Remittance Transfers Under the Electronic Fund Transfer Act (Regulation E), 67132-67167 [2019-25944]

Download as PDF 67132 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1005 [Docket No. CFPB–2019–0058] RIN 3170–AA96 Remittance Transfers Under the Electronic Fund Transfer Act (Regulation E) Bureau of Consumer Financial Protection. ACTION: Proposed rule with request for public comment. AGENCY: The Electronic Fund Transfer Act (EFTA), as amended by the DoddFrank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), establishes certain protections for consumers sending international money transfers, or remittance transfers. The Bureau of Consumer Financial Protection’s (Bureau) remittance rule in Regulation E (Remittance Rule or Rule) implements these protections. The Bureau is proposing changes to the Rule to mitigate the effects of the expiration of a statutory exception that allows insured institutions to disclose estimates instead of exact amounts to consumers. That exception expires on July 21, 2020. In addition, the Bureau is proposing to increase a safe harbor threshold in the Rule related to whether a person makes remittance transfers in the normal course of its business, which would have the effect of reducing compliance costs for entities that make a limited number of remittance transfers annually. DATES: Comments must be received on or before January 21, 2020. ADDRESSES: You may submit comments, identified by Docket No. CFPB–2019– 0058 or RIN 3170–AA96, by any of the following methods: • Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments. • Email: 2019–NPRM-Remittances@ cfpb.gov. Include Docket No. CFPB– 2019–0058 or RIN 3170–AA96 in the subject line of the message. • Mail/Hand Delivery/Courier: Comment Intake—Remittances, Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, DC 20552. Instructions: The Bureau encourages the early submission of comments. All submissions should include the agency name and docket number or Regulatory Information Number (RIN) for this rulemaking. Because paper mail in the Washington, DC area and at the Bureau is subject to delay, commenters are encouraged to submit comments lotter on DSKBCFDHB2PROD with PROPOSALS5 SUMMARY: VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 electronically. In general, all comments received will be posted without change to https://www.regulations.gov. In addition, comments will be available for public inspection and copying at 1700 G Street NW, Washington, DC 20552, on official business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to inspect the documents by telephoning 202–435– 7275. All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Proprietary information or sensitive personal information, such as account numbers or Social Security numbers, or names of other individuals, should not be included. Comments will not be edited to remove any identifying or contact information. FOR FURTHER INFORMATION CONTACT: Yaritza Velez, Counsel, or Kristine M. Andreassen, Krista Ayoub, or Jane Raso, Senior Counsels, Office of Regulations, at 202–435–7700. If you require this document in an alternative electronic format, please contact CFPB_ Accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: I. Summary of the Proposed Rule The Bureau is proposing several amendments to the Remittance Rule,1 which implements EFTA section 919 governing international remittance transfers. First, the Bureau is proposing to increase a safe harbor threshold in the Rule which would have the effect of reducing compliance costs for entities that make a limited number of remittance transfers annually. Under both EFTA and the Rule, the term ‘‘remittance transfer provider’’ is defined, in part, to mean any person that provides remittance transfers for a consumer in the normal course of its business.2 The Rule also provides a safe harbor, stating that 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.3 The Bureau is proposing to adjust the safe harbor threshold from 100 transfers to 500 1 77 FR 6194 (Feb. 7, 2012); as amended on 77 FR 40459 (July 10, 2012), 77 FR 50243 (Aug. 20, 2012), 78 FR 6025 (Jan. 29, 2013), 78 FR 30661 (May 22, 2013), 78 FR 49365 (Aug. 14, 2013), 79 FR 55970 (Sept. 18, 2014), 81 FR 70319 (Oct. 12, 2016), and 81 FR 83934 (Nov. 22, 2016) (together, Remittance Rule or Rule). 2 EFTA section 919(g)(3), codified at 15 U.S.C. 1693o-1(g)(3); 12 CFR 1005.30(f)(1). 3 12 CFR 1005.30(f)(2)(i). PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 transfers annually. The Bureau’s proposed changes to the safe harbor threshold appear in the definition of remittance transfer provider in § 1005.30(f) and related commentary. Second, the Bureau is proposing changes to the Rule to mitigate the effects of the expiration of a statutory exception that allows insured institutions to disclose estimates to consumers of the exchange rate and covered third-party fees instead of exact amounts. That exception expires on July 21, 2020. Specifically, with respect to the exchange rate, the Bureau is proposing to adopt a permanent exception that would permit insured institutions to estimate the exchange rate for a remittance transfer to a particular country if, among other things, the designated recipient will receive funds in the country’s local currency and the insured institution made 1,000 or fewer remittance transfers in the prior calendar year to that country when the designated recipients received funds in the country’s local currency. With respect to covered third-party fees, the Bureau is proposing to adopt a permanent exception that would permit insured institutions to estimate covered thirdparty fees for a remittance transfer to a particular designated recipient’s institution if, among other things, the insured institution made 500 or fewer remittance transfers to that designated recipient’s institution in the prior calendar year. The temporary exception and its statutorily mandated expiration date are in existing § 1005.32(a)(1) and (2); the Bureau’s proposed changes to mitigate the expiration of that exception appear in proposed § 1005.32(b)(4) and (5) and related commentary, along with conforming changes in §§ 1005.32(c), 1005.33(a)(1)(iii)(A), and 1005.36(b)(3) and in the commentary accompanying §§ 1005.32, 1005.32(b)(1), (c)(3), and (d), and 1005.36(b). Finally, the Bureau is also seeking comment on a permanent exception in the Rule (in § 1005.32(b)(1)) permitting providers to use estimates for transfers to certain countries and the process for adding countries to the safe harbor countries list maintained by the Bureau. The Bureau has received a number of suggestions for other changes to the Remittance Rule to improve its effectiveness in helping consumers or to reduce the burden on providers. However, in light of the time sensitivity of the expiration of the temporary exception, this proposal is limited to the issues described above. Due to changes in requirements by the Office of the Federal Register, when amending commentary the Bureau is E:\FR\FM\06DEP5.SGM 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules now required to reprint certain subsections being amended in their entirety rather than providing more targeted amendatory instructions. The sections of commentary included in this document show the language of those sections if the Bureau adopts its changes as proposed. The Bureau is releasing an unofficial, informal redline to assist industry and other stakeholders in reviewing the changes that it is proposing to make to the regulatory text and commentary of the Remittance Rule.4 II. Background lotter on DSKBCFDHB2PROD with PROPOSALS5 A. Market Overview Consumers in the United States send billions of dollars in remittance transfers to recipients in foreign countries each year. The term ‘‘remittance transfers’’ is sometimes used to describe consumer-to-consumer transfers of small amounts of money, often made by immigrants supporting friends and relatives in other countries. The term may also include, however, payments of larger amounts, for instance, to pay bills, tuition, or other expenses. Money services businesses (MSBs) as well as banks and credit unions send remittance transfers on behalf of consumers. MSBs, however, provide the overwhelming majority of remittance transfers for consumers in the United States. For example, in the Bureau’s October 2018 Remittance Rule Assessment Report,5 which is discussed in greater detail below, the Bureau observed that in 2017, MSBs provided approximately 95.5 percent of all remittance transfers for consumers. The average amount of a remittance transfer sent by MSBs on behalf of consumers was approximately $381. Banks and credit unions generally send fewer remittance transfers on behalf of consumers than MSBs. The Bureau found that in 2017, banks and credit unions conducted 4.2 and 0.2 4 This redline can be found on the Bureau’s regulatory implementation page for the Remittance Rule, at https://www.consumerfinance.gov/policycompliance/guidance/remittance-transfer-rule/. If any conflicts exist between the redline and the text of the Remittance Rule or this proposed rule, the rules themselves, as published in the Federal Register, are the controlling documents. 5 Bureau of Consumer Fin. Prot., Remittance Rule Assessment Report (Oct. 2018, rev. Apr. 2019) (Assessment Report), https:// www.consumerfinance.gov/documents/7561/bcfp_ remittance-rule-assessment_report_corrected_2019– 03.pdf. The Bureau’s initial rule and certain amendments took effect in October 2013. As explained in the Assessment Report, the Assessment Report considers all rules that took effect through November 2014 and refers to them collectively as the Remittance Rule. See Assessment Report at 115. