Consumer Financial Protection Bureau Update: Remittance Transfers

By Douglas Hattaway, Attorney

Regulations scheduled to take effect next year may force some credit unions to stop offering its members an important service: the ability to send money electronically to foreign countries. Earlier this year the Consumer Financial Protection Bureau (CFPB) issued its final rule on electronic remittances. The final rule amends Regulation E, which implements the Electronic Funds Transfer Act.

Under the new rules, businesses will have to make certain disclosures—such as the exchange rate, fees, and the amount of money to be delivered—before the consumer pays for a remittance transfer. However, the ability to cheaply and accurately provide these disclosures can depend on the process a company uses to facilitate remittances. Many major providers of remittance transfers use “closed networks,” where the remittance transfer provider has a contractual relationship with every network and agent involved in the remittance process. Many credit unions, however, facilitate electronic remittances using “open networks,” such as international wire transfers and international automated clearing house systems (ACH), where the remittance transfer provider does not have a contractual relationship with, and thus does not have the same ability to monitor and control every institution involved in the transaction.[1]  For credit unions and other users of open networks, the regulatory burden imposed by these new rules could be enough to force them out of the electronic remittance market.

The new rules do provide a potential safe harbor: the rule only applies to a remittance provider that provides remittance transfers “in the normal course of its business.”[2]  But what constitutes the “normal course” of business? A business that makes no more than 25 remittance transactions in a calendar year is deemed not to provide remittance transfers in the normal course of its business, but beyond that the standard gets murky. The comment to the current version of the rule states that what constitutes the normal course of business “depends on the facts and circumstances, including the total number and frequency of remittance transfers sent by the provider.”[3]  Obviously, this fluid standard does little to ease compliance concerns and could potentially strip the safe harbor of much of its usefulness.  

Fortunately, the CFPB has shown that it is willing to consider implementing a clearer (and possibly higher) threshold for the “normal course of business” standard, and has requested public comment on what this threshold should be. On April 6, 2012, the National Association of Federal Credit Unions (NAFCU) sent a letter to the CFPB arguing that the 25-transaction standard is useless because no business with such a low demand would expend the time and resources necessary to establish remittance transfer capability in the first place. Instead, NAFCU suggests that the threshold should be 600 transactions a year.[4]  Similarly, the Credit Union National Association (CUNA) sent a letter to the CFPB urging the Bureau to raise the safe harbor from 25 transactions to 1,000 transactions a year, or alternatively, having the safe harbor protect any institution that does not earn more than 30% of its total net income from remittances.[5]   Both letters suggest that credit unions may be forced to stop offering remittance transactions if the safe harbor provision is not expanded.  

Hopefully the CFPB acts quickly to address these concerns. The final rule takes effect in February 2013.

DOUG HATTAWAY. Doug is an associate in Consumer Collections located in the Grove City, Ohio office. He can be reached at 614.801.2739 and

[1] See 77 Fed. Reg. 6194
[2] Id.
[3] Id.
[4] A copy of the NAFCU letter is available here:
[5] A copy of the CUNA letter is available here:


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