpretation would be
reasonable under the circumstances. Although Sendwave disclosed a 1
percent transfer fee in the FAQ section of its website, this did not
correct the misleading statement or communication made at the top of
its web page and on a graphic depicting its mobile app.\24\ And as an
express marketing statement regarding a central consideration for
consumers when sending a remittance transfer--cost --, the misleading
representation about transfer fees was material.\25\
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\24\ See FTC v. Davison Assocs., Inc., 431 F. Supp. 2d 548, 560
(W.D. Pa. 2006) (``Disclaimers or curative language must be
`sufficiently prominent and unambiguous' such that the overall net-
impression of the communication becomes non-deceptive.''); FTC v.
Roca Labs, Inc., 345 F. Supp. 3d 1375, 1392 (M.D. Fla. 2018)
(``Defendants cannot avoid liability by exclusively advertising that
the product costs $480 without any caveats and then burying the
conditions of the discount in a separate disclaimer.'').
\25\ See FTC, Policy Statement on Deception (Oct. 14, 1983).
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It may be deceptive to market promotional fees or promotional
exchange rates for remittance transfers without sufficiently clarifying
when the offer is only limited or temporary.
Remittance transfer providers may violate the CFPA's prohibition on
deceptive acts or practices by advertising promotional pricing for
remittance transfers without sufficiently clarifying that the offer is
only limited or temporary in scope, even if the promotional nature of
the offer is disclosed in fine print or later in the transaction.\26\
In such cases, consumers may not understand the pricing is limited and
promotional and they may not understand that the cost of sending a
remittance transfer through the provider rises after the first or first
few transactions.
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\26\ See FTC v. Davison Assocs., 431 F. Supp. 2d 548 at 560
(``Disclaimers or curative language must be `sufficiently prominent
and unambiguous' such that the overall net-impression of the
communication becomes non-deceptive.'').
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As the CFPB has articulated, consumers may be reasonably misled
when financial service providers fail to clearly and conspicuously
disclose material terms in advertising, such as when and by how much
charges will increase.\27\ Written disclosures or fine print in
marketing materials would often be insufficient to correct a misleading
statement or representation in marketing communications.\28\ When a
consumer's first contact with a remittance transfer provider involves
deception, ``the law may be violated
[[Page 27360]]
even if the truth is subsequently made known'' to the consumer.\29\
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\27\ CFPB, Consumer Financial Protection Circular 2023-01:
Unlawful negative option marketing practices (Jan. 19, 2023),
https://www.consumerfinance.gov/compliance/circulars/consumer-financial-protection-circular-2023-01-unlawful-negative-option-marketing-practices/.
\28\ FTC, Policy Statement on Deception (Oct. 14, 1983). See
also In re Intuit, Inc., No. 9408, at 43 (FTC Opinion, Jan. 19,
2024) (``Disclaimers or qualifications are not adequate to avoid
liability `unless they are sufficiently prominent and unambiguous to
change the apparent meaning of the claims and to leave an accurate
impression. Anything less is only likely to cause confusion by
creating contradictory double meanings.''') (quoting Removatron
Int'l Corp. v. FTC, 884 F.2d 1489, 1497 (1st Cir. 1989)); FTC v.
Davison Assocs., 431 F. Supp. 2d 548 at 560 (``Disclaimers or
curative language must be `sufficiently prominent and unambiguous'
such that the overall net-impression of the communication becomes
non-deceptive.''); FTC v. Roca Labs, 345 F. Supp. 3d 1375 at 1392
(``Defendants cannot avoid liability by exclusively advertising that
the product costs $480 without any caveats and then burying the
conditions of the discount in a separate disclaimer.'').
\29\ FTC, Policy Statement on Deception (Oct. 14, 1983).
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Representations in advertising about ``no fee'' remittance
transfers or specific promotional exchange rates without sufficiently
clarifying, when applicable, that the offer is only limited or
temporary in scope are presumed to be material, as they relate to cost,
a key consumer consideration.