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 percent of all remittance transfers, respectively. However, the average amount that banks and credit unions transferred was much greater than the average amount transferred by MSBs. For example, based on the Bureau’s analysis, the average transfer size of a bank-sent remittance transfer was more than $6,500.6 As such, based on information it received as part of its assessment of the Remittance Rule in connection with the Assessment Report, while banks and credit unions provide a small percentage of the overall number of remittance transfers, because the average amount of the transfers they send is higher than MSBs, banks and credit unions collectively sent approximately 45 percent of the dollar volume of all remittance transfers sent for consumers in the United States (43 percent attributed to banks and 2 percent attributed to credit unions). In addition, MSBs differ from banks and credit unions in the means by which they provide remittance transfers. Traditionally, MSBs sending remittance transfers have predominantly relied on a storefront model and a network of the MSBs’ employees and agents (such as grocery stores and neighborhood convenience stores).7 Because MSBs receive and disburse funds either through their own employees or agents, the payment system by which MSBs facilitate remittance transfers is typically referred to as a ‘‘closed network’’ payment system. A single entity in this system—the MSB—exerts a high degree of end-to-end control over a transaction. Such level of control means, among other things, that an entity that uses a closed network payment system to send remittance transfers can disclose to its customers precise and reliable information about the terms and costs of a remittance transfer before the entity sends the remittance transfer on its customer’s behalf. In contrast to MSBs, banks and credit unions have predominantly utilized an ‘‘open network’’ payment system made up of the correspondent banking network 8 to send remittance transfers 6 Id. at 73. at 54. As noted in the Assessment Report, increased access to digital devices has impacted the traditional MSB model by enabling more MSBfacilitated transfers to be conducted via the internet. See also id. at 102. 8 Generally speaking, a correspondent banking network is made up of individual correspondent banking relationships, which consist of bilateral arrangements under which one bank (correspondent) holds deposits owned by other banks (respondents) and provides payment and other services to those respondent banks. See, e.g., Bank for Int’l Settlements, Correspondent Banking, at 9 (2016) (2016 BIS Report), https://www.bis.org/ cpmi/publ/d147.pdf. 7 Id. PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 67133 on behalf of consumers.9 The open network payment system based on the correspondent banking network lacks a single, central operator. This feature distinguishes it from closed network payment systems. The correspondent banking network is a decentralized network of bilateral banking relationships between the world’s tens of thousands of banks and credit unions. Most institutions only maintain relationships with a relatively small number of correspondent banks but can nonetheless ensure that their customers’ remittance transfers are able to reach a wide number of recipient financial institutions worldwide even if the institution does not have control over, or a relationship with, all of the participants involved in the transmission of a remittance transfer. As discussed in greater detail in the section-by-section analysis of § 1005.32(a) below, the decentralized nature of the correspondent banking system has presented certain challenges to the ability of banks and credit unions to disclose precise and reliable information about the terms and costs of remittance transfers to its customers before these institutions send remittance transfers on their customers’ behalf. B. Remittance Rulemaking Under Section 1073 of the Dodd-Frank Act Prior to the Dodd-Frank Act, remittance transfers fell largely outside of the scope of Federal consumer protection laws. Section 1073 of the Dodd-Frank Act amended EFTA by adding a new section 919, which created a comprehensive system for protecting consumers in the United States who send remittance transfers to individuals and businesses in foreign countries.10 EFTA applies broadly in terms of the types of remittance transfers it covers. EFTA section 919(g)(2) defines ‘‘remittance transfer’’ as the electronic transfer of funds by a sender in any State to designated recipients located in foreign countries 9 The Bureau notes that some methods of sending cross-border money transfers, including remittance transfers, include elements of closed and open payment networks and some providers may also rely on both types of systems to facilitate different transfers. For example, the Bureau understands that banks may offer low-cost international fund transfers to its commercial clients through the use of the automated clearing house (ACH) system, and a minority of banks also offer international ACH to their consumer clients. See Bd. of Governors of the Fed. Reserve Sys., Report to Congress on the Use of the ACH System and Other Payment Mechanisms for Remittance Transfers to Foreign Countries, at 7 (May 2019), https://www.federalreserve.gov/ publications/2019-may-ach-report-other-paymentmechanisms.htm. 10 15 U.S.C. 1693 et seq. EFTA section 919 is codified at 15 U.S.C. 1693o-1. E:\FR\FM\06DEP5.SGM 06DEP5 67134 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules that are initiated by a remittance transfer provider; only small dollar transactions are excluded from this definition.11 EFTA also applies broadly in terms of the providers subject to it, including MSBs, banks, and credit unions. The Bureau adopted subpart B of Regulation E to implement EFTA section 919 through a series of rulemakings that were finalized in 2012 and 2013, and which became effective on October 28, 2013.12 The Bureau subsequently amended subpart B several times.13 The Rule provides three significant consumer protections: It specifies the information that must be disclosed to consumers who send remittance transfers, including information related to the exact cost of a remittance transfer; it provides consumers with cancellation and refund rights; and it specifies procedures and other requirements for providers to follow in resolving errors. lotter on DSKBCFDHB2PROD with PROPOSALS5 III. Assessment Report, Requests for Information, and Other Outreach The Bureau has received feedback regarding the Remittance Rule over time through both formal and informal channels. The following is a brief summary of some of the Bureau’s requests for information regarding the Rule and recent informal feedback received by the Bureau outside those channels. Assessment and 2017–2018 RFIs. The Bureau conducted an assessment of the Remittance Rule (Assessment), as required pursuant to section 1022(d) of the Dodd-Frank Act. Section 1022(d) requires the Bureau to conduct an assessment of each significant rule or order adopted by the Bureau under Federal consumer financial law and to publish a report of such assessment not later than five years after the rule or order’s effective date.14 In 2017, the Bureau issued a request for information (RFI) in connection with the Assessment 11 15 U.S.C. 1693o-1(g)(2). As adopted in the Remittance Rule, the term ‘‘remittance transfer’’ means: ‘‘[The] electronic transfer of funds requested by a sender to a designated recipient that is sent by a remittance transfer provider. The term applies regardless of whether the sender holds an account with the remittance transfer provider, and regardless of whether the transaction is also an electronic fund transfer, as defined in [subpart A of Regulation E].’’ The Rule’s definition specifically excludes (1) transfer amounts of $15 or less and (2) certain securities and commodities transfers. 12 CFR 1005.30(e). 12 77 FR 6194 (Feb. 7, 2012); as amended on 77 FR 40459 (July 10, 2012); 77 FR 50243 (Aug. 20, 2012); 78 FR 6025 (Jan. 29, 2013); 78 FR 30661 (May 22, 2013); and 78 FR 49365 (Aug. 14, 2013). 13 79 FR 55970 (Sept. 18, 2014), 81 FR 70319 (Oct. 12, 2016), and 81 FR 83934 (Nov. 22, 2016). 14 12 U.S.C. 5512(d). VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 (2017 Assessment RFI) and received approximately 40 comments in response.15 As referenced above, in October 2018, the Bureau published the results of the Assessment in the Assessment Report, providing insights into the effectiveness of the Rule and its provisions. Separately, in 2018, the Bureau issued a series of RFIs as part of a call for evidence to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers.16 One of the 2018 RFIs concerned whether the Bureau should amend any rules it has issued since its creation or exercise new rulemaking authorities provided for by the Dodd-Frank Act; another concerned whether the Bureau should amend rules or exercise the rulemaking authorities that it inherited from other Federal government agencies (together, the 2018 Adopted/Inherited Regulations RFIs).17 The Bureau received a total of approximately 34 comments on the Remittance Rule in response to these two RFIs. Industry commenters that responded to the three RFIs mentioned above suggested a variety of modifications to the Rule. Many recommended changing the scope of coverage of the Rule in various ways,18 including raising the 100-transfer safe harbor threshold, because, they said, the current threshold is too low and causes consumer harm. Consumer advocacy groups conversely cautioned against changes to the Rule, including to the safe harbor threshold. Industry commenters suggested other scope-related changes as well, such as exempting transfers in excess of a certain amount (such as $10,000) from the Rule’s definition of ‘‘remittance transfer’’ or creating blanket exemptions from the Rule for certain types of entities, such as for regulated entities with total assets under $10 billion or for all credit unions. A group of consumer advocates and a number of industry commenters also addressed the July 21, 2020 expiration of the temporary exception that allows disclosure of estimates instead of exact amounts in certain circumstances. Some industry commenters expressed concerns about 15 82 FR 15009 (Mar. 24, 2017). These comment letters are available on the public docket at https:// www.regulations.gov/document?D=CFPB-20170004-0001. See also Assessment Report at 149. 16 See https://www.consumerfinance.gov/policycompliance/notice-opportunities-comment/archiveclosed/call-for-evidence/. 