Nov 27 The U.S. consumer finance watchdog plans to relax rules requiring firms that provide foreign money transfers to disclose more about fees and exchange rates after industry groups said the requirements could lead some banks to halt the service.
The Consumer Financial Protection Bureau said it will issue a proposal next month to ease some of the fee and tax disclosure requirements and to ensure that banks are not liable when a sender provides the wrong account number for a money transfer.
And the new rules regulating such transfers, or remittances, will take effect sometime in the spring of 2013, rather than in February as initially planned, the bureau said in a statement on Tuesday.
The consumer agency approved rules in January 2012 that require banks to explain fees being charged during transfers to people in other countries, the exchange rate and the total amount of money the person on the other end will receive.
Regulators already adjusted the rules in August to exempt firms that conduct 100 or fewer remittances each year.
"The CFPB's proposed adjustments will be designed to facilitate implementation and compliance with the rule's requirements while maintaining the rule's valuable new consumer protections," the agency said in a statement on its website.
Transfers to people in other countries through banks and companies such as Western Union and MoneyGram International add up to billions of dollars each year, but the transactions have been mostly excluded from federal consumer protection rules, the consumer bureau has said.
The 2010 Dodd-Frank financial oversight law established the agency and called for it to write remittance rules. The CFPB said disclosures, as well as new error resolution and cancellation rights for consumers, would help protect people who send money to foreign countries.
But banks have said they would struggle to determine all of the taxes imposed in countries where money is being sent, as well as the fees charged by recipients' banks. Industry representatives said some firms might stop offering remittances altogether.
"It requires the bank to disclose things that they don't know and are outside of their control," said Cary Whaley, vice president for payments and technology policy with the Independent Community Bankers of America.
The CFPB said it would give banks more flexibility by letting them base fee disclosures on published fee schedules. Banks will have to disclose national-level taxes but not taxes imposed by local governments or other smaller foreign entities.
Financial firms also said provisions giving companies more responsibility for mistakes with transfers might unfairly put them on the hook if money did not reach the intended recipient because a sender accidentally gave the wrong account number.
Companies must attempt to recover misdirected funds but will not be liable for the funds if the firm can demonstrate that the customer provided the wrong information, the consumer bureau said on Tuesday.
"If these changes are made and they're made correctly, in a way that doesn't add regulatory burden, the consumers will win, remittance providers will win, and this industry will continue to grow," Whaley said.