In addition, such statements are likely to be material because of
their likely impact on a consumer's initial and subsequent choice of
remittance transfer provider. The impact could be particularly
significant for promotions offered to first-time customers who seek to
continue using the provider to send remittance transfers. Such
consumers may face unexpected higher costs after the expiration of the
promotion and may also face unexpected hurdles in searching for a
different provider. Had they been aware of the limited promotional
nature of the offer, a reasonable consumer may have chosen a different
provider.
It is deceptive to market remittance transfers as ``free'' if they
are not in fact free.
Remittance transfer providers would also violate the CFPA's
prohibition on deceptive acts or practices by marketing remittance
transfers as ``free'' if they are not actually free for the consumer.
For example, it may be deceptive to market a remittance transfer as
``free'' if the remittance transfer provider is imposing costs on
consumers through the exchange rate spread for the transfer or, with
respect to digital wallets or other prepaid products, if the provider
imposes costs to convert funds into a different currency or to withdraw
funds from the product.
The FTC has articulated that, under the FTC Act, offers of ``free''
services ``must be made with extreme care so as to avoid any
possibility that consumers will be misled or deceived.'' \30\ ``The
word `free' is a lure. It is the bait. It is a powerful magnet that
draws the best of us against our will `to get something for nothing.'
'' Book-of-the-Month Club, Inc., 48 F.T.C. 1297, 1312 (1952), aff'd,
202 F.2d 486 (2d Cir. 1953).
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\30\ FTC, Guide Concerning the Use of the Word ``Free'' and
Similar Representations, 16 CFR 251.1(a)(2).
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A consumer should generally expect that a ``free'' product or
service is indeed free, and that the seller ``will not directly and
immediately recover, in whole or in part, the cost of [] the service.''
\31\ The FTC has explained that terms, conditions, and obligations that
apply to a ``free'' item should be set forth clearly, conspicuously,
and in close conjunction with the offer of the ``free'' item, and they
should further be made clear at the outset of the offer ``so as to
leave no reasonable probability that the terms of the offer might be
misunderstood.'' \32\ The same analysis applies to the use of terms
that are similar to ``free,'' such as ``gift'' or ``given without
charge.'' \33\
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\31\ 16 CFR 251.1(b).
\32\ 16 CFR 251.1(c). See also In re Intuit, Inc., No. 9408, at
36-52 (FTC Opinion, Jan. 19, 2024); Lesley Fair, Full Disclosure,
FTC Business Blog (Sept. 23, 2014), https://www.ftc.gov/business-guidance/blog/2014/09/full-disclosure (describing the FTC's
``4Ps''--prominence, presentation, placement, and proximity--four
key considerations to help business ensure their advertisements are
clear and conspicuous).
\33\ 16 CFR 251.1(i) (applying same deception analysis to terms
similar to ``free,'' such as ``gift,'' ``given without charge,'' or
``other words or terms which tend to convey the impression to the
consuming public than an article of merchandise or service is
``Free'').
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The FTC has recently reiterated that representations of ``free'' in
marketing are deceptive when the offer is not in fact free or when
limitations, restrictions, or hidden charges are inadequately
disclosed, such that the claim is likely to mislead a reasonable
consumer about information important to them when choosing a
product.\34\ As applied here, marketing representations of remittance
transfers as free are deceptive under the CFPA if they are not actually
free or when limitations, restrictions, or hidden charges are
inadequately disclosed.
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\34\ See In re Intuit, Inc., No. 9408 (FTC Opinion, Jan. 19,
2024). The FTC regularly brings cases against companies for
``inadequate disclosures of hidden charges in ostensibly `free'
offers and other products or services.'' FTC, Enforcement Policy
Statement Regarding Negative Option Marketing, 86 FR 60822, 60823
(Nov. 11, 2021). Both the CFPB and the FTC have also taken action
against companies that advertised ``free'' products and services and
deceptively enrolled consumers in a negative option plan. Cf.