17 See 83 FR 12286 (Mar. 21, 2018) and 83 FR 12881 (Mar. 26, 2018). The comment letters from these RFIs are available on the public dockets at https://www.regulations.gov/docket?D=CFPB-20180011 and https://www.regulations.gov/ document?D=CFPB-2018-0012-0001. 18 See, e.g., Assessment Report at 154–61. PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 the impact of the temporary exception’s eventual expiration and urged the Bureau to make the exception permanent, while consumer advocacy groups expressed concern about the use of estimates permitted by the temporary exception and urged the Bureau to let the exception expire. Some industry commenters also requested that the Bureau expand the list of ‘‘safe harbor’’ countries that have laws impacting their ability to disclose exact exchange rates, arguing an expanded countries list would help alleviate some of the challenges certain providers will face when the temporary exception expires. Industry and consumer advocacy group commenters also raised other issues about various aspects of the Rule, including regarding other disclosure requirements, error resolution, and the 30-minute cancellation period. 2019 RFI. The Bureau published an RFI on April 29, 2019 (2019 RFI),19 seeking information on several aspects of the Rule. First, based on comments and other feedback from various remittance transfer providers and their trade associations, as well as its own analysis, the Bureau was concerned about the potential negative effects of the expiration of the temporary exception. The Bureau thus sought information about the upcoming expiration of the temporary exception and potential options to mitigate its impact. The Bureau was also concerned about the Rule’s effects on certain remittance transfer providers that account for a small portion of the overall number of remittance transfers but nonetheless are subject to the Rule because they provide more than 100 transfers annually and thus are unable to rely on the current normal course of business safe harbor. The Bureau thus sought information in the 2019 RFI on possible changes to the current safe harbor threshold in the Rule 20 and whether an exception for ‘‘small financial institutions’’ may be appropriate. The Bureau received approximately 44 comments on the 2019 RFI.21 The overwhelming majority of comments came from banks and credit unions, 19 84 FR 17971 (Apr. 29, 2019). discussed above, the phrase ‘‘normal course of business’’ in the definition of ‘‘remittance transfer provider’’ determines whether a person providing remittance transfers is covered by the Rule. Also, as discussed, the Rule contains a safe harbor that clarifies that certain persons are deemed not to provide transfers in the ‘‘normal course of business’’ because they provide 100 or fewer transfers per year in both the previous and current calendar years. 21 These comment letters are available on the public docket for the 2019 RFI at https:// www.regulations.gov/docket?D=CFPB-2019-0018. 20 As E:\FR\FM\06DEP5.SGM 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 their trade associations, and their service providers. As discussed in greater detail below, these commenters generally urged the Bureau to replicate the temporary exception and raise the normal course of business safe harbor threshold. A number of them also supported a small financial institution exception. The Bureau received one comment letter from a ‘‘fintech’’ nonbank remittance transfer provider and one comment letter from a consumer advocacy group. These commenters generally did not support extending the temporary exception or making it permanent. They asserted that the Remittance Rule was intended to improve accountability and transparency, and said that continuing to permit estimates could stunt the movement toward realizing those objectives. Additionally, the nonbank remittance transfer provider also expressed concern that the temporary exception has helped to perpetuate a bifurcated regulatory approach, as only insured banks and credit unions are permitted to use the temporary exception. Several commenters also specifically addressed the existing permanent exception allowing estimates for transfers to certain countries and the related Bureau-established safe harbor countries list. Ongoing market monitoring and other outreach. The Bureau has engaged in ongoing market monitoring and other outreach to industry and other stakeholders regarding the Remittance Rule. For example, in June 2019, Bureau staff met with the Bureau’s Consumer Advisory Board, Community Bank Advisory Council, and Credit Union Advisory Council to discuss several topics, including the 2019 RFI.22 The Bureau discusses feedback received through these various channels that is relevant to this proposal throughout this document. IV. Legal Authority Section 1073 of the Dodd-Frank Act created a new section 919 of EFTA requiring remittance transfer providers to provide disclosures to senders of remittance transfers, pursuant to rules prescribed by the Bureau. In particular, providers must give a sender a written pre-payment disclosure containing specified information applicable to the sender’s remittance transfer, including the amount to be received by the 22 Minutes of these meetings are available at https://www.consumerfinance.gov/documents/ 7852/201906_cfpb_CAB-Meeting-Minutes.pdf, https://www.consumerfinance.gov/documents/ 7853/201906_cfpb_CBAC-meeting-minutes.pdf, and https://www.consumerfinance.gov/documents/ 7854/201906_cfpb_CUAC-meeting-minutes.pdf. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 designated recipient. The provider must also provide a written receipt that includes the information provided on the pre-payment disclosure, as well as additional specified information.23 In addition, EFTA section 919(d) directs the Bureau to promulgate rules regarding appropriate error resolution standards and cancellation and refund policies. In addition to the Dodd-Frank Act’s statutory mandates, EFTA section 904(a) authorizes the Bureau to prescribe regulations necessary to carry out the purposes of EFTA. The express purposes of EFTA, as amended by the Dodd-Frank Act, are to establish ‘‘the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems’’ and to provide ‘‘individual consumer rights.’’ 24 EFTA section 904(c) further provides that regulations prescribed by the Bureau may contain any classifications, differentiations, or other provisions, and may provide for such adjustments or exceptions for any class of electronic fund transfers or remittance transfers that the Bureau deems necessary or proper to effectuate the purposes of the title, to prevent circumvention or evasion, or to facilitate compliance. As described in more detail below, the changes herein are proposed pursuant to the Bureau’s authority under EFTA sections 904(a) and (c). V. Section-by-Section Analysis 1005.30 Remittance Transfer Definitions 30(f) Remittance Transfer Provider EFTA section 919(g)(3) defines ‘‘remittance transfer provider’’ to be a person or financial institution providing remittance transfers for a consumer in the ‘‘normal course of its business.’’ The Rule uses a similar definition.25 It states that whether a person provides remittance transfers in the normal course of its business depends on the facts and circumstances, including the total number and frequency of transfers sent by the provider.26 The Rule currently contains a safe harbor whereby a person that provides 100 or fewer remittance transfers in each of the previous and current calendar years is deemed not to be providing remittance transfers in the normal course of its business, and therefore is outside of the Rule’s coverage.27 When the Bureau finalized the normal course of business 100-transfer safe section 919(a); 15 U.S.C. 1693o-1(a). section 902(b); 15 U.S.C. 1693(b). 25 See 12 CFR 1005.30(f)(1). 26 Comment 30(f)-2.i. 27 12 CFR 1005.30(f)(2)(i). harbor threshold in August 2012, it stated that it intended to monitor that threshold over time.28 The Bureau acknowledged, among other things, that the administrative record contained little data on the overall distribution and frequency of remittance transfers to support treating any particular number of transactions as outside the normal course of business.29 After explaining the limitations in the data it did have, the Bureau stated that it did not believe it could rely on the data received to describe the number of remittance transfers provided by ‘‘typical’’ entities or to identify a clear pattern in the distribution of providers by the number of transfers provided.30 The Bureau concluded that the data collected at the time provided some additional support for the 100 threshold, and that the threshold was ‘‘not so low as to be meaningless.’’ 31 The Bureau determined that a threshold of 100 was high enough that persons would not risk exceeding the safe harbor based on making transfers for just two or three customers each month, while low enough to serve as a reasonable basis for identifying persons who occasionally provide remittance transfers, but not in the normal course of their business. The Bureau also noted that 100 transfers per year is equivalent to an average of approximately two transfers per week, or the number of transfers needed to satisfy the needs of a handful of customers sending money abroad monthly.32 Since August 2012, the Bureau has received feedback suggesting that the 100-transfer safe harbor threshold is too low, including in response to several RFIs issued by the Bureau as well as during market monitoring and other outreach to industry. (See part III above for more information on these RFIs and other outreach.) Comments Received in Response to the 2019 RFI Comments on the safe harbor threshold. As noted above, the Bureau in the 2019 RFI sought information on possible changes to the current normal course of business 100-transfer safe harbor threshold. A variety of industry commenters as well as a consumer advocacy group responded to questions regarding coverage of certain remittance transfer providers in the 2019 RFI, primarily focusing on changing the 100transfer safe harbor threshold. 23 EFTA 28 77 24 EFTA 29 Id. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 67135 FR 50243, 50252 (Aug. 20, 2012). at 50251–52. 30 Id. at 50251–52. 31 Id. at 50252. 32 Id. at 50251. E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 67136 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules The consumer advocacy group opposed any changes to the threshold, asserting that there is insufficient evidence to make such changes.33 A number of industry commenters, on the other hand, including credit unions, banks, trade associations, and a payments service provider to banks and credit unions, suggested increasing the threshold; specific threshold suggestions ranged from 200 to 1,200 transfers annually. These industry commenters stated that credit unions and community banks offer remittance transfers as an accommodation for their customers and generally do not provide enough transfers to recover operational and compliance costs. A trade association commenter stated that the impact of compliance costs on small providers is especially significant as they are unable to spread their costs over a large volume of transactions. Several industry commenters also asserted, among other things, that complying with the Remittance Rule has caused credit unions and community banks to exit the remittance transfer market, limit the number of transfers that they provide, or increase the price of transfers, which they asserted has resulted in consumer harm in the form of reduced access and other inconveniences. Several industry commenters offered anecdotes of one or two customers sending a high volume of transfers that pushed a bank or credit union beyond the 100-transfer safe harbor threshold. Some industry commenters suggested that raising the threshold may encourage banks and credit unions that have stopped or limited providing remittance transfers to begin offering them again or relax the limits. A number of industry commenters also stated that raising the threshold would promote competition and thus increase options for consumers and possibly lower prices. In addition, several industry commenters asserted that raising the threshold would increase consumer access to remittance transfer services, especially for consumers in rural areas or locations serviced primarily by local banks or credit unions. Several industry commenters, including credit unions, banks, and trade associations, alternatively or additionally suggested basing the safe harbor threshold on something other 33 For example, the consumer advocacy group stated that the Bureau would need additional information to raise the safe harbor threshold, such as the size and location of entities providing just above 100 transfers, the number of transfers above 100 that those entities provide, and other options in the market for sending remittance transfers and their cost. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 than the number of transfers. Suggestions included, among other things, basing the threshold on the percentage of an entity’s customers that send remittance transfers, or the percentage of an entity’s transfers that are remittance transfers. A few industry commenters suggested setting a dollar amount threshold (e.g., applying the Rule only to transfers over $1,000 or $10,000, or only to transfers under $500). A few industry commenters noted the overlap between the expiration of the temporary exception and coverage of certain remittance transfer providers under the Rule. Several trade associations stated that raising the normal course of business safe harbor threshold would address concerns from credit unions and community banks regarding the expiration of the temporary exception. These commenters asserted that a small number of credit unions have already stopped providing remittance transfers anticipating the temporary exception’s expiration in July 2020, and that community banks will discontinue providing transfers if they can no longer disclose estimates. Comments on exempting small financial institutions. In the 2019 RFI, the Bureau sought information on a possible exemption from the Rule for small financial institutions. In response, a consumer advocacy group asserted that market data and the results of the Bureau’s Assessment do not support creating such an exemption. Conversely, a number of industry commenters, including credit unions, banks, trade associations, and a payments service provider to banks and credit unions, supported a small financial institution exemption. They asserted that small institutions have fewer opportunities than larger institutions to offset the cost of compliance with the Remittance Rule and indicating that such an exemption would help small financial institutions serve their customers at a lower cost. A few industry commenters also asserted that a small financial institution exemption would be particularly helpful for community banks in underserved or rural areas. Industry commenters suggested a small financial institution exemption based on an asset size threshold of $500 million, $1 billion, $3 billion, or $10 billion. A credit union suggested that the Bureau increase the safe harbor threshold to 1,000 transfers annually for financial institutions with an asset size of less than $50 billion, explaining that the Dodd-Frank Act classifies ‘‘large banks’’ as those with more than $50 billion in assets. Another industry commenter stated that in addition to asset size, the PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 particular markets served by the institution should also be considered for creating a small financial institution exemption. Several banks, credit unions, credit union trade associations, and a payments service provider to banks and credit unions suggested exempting from the Remittance Rule credit unions or financial institutions altogether, arguing that such institutions account for a small percentage of the total number of remittance transfers sent and therefore do not actually provide remittance transfers in the normal course of their business. Recent Outreach Regarding Coverage As discussed in part III above, the Bureau has engaged in ongoing market monitoring and other outreach to industry and other stakeholders regarding the Remittance Rule. As in their comments on the 2019 RFI, the general consensus from industry representatives in these meetings and discussions was that the 100-transfer safe harbor threshold is too low. Representatives from two credit unions suggested raising the threshold to 500 transfers annually. One also suggested the Bureau create an accommodation for recurring transfers and stated that it did not believe a small financial institution exemption would be helpful. Several other entities’ representatives noted that market dynamics (e.g., mergers and consolidations) and customer demand can cause banks and credit unions to get close to crossing the 100-transfer safe harbor threshold. Representatives of several entities suggested other metrics for a safe harbor. A representative for a credit union stated that whether an entity provides remittance transfers in the ‘‘normal course of business’’ should be based on the entity’s proportion of customers sending remittance transfers to total customers overall, while representatives of several other credit unions offered ideas for tying the safe harbor to an entity’s asset size. Similarly, a representative of a bank suggested using relative size measures, such as the percentage of an entity’s total transactions that are remittance transfers, or the percentage of an entity’s revenue that is earned from providing remittance transfers. Representatives of several banks offered insights as to the kind of information that entities not subject to the Rule provide or would provide to consumers. The representative for a bank currently subject to the Rule stated that if the bank no longer had to comply with the Rule, it would end its correspondent banking relationship E:\FR\FM\06DEP5.SGM 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules (which it had established to provide the disclosures required by the Rule) and provide consumers with information about its own fees for sending remittance transfers but likely not the exchange rate or the date of availability. Representatives of two banks not currently subject to the Remittance Rule indicated that the only information they provide to their remittance customers are the amount of funds debited from the customer’s account and their banks’ wire transfer fees. lotter on DSKBCFDHB2PROD with PROPOSALS5 The Bureau’s Proposal The Bureau has monitored the normal course of business 100-transfer safe harbor threshold in the years since the Rule became effective. Based on comments received on the 2019 RFI, other previous RFIs, the results of the Assessment, and other informal feedback received over time, the Bureau is preliminarily persuaded that the safe harbor threshold should be increased to 500 transfers and that such a change is appropriate to implement Congress’ definition of remittance transfer provider in EFTA section 919(g)(3) as a person or financial institution providing remittance transfers in the normal course of its business, whether or not the consumer holds an account with such person. The Bureau believes that a threshold of 500 transfers may be more appropriate to identify persons who occasionally provide remittance transfers, but not in the normal course of their business, and would remove them from coverage under the Rule. Five hundred transfers annually would be equivalent to an average of approximately 10 transfers per week, which the Bureau believes would allow entities to send a relatively limited number of transfers without having to incur the costs of developing and implementing processes and procedures to comply with the Rule or the costs of continued compliance with the Rule. The Bureau believes that, at this volume, entities are generally offering remittance transfers as an accommodation for their accountholding customers rather than operating a separate remittance transfers line of business. In addition, the Bureau believes that raising the safe harbor threshold would mitigate any issues that insured institutions currently providing between 101 and 500 transfers annually 34 might otherwise encounter with respect to the upcoming expiration of the temporary exception. 34 As used in this document, ‘‘between 101 and 500’’ means 101 or more and 500 or fewer—that is, above the current safe harbor threshold but at or below the proposed threshold. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 The Bureau seeks comment on its proposal to increase the normal course of business safe harbor threshold. Specifically, the Bureau seeks comment on its proposed 500-transfer safe harbor threshold, as well as on whether a different threshold, such as 200 or a number between 200 and 500, would be more appropriate. In particular, the Bureau requests data or other evidence that would assist it in determining what number would be most appropriate for the safe harbor threshold in the Remittance Rule. The Bureau also seeks comment on whether its proposal to increase the safe harbor threshold would in fact help reduce burden for banks and credit unions that provide transfers only as an accommodation to their customers. The Bureau also recognizes that any safe harbor interpreting the phrase ‘‘normal course of business’’ could limit the protections afforded to some consumers and seeks data and other information demonstrating the nature and magnitude of any harm to consumers as a result of such a limit. The Bureau believes that raising the safe harbor threshold to 500 transfers would appropriately implement the purposes of EFTA section 919, including the statutory definition of remittance transfer provider, by helping to reduce burden for banks and credit unions that provide transfers only as an accommodation to their customers, thereby ensuring that banks and credit unions continue to offer the service to benefit consumers and do not bear a disproportionate cost to do so. The data now available through Call Reports 35 indicate that a substantial proportion of banks and credit unions make between 101 and 500 remittance transfers per year (i.e., above the current safe harbor threshold but within the proposed threshold), although their percentage of the overall annual volume of remittance transfers is quite small. Specifically, based on the Bureau’s analysis of the 2018 Call Report data, raising the threshold from 100 to 500 transfers would remove approximately 414 banks and 247 credit unions (which represent 54.6 percent and 62.3 percent of such entities currently covered by the Remittance Rule, respectively). These entities account for 0.8 percent (92,600) of bank transfers and 6.2 percent (49,300) of credit union transfers, for a total of approximately 141,900 transfers 35 Banks and credit unions are required to submit quarterly ‘‘Call Reports’’ by the Federal Financial Institutions Examination Council (FFIEC) and the National Credit Union Administration (NCUA), respectively. For a more detailed description of these reporting requirements, see Assessment Report at 24. PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 67137 that would no longer be covered by the Rule. Given that MSBs provide more than 95 percent of remittance transfers annually (discussed in greater detail in part II above), the combined number of bank and credit union transfers that would no longer be covered at a threshold of 500 represents only a minimal percentage of all transfers— specifically, under 0.059 percent of all remittance transfers. If the Bureau were to raise the threshold from 100 to 200 transfers, it would remove 156 banks and 138 credit unions (which represent 20.6 percent and 34.8 percent of such entities currently covered by the Remittance Rule, respectively). These entities account for 0.18 percent (19,900) of bank transfers and 2.31 percent (18,200) of credit union transfers, for a total of approximately 38,100 transfers that would no longer be covered by the Rule. As with the proposed increase from 100 transfers to 500 transfers, given that MSBs provide more than 95 percent of remittance transfers annually, the combined number of bank and credit union transfers that would no longer be covered at a threshold of 200 represents only a minimal percentage of all transfers—specifically, under 0.016 percent of all remittance transfers.36 The Bureau notes that the safe harbor, as it currently exists in the Rule as well as with the proposed modification, is not limited to depository institutions but rather is applicable to all persons. However, the types of entities that would qualify for the proposed safe harbor are predominantly banks and credit unions. MSBs provide far greater numbers of transfers annually. The Bureau is not aware of any MSBs providing such a low volume of remittance transfers that they would qualify for the proposed 500-transfer safe harbor threshold, much less a 200transfer safe harbor threshold.37 The Bureau seeks comment on whether there are any MSBs, or other persons, that 36 In the Assessment Report, the Bureau estimated the number of remittance transfers in 2017 to be 325 million (see id. at 63–64) and that more than 95 percent of transfers were provided by MSBs in 2017. The Bureau does not have an estimate of the total transfers in 2018, but assumed that 95 percent of transfers were provided by MSBs in 2018 to calculate this proportion. 37 The Bureau’s information on MSBs that provide a small number of remittance transfers is incomplete. States that license MSBs collect information on the ‘‘international transfers’’ that are sent by MSBs, which may not be ‘‘remittance transfers’’ as defined by the Remittance Rule. Therefore, it is challenging to determine which MSBs are ‘‘remittance transfer providers,’’ as defined by the Rule, and the number of remittance transfers they provide. However, few MSBs provide 500 or fewer transfers annually and to the best of the Bureau’s knowledge, none of them are remittance transfer providers under the Rule. E:\FR\FM\06DEP5.SGM 06DEP5 67138 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules provide remittance transfers as their primary business that would qualify for the safe harbor at the proposed revised threshold. As noted above, some industry representatives have claimed that some community banks and credit unions have stopped or limited remittance transfer services due to the Remittance Rule. The Bureau in its Assessment found no evidence that, on net, banks or credit unions ceased or limited providing remittance transfers because of the safe harbor threshold.38 To the extent that this has occurred, however, the Bureau expects a likely result of raising the safe harbor threshold might be that at least some of those entities would resume their offering of transfers. The Bureau seeks comment on whether any banks or credit unions actually exited the market or limited the number of remittance transfers provided as a result of compliance costs associated with the Remittance Rule and, if so, whether they would reenter the market or lift the limits they placed on their remittance transfer services if the Bureau raised the safe harbor threshold as proposed. The Bureau acknowledges that raising the safe harbor threshold would likely result in a reduction of protections for some consumers, because consumers that send remittance transfers from entities that newly qualify for the safe harbor would likely receive less information about the exchange rates and fees related to their remittance transfers, and those entities would likely not give the same cancellation rights or error resolution protections as required under the Remittance Rule. However, based on the results of the Assessment, as well as the updated analysis contained herein, the Bureau understands that the number of affected consumers would likely be relatively small, given that the banks and credit unions that would no longer be covered by the Rule if the Bureau raised the safe harbor threshold to 500 transfers account for a very small proportion of all remittance transfers annually.39 The Bureau also notes that it has received relatively few consumer complaints related to any providers of remittance lotter on DSKBCFDHB2PROD with PROPOSALS5 38 Assessment Report at 133–35. the Assessment Report, only about 20 percent of banks and about 25 percent of credit unions that offered remittance transfer services were covered by the Remittance Rule at the time of the report; a large portion of banks and credit unions either offered no remittance transfer services or provided 100 or fewer transfers per year and thus were excluded from coverage under the Remittance Rule by virtue of the current safe harbor threshold. Id. at 79 n.200. 39 Per VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 transfers,40 including the subset of providers that would newly qualify for the safe harbor under this proposal. It is not clear why the Bureau does not receive many complaints about possible violations of the Remittance Rule. One possibility is that providers are complying with the law and therefore the Bureau receives few complaints.41 Another possibility is that some consumers who send remittance transfers may have limited English proficiency and, therefore, be less likely to know that they can submit complaints to the Bureau or may be less likely to seek help from a government agency than other consumers. The Bureau seeks comment on whether entities that would no longer be covered under the Remittance Rule would discontinue providing the disclosures, cancellation rights, or error resolution protections that they are currently required to provide pursuant to the Rule. If such entities would continue providing consumer protections for some or all of their remittance transfers, the Bureau seeks comment on what those protections would be. Based on the data the Bureau currently has, and in order to effectuate the purposes of EFTA and to facilitate compliance, the Bureau is proposing to raise the safe harbor threshold from 100 to 500 remittance transfers. Specifically, the Bureau is proposing to revise existing § 1005.30(f)(2)(i) to state that a person is deemed not to be providing remittance transfers for a consumer in the normal course of its business (and thus not subject to the Remittance Rule), if the person provided 500 or fewer transfers in the previous calendar year and provides 500 or fewer transfers in the current calendar year. The Bureau is also proposing to revise part of existing § 1005.30(f)(2)(ii) regarding the safe harbor transition period to reflect the proposed 500-transfer safe harbor threshold and the proposed effective date for this rulemaking. (The proposed effective date is discussed in more detail 40 The Bureau’s complaint form lists ‘‘international money transfers’’ as an option for consumers to select when submitting a complaint, which is the closest available approximation for ‘‘remittance transfers’’ as defined by the Remittance Rule. From April 1, 2013 through December 31, 2017, the Bureau received approximately 1,260,600 consumer complaints, including 4,700 international money transfer complaints representing about 0.4 percent of the total complaints received. Id. at 114. 41 Bureau examinations have uncovered mixed levels of compliance among persons under the Bureau’s supervision that provide remittance transfers, including general compliance at certain institutions as well as individual and wholesale violations. See Bureau of Consumer Fin. Prot., Supervisory Highlights, at 11–14 (Issue 10, Mar. 2016), https://files.consumerfinance.gov/f/201603_ cfpb_supervisory-highlights.pdf. PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 in part VI below.) Specifically, the proposed revision to § 1005.30(f)(2)(ii) states that if, beginning on July 21, 2020, a person that provided 500 or fewer remittance transfers in the previous calendar year provides more than 500 remittance transfers in the current calendar year, and if that person is then providing remittance transfers for a consumer in the normal course of its business pursuant to § 1005.30(f)(1), the person has a reasonable period of time, not to exceed six months, to begin complying with subpart B. The Bureau is also proposing to add new § 1005.30(f)(2)(iii) to address the transition period for persons qualifying for the safe harbor. Proposed § 1005.30(f)(2)(iii) states that if a person who previously provided remittance transfers in the normal course of its business in excess of the safe harbor threshold set forth in § 1005.30(f)(2) determines that, as of a particular date, it will qualify for the safe harbor, it may cease complying with the requirements of subpart B of Regulation E with respect to any remittance transfers for which payment is made after that date. The requirements of EFTA and Regulation E, including those set forth in §§ 1005.33 and 1005.34, as well as the requirements set forth in § 1005.13, continue to apply to transfers for which payment is made prior to that date. The Bureau notes that existing language in § 1005.30(f)(2)(ii) regarding the six month transitional period for coming into compliance after ceasing to qualify for the safe harbor, as well as the proposed language in § 1005.30(f)(2)(iii) regarding newly qualifying for the safe harbor, both peg their requirements for particular transfers based on when payment is made for such transfers. The phrase ‘‘payment is made’’ is used numerous times throughout the Rule, and the Bureau believes that it provides a clear test as to whether any particular transfer is or is not subject to the Rule.42 The Bureau is concerned that hinging the standard on, for example, when a transfer is made may not provide adequate certainty, in particular for transfers that are scheduled in advance. The Bureau seeks comment on whether when ‘‘payment is made’’ is the appropriate standard on which to hinge these provisions, or whether a different 42 For example, the phrase ‘‘payment is made’’ is used in the portion of existing § 1005.30(f)(2)(ii) (that the Bureau is not proposing to modify) which states that compliance with subpart B of Regulation E will not be required for any remittance transfers for which payment is made during the reasonable period of time that a person has to transition in to compliance with the Rule once that person no longer qualifies for the safe harbor. See also, e.g., comment 31(e)–2, which discusses the timing of certain disclosure requirements. E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules standard would be better and, if so, why. With respect to transfers scheduled before the date of transfer pursuant to § 1005.36, in particular for a series of transfers that are scheduled in advance, the Bureau notes that remittance transfer providers subject to the Rule are required to give consumers disclosures in accordance with the Rule’s requirements, including but not limited to consumers’ cancellation and error resolution rights. The Bureau notes that the transition from being covered by the Rule to qualifying for the safe harbor is not a new issue presented by this proposal, and seeks comment on what persons that were remittance transfer providers subject to the Rule before qualifying for the safe harbor have done—or expect to do—with respect to any transfers scheduled in advance after they qualify for the safe harbor. The Bureau further seeks comment on whether it is necessary and appropriate for the Bureau to prescribe specific notice obligations in this situation and, if so, what those obligations should be. The Bureau notes that if a provider gives consumers the required disclosures under the Rule, but does not subsequently inform consumers of its changed compliance obligations with respect to what it has previously disclosed, that person risks exposing itself to potential liability under the Dodd-Frank Act or other laws. With respect to the commentary accompanying § 1005.30(f), first, the Bureau is proposing to revise the last sentence in existing comment 30(f)–2.i in order to avoid potential conflict or confusion with the proposed safe harbor threshold of 500 transfers. The Bureau is also proposing to revise existing comments 30(f)–2.ii and iii regarding the safe harbor and transition period for consistency with the proposed changes to § 1005.30(f)(2)(i) and (ii). In addition, the Bureau is proposing to add a sentence in comment 30(f)–2.ii that states that on July 21, 2020, the safe harbor threshold in § 1005.30(f)(2)(i) changed from 100 transfers to 500 transfers, to memorialize the change. The Bureau is also proposing to renumber existing comment 30(f)–2.iv as 30(f)–2.iv.A (in order to add two additional examples, described below), to revise the heading for this comment to make clear that it provides an example of the safe harbor and transition period for the 100-transfer safe harbor threshold that was effective prior to the proposed effective date of July 21, 2020, and to change the verb tense from present to past throughout the example. The Bureau requests comment on whether it is useful to VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 retain this example, as it has proposed to do, or whether the example should be eliminated. The Bureau is proposing to add new comment 30(f)–2.iv.B to provide an example of the safe harbor for a person that provided 500 or fewer transfers in 2019 and provides 500 or fewer transfers in 2020. The Bureau is also proposing to add new comment 30(f)– 2.iv.C, which provides an example of the safe harbor and transition period for the 500-transfer threshold that would be effective beginning on the proposed effective date of July 21, 2020. This proposed comment is based on the example in existing comment 30(f)–2.iv, with modifications to reflect the changes the Bureau is proposing to § 1005.30(f)(2). Finally, the Bureau is proposing to add new comment 30(f)–2.v to address continued obligations under the Rule with respect to transfers for which payment was made before a person qualifies for the safe harbor. The proposed comment states that proposed § 1005.30(f)(2)(iii) addresses situations where a person who previously was required to comply with subpart B of Regulation E newly qualifies for the revised safe harbor in proposed § 1005.30(f)(2)(i). It explains that proposed § 1005.30(f)(2)(iii) states that the requirements of EFTA and Regulation E, including those set forth in §§ 1005.33 and 1005.34 (which address procedures for resolving errors and procedures for cancellation and refund of remittance transfers, respectively), as well as the requirements set forth in § 1005.13 (which, in part, governs record retention), continue to apply to transfers for which payment is made prior to the date the person qualifies for the safe harbor in § 1005.30(f)(2)(i). The comment also explains that qualifying for the safe harbor in § 1005.30(f)(2)(i) likewise does not excuse compliance with any other applicable law or regulation. For example, if a remittance transfer is also an electronic fund transfer, any requirements in subpart A of Regulation E that apply to the transfer continue to apply, regardless of whether the person must comply with subpart B. Relevant requirements in subpart A of Regulation E may include, but are not limited to, those relating to initial disclosures, change-in-terms notices, liability of consumers for unauthorized transfers, and procedures for resolving errors. The Bureau seeks comment on its proposed revisions and additions to commentary, as described above. The Bureau also requests comment on whether any additional clarification or PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 67139 guidance regarding the proposed revised safe harbor threshold is needed and, if so, what specifically should be addressed. In particular, the Bureau seeks comment on whether and to what extent providers have encountered transitional issues when qualifying for the existing safe harbor after complying with the Rule, as well as whether providers who expect to qualify for the proposed revised safe harbor anticipate any transitional issues. The Bureau also solicits comment on whether providers anticipate any particular issues with a mid-year effective date (July 21, 2020) for its proposed change to the safe harbor threshold (see also the discussion of the proposed effective date in part VI below). Finally, the Bureau seeks comment on whether there are any other provisions in existing commentary that should be modified or removed in light of the changes proposed herein. Other potential approaches considered by the Bureau. As noted above, several industry commenters responded to the Bureau’s query in the 2019 RFI as to whether there were any other factors the Bureau should consider in determining whether a person is providing remittance transfers in the ‘‘normal course of its business.’’ Suggestions included basing the term on the percentage of an entity’s customers that send remittance transfers, the percentage of an entity’s transfers that are remittance transfers, or an entity’s total revenue generated from providing remittance transfers. The Bureau notes that it considered these and other approaches when it finalized the 100-transfer safe harbor threshold in 2012. The Bureau stated it did not believe it was appropriate, based on the administrative record at the time, to define a safe harbor based on a relative size measure, such as percentage of revenue, or other suggested criteria, and that commenters did not provide, and the Bureau did not have data suggesting, across the remittance transfer industry, why any of the suggestions made by commenters would be an appropriate basis for the safe harbor threshold. The Bureau also stated that it believed that due to the wide variety of business models for offering remittance transfers and lack of currently available data, it would be difficult to craft a single standalone measure of relative size for identifying persons who provide remittance transfers on only a limited basis.43 The Bureau does not have any further data to inform such approaches and thus its position on adopting any such 43 77 E:\FR\FM\06DEP5.SGM FR 50243, 50250 (Aug. 20, 2012). 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 67140 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules alternative thresholds remains unchanged. Entities are familiar with tracking their remittance transfers for purposes of the current safe harbor, Call Report requirements, and other purposes; the Bureau does not believe that tracking remittance transfer volume in order to confirm that entities qualify for the safe harbor will be any more difficult if the safe harbor threshold were 500 than it is with the current threshold of 100. While tracking total revenue (rather than profits) from remittance transfers may also be somewhat straightforward, the Bureau is particularly concerned that some alternative approaches, such as tracking a proportion (e.g., percentage of customers that send remittance transfers), could be difficult for an entity to track on an ongoing or real-time basis and could fluctuate both up and down over the course of the year. The Bureau also believes that a safe harbor provides the most certainty if it is based on a bright-line measure that permits entities to easily identify whether or not they qualify, especially if it is a measure with which industry is already familiar. Nonetheless, the Bureau solicits comment on whether it should adopt any alternate or additional approach for the safe harbor from the ‘‘normal course of business’’ definition. Specifically, regarding the suggestion to base the safe harbor threshold on the percentage of an entity’s customers that send remittance transfers, the Bureau seeks comment on whether this would be a viable approach and if so, what the appropriate percentage of customers would be and why. In addition, the Bureau seeks comment on the time frame over which any such alternate approach should be tracked and the timing for any transitional provisions that might be necessary using such an approach. The Bureau also seeks comment on the potential burdens to entities, or challenges that could arise, in basing the safe harbor on an approach other than the annual number of remittance transfers. In the 2019 RFI, the Bureau also requested information and evidence to determine whether an exception for small financial institutions (for example, based on asset size) might be appropriate.44 EFTA section 904(c) contains a ‘‘small financial institution’’ exception, which provides that the Bureau ‘‘shall by regulation modify’’ EFTA’s statutory requirements for such institutions if the Bureau determines that ‘‘such modifications are necessary to alleviate any undue compliance burden on small financial institutions 44 84 FR 17971 (Apr. 29, 2019). VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 and such modifications are consistent with the purpose and objective of [EFTA].’’ The Bureau considered the information received in response to the 2019 RFI and assessed whether the data it has would be sufficient to develop a proposed small financial institution exception that meets the criteria in section 904(c). The Bureau also considered whether other options might be more preferable to address the issue of coverage under the Remittance Rule. While some industry commenters requested a small financial institution exemption and provided some information in support of that request, the Bureau has concluded that proposing to adjust the safe harbor threshold would be a more effective approach to addressing the concerns of small financial institutions. In addition, a consumer advocacy group asserted that market data and the results of the Assessment do not support creating a small financial institution exemption. On balance, the Bureau believes that its proposal to raise the safe harbor threshold would be a more effective way to address the issue of coverage under the Remittance Rule and thus is not proposing to create a small financial institution exemption. 1005.32 Estimates As discussed in part II above, a significant consumer protection provided by the Remittance Rule is the requirement that remittance transfer providers disclose certain information to consumers that send remittance transfers. Specifically, a provider generally must provide a pre-payment disclosure (as set forth in § 1005.31(b)(1)) to a sender when the sender requests the remittance transfer, but prior to payment for the transfer. The provider also generally must provide a receipt (as required by § 1005.31(b)(2)) to the sender when payment is made for the remittance transfer. As an alternative to providing the separate pre-payment disclosure and the receipt, a provider may provide a combined disclosure (as described in § 1005.31(b)(3)) to the sender when the sender requests a remittance transfer, but prior to payment. Section 1005.36(a)(1) and (2) sets forth special rules for when the disclosures must be given for a one-time transfer scheduled five or more business days before the date of transfer or for the first in a series of preauthorized remittance transfers. The disclosures required by §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2) include a disclosure of the exchange rate if the transfer will be received in a currency other than the one in which the transfer PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 was funded, as described in § 1005.31(b)(1)(iv). The disclosures required by §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2) also must include the following disclosures as set forth in § 1005.31(b)(1)(v) through (vii), respectively: (1) If ‘‘covered third-party fees’’ as defined in § 1005.30(h) are imposed, the total amount that will be transferred to the recipient inclusive of the covered third-party fees; (2) the amount of any covered third-party fees; and (3) the amount that will be received by the designated recipient (after deducting any covered third-party fees). The above disclosures set forth in § 1005.31(b)(1)(v) through (vii) must be provided in the currency in which the designated recipient will receive the funds. Relatedly, an important requirement established by EFTA section 919 is that remittance transfer providers generally must disclose (both prior to and at the time the consumer pays for the transfer) the exact exchange rate and the amount to be received by the designated recipient of a remittance transfer.45 Accordingly, the Rule generally requires that providers disclose to senders the exact amount of currency that the designated recipient will receive. Section 1005.32, however, sets forth several exceptions to this general requirement, including the temporary exception in existing § 1005.32(a). As such, the Bureau is proposing two new permanent exceptions to address the expiration of the temporary exception, set forth in proposed § 1005.32(b)(4) and (5) and related commentary. 32(a) Temporary Exception for Insured Institutions As noted above, EFTA section 919 sets forth a temporary exception that permits certain financial institutions to disclose estimates instead of exact amounts to consumers. Remittance transfer providers qualify for the temporary exception in EFTA section 919 if: (i) They are insured depository institutions or insured credit unions (collectively, ‘‘insured institutions’’) that make a transfer from an account that the sender holds with them; and (ii) they are unable to know, for reasons beyond their control, the amount of currency that will be made available to the designated recipient. If these conditions are met, EFTA’s temporary exception provides that these institutions need not disclose the amount of currency that will be received by the designated recipient but rather may disclose ‘‘a reasonably accurate 45 15 E:\FR\FM\06DEP5.SGM U.S.C. 1693o–1(a)(1) and (2). 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 estimate of the foreign currency to be received.’’ 46 EFTA set the temporary exception to expire five years from the enactment of the Dodd-Frank Act. EFTA also provided a one-time ability for the Bureau to extend the exception for up to five more years, until July 21, 2020, if the Bureau determined that the expiration of the exception would negatively affect the ability of insured institutions to send remittance transfers to foreign countries. In 2014, the Bureau by rule extended the exception for five years to July 21, 2020.47 As EFTA section 919 expressly limits the length of the temporary exception to the term specified therein, the temporary exception will expire on July 21, 2020. In implementing the temporary exception in EFTA section 919, § 1005.32(a)(1) provides that a remittance transfer provider may give estimates in compliance with § 1005.32(c) for the exchange rate (if applicable), covered third-party fees, and certain other disclosures if the provider meets three conditions. The three conditions are: (1) The provider must be an insured institution; (2) the provider must not be able to determine the exact amounts to be disclosed for reasons beyond its control; and (3) the transfer generally must be sent from the sender’s account with the insured institution.48 Section 1005.32(a)(3) provides that insured depository institutions, insured credit unions, and uninsured U.S. branches and agencies of foreign depository institutions are considered ‘‘insured institutions’’ for purposes of the temporary exception. MSBs are not ‘‘insured institutions’’ for purposes of the temporary exception. The Bureau is not proposing to amend § 1005.32(a) but provides a discussion of this provision and related comments received in response to the 2019 RFI as background to explain its proposed two new exceptions in § 1005.32(b)(4) and (5), discussed below. Challenges of Insured Institutions in Disclosing Exact Amounts As discussed in part II above, banks and credit unions have predominantly utilized an ‘‘open network’’ payment system made up of the correspondent banking network to send remittance transfers on behalf of consumers, and most banks and credit unions only maintain a relatively small number of 46 15 U.S.C. 1693o–1(a)(4). FR 55970 (Sept. 18, 2014). 48 For the purposes of the temporary exception, a sender’s account does not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account. 47 79 VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 correspondent banking relationships. As such, in many cases involving remittance transfers sent via the correspondent banking network, the sending institution must find a chain of one or more intermediary financial institutions to transmit funds from the sending institution to the designated recipient’s institution. There are two basic ways of how such a chain works where the originating (sending) institution has no correspondent banking relationship with the designated recipient’s institution: the ‘‘serial’’ method and the ‘‘cover’’ method (also known as the ‘‘split and cover’’ method).49 Sending a remittance transfer using the serial method means that the payment is instructed and settled one step at a time between each of the financial institutions in the transmittal route. Each connected pair of financial institutions in the transmittal route have a correspondent banking relationship with each other, which enables fund settlement.50 By current market practice, each intermediary financial institution typically deducts a fee from the payment amount, which results in the recipient of the payment not receiving the full amount of the original payment order.51 Sending a remittance transfer using the cover method means that the payment information is conveyed from the sending institution to the designated recipient’s institution while settlement is handled separately through correspondent banks.52 Further, current market practice is such that correspondent banks typically do not deduct transaction fees from payments sent using the cover method.53 As discussed above, the temporary exception permits insured institutions to disclose estimates (rather than exact amounts) of the exchange rate and covered third-party fees (and other amounts that have to be estimated because the exchange rate and covered third-party fees are estimated). With respect to the exchange rate, insured institutions and their trade associations have reported to the Bureau that because exchange rates fluctuate, sending institutions comply with the requirement to disclose exact exchange rates by ‘‘fixing’’ the exchange rate at 49 See 2016 BIS Report at 33–34. at 34. 51 Id. at 37. 52 Every cross-border money transfer, including remittance transfers, sent via the correspondent banking network has two components: The payment information and the settlement instruction. Whereas these two components travel together when using the serial method, the cover method separates the payment information from the settlement instructions. 53 2016 BIS Report at 37. 50 Id. PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 67141 the time a sender requests a remittance transfer. They do this by converting the funds to the applicable foreign currency up front themselves, or by using their correspondent bank or third-party service provider (instead of having an intermediary financial institution or the designated recipient’s institution perform the foreign currency conversion). As discussed in greater detail below in the section-by-section analysis of proposed § 1005.32(b)(4), insured institutions may face a number of hurdles with respect to converting funds to certain currencies upfront. In such cases, they may rely on the temporary exception with respect to the disclosure of the exchange rate.54 With respect to covered third-party fees, insured institutions and their trade associations have told the Bureau that when banks and credit unions send remittance transfers using the serial method (where sending institutions do not have a correspondent relationship with all the financial institutions in the remittance transfer’s transmittal route), they cannot control or even know transaction fees imposed by another financial institution in the payment chain without having a correspondent relationship with that financial institution. As such, they rely on the temporary exception with respect to the disclosure of covered third-party fees.55 Recent market developments and potential solutions. In the Assessment Report, the Bureau observed that the remittance market has undergone substantial change since the Rule became effective. The Assessment Report described several developments regarding the growth and incorporation of innovative technologies by providers of cross-border money transfers and other companies that support such providers.56 The Bureau has continued to monitor the remittance transfer market since the publication of the Assessment Report and observes that most of these developments continue to progress. Examples include: (1) The continued growth and expanding functionality of the Society for Worldwide Interbank Financial Telecommunication (SWIFT)’s ‘‘global payment innovation’’ (gpi) tracking product, which can increase the amount of up-front information available to sending 54 Section 1005.32(b) also contains other exceptions that permit the estimation of the exchange rate in certain circumstances. 55 See below in the section-by-section analysis of proposed § 1005.32(b)(5) for a discussion of why sending institutions are not always able to send cover payments to designated recipients’ institutions. 56 Assessment Report at 97–106. E:\FR\FM\06DEP5.SGM 06DEP5 67142 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 institutions, and the expansion of the major payment card networks’ capacity to support cross-border payments; 57 (2) the continued growth of ‘‘fintech’’ nonbank remittance transfer providers and their further expansion into partnerships and other relationships with banks and credit unions, which allow such entities to tap into the closed network payment systems that nonbank remittance transfer providers have developed; 58 and (3) the continued growth and expanding partnerships of virtual currency companies, such as Ripple, which offer both a payments messaging platform to support crossborder money transfers as well as a proprietary virtual currency, XRP, which can be used to effect settlement of those transfers.59 These developments suggest that in the future there may be means by which banks and credit unions could reduce their remaining reliance on estimates. These developments all share a fundamental similarity: They all apply elements of a closed network payment system to cross-border money transfers sent by banks and credit unions. As discussed in part II above, in a closed network payment system, a single entity generally exerts a high degree of end-toend control over a transaction. This control generally facilitates standardization and uniformity over terms, conditions, and processes to which participants in a closed network payment system must adhere. That standardization and uniformity, in turn, can provide a great deal of certainty to all participants in such a system as to the terms and conditions that will apply to individual transactions within that system. To the degree banks and credit unions increase their reliance on closed network payment systems for sending 57 SWIFT provides financial messaging services that support a large share of all cross-border interbank payments sent via correspondent banks. See, e.g., Press Release, SWIFT, SWIFT enables payments to be executed in seconds (Sept. 23, 2019), https://www.swift.com/news-events/pressreleases/swift-enables-payments-to-be-executed-inseconds; John Adams, Small cross-border deals play a big role for Visa, Mastercard, PaymentsSource (May 21, 2019), https://www.paymentssource.com/ news/small-cross-border-deals-play-a-big-role-forvisa-mastercard. 58 See, e.g., Zoe Murphy, TransferWise launches TransferWise for Banks in the U.S. with Novo, Tearsheet (Sept. 26, 2019), https://tearsheet.co/newbanks/transferwise-launches-transferwise-forbanks-in-the-u-s-with-novo/. 59 See, e.g., Press Release, Ripple, Ripple Announces Strategic Partnership with Money Transfer Giant, MoneyGram (June 17, 2019), https:// www.ripple.com/insights/ripple-announcesstrategic-partnership-with-money-transfer-giantmoneygram/; Sharon Kimathi, PNC becomes first US bank on RippleNet, FinTech Futures (Aug. 29, 2019), https://www.fintechfutures.com/2019/08/ pnc-becomes-first-us-bank-on-ripplenet/. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 remittance transfers and other crossborder money transfers, the Bureau notes that this could result in greater standardization and ease by which sending institutions can quote exact covered third-party fees and exchange rates. The Bureau also believes that expanded adoption of SWIFT’s gpi product or Ripple’s suite of products could similarly allow banks