Equifax Inc. and Equifax Consumer Services LLC, No. 2017-CFPB-0001
(filed Jan. 3, 2017) (consent order); Transunion Interactive, Inc.
et al., No. 2017-CFPB-0002 (filed Jan. 3, 2017) (consent order); FTC
v. Health Formulas, LLC, No. 2:14-cv-01649 (D. Nev. 2016); FTC v.
Complete Weightloss Center, No. 1:08-cv-00053 (D.N.D. 2008).
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Marketing a remittance transfer as ``free'' is likely to cause a
reasonable consumer to believe they are sending a remittance transfer
without the provider imposing a cost to the consumer. Such
interpretation would be incorrect--but reasonable--in instances where
the remittance transfer provider is imposing costs through the exchange
rate spread for the transfer. In this situation, a remittance transfer
provider's claim that the transfer is ``free'' would be false and thus
likely to be deceptive because there was a cost imposed on the transfer
through the exchange rate spread.\35\
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\35\ See In re Intuit, Inc., No. 9408, at 46 (FTC Opinion, Jan.
19, 2024) (finding liability for false misrepresentations about
``free'' services where it was false \2/3\ of the time).
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Remittance transfer providers should also be aware of the risk of
deception when marketing ``free'' remittance transfers for digital
wallets or other prepaid products. A claim that remittance transfers
are ``free'' may be misleading if the provider in fact imposes costs
for recipients to convert funds into a different currency or to
withdraw funds from the product. In these circumstances, marketing
``free'' transfers may constitute a misrepresentation of the terms for
the remittance transfer provider's services that may mislead a
reasonable consumer, even with subsequent disclosure of such fees.
About Consumer Financial Protection Circulars
Consumer Financial Protection Circulars are issued to all parties
with authority to enforce Federal consumer financial law. The CFPB is
the principal Federal regulator responsible for administering Federal
consumer financial law, see 12 U.S.C. 5511, including the Consumer
Financial Protection Act's prohibition on unfair, deceptive, and
abusive acts or practices, 12 U.S.C. 5536(a)(1)(B), and 18 other
``enumerated consumer laws,'' 12 U.S.C. 5481(12). However, these laws
are also enforced by State attorneys general and State regulators, 12
U.S.C. 5552, and prudential regulators including the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, and the National
Credit Union Administration. See, e.g., 12 U.S.C. 5516(d), 5581(c)(2)
(exclusive enforcement authority for banks and credit unions with $10
billion or less in assets). Some Federal consumer financial laws are
also enforceable by other Federal agencies, including the Department of
Justice and the Federal Trade Commission, the Farm Credit
Administration, the Department of Transportation, and the Department of
Agriculture. In addition, some of these laws provide for private
enforcement.
Consumer Financial Protection Circulars are intended to promote
consistency in approach across the various enforcement agencies and
parties, pursuant to the CFPB's statutory objective to ensure Federal
consumer financial law is enforced consistently. 12 U.S.C. 5511(b)(4).
[[Page 27361]]
Consumer Financial Protection Circulars are also intended to
provide transparency to partner agencies regarding the CFPB's intended
approach when cooperating in enforcement actions. See, e.g., 12 U.S.C.
5552(b) (consultation with CFPB by State attorneys general and
regulators); 12 U.S.C. 5562(a) (joint investigatory work between CFPB
and other agencies).
Consumer Financial Protection Circulars are general statements of
policy under the Administrative Procedure Act. 5 U.S.C. 553(b). They
provide background information about applicable law, articulate
considerations relevant to the Bureau's exercise of its authorities,
and, in the interest of maintaining consistency, advise other parties
with authority to enforce Federal consumer financial law. They do not
restrict the Bureau's exercise of its authorities, impose any legal
requirements on external parties, or create or confer any rights on
external parties that could be enforceable in any administrative or
civil proceeding. The CFPB Director is instructing CFPB staff as
described herein, and the CFPB will then make final decisions on
individual matters based on an assessment of the factual record,
applicable law, and factors relevant to prosecutorial discretion.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-08007 Filed 4-16-24; 8:45 am]
BILLING CODE 4810-AM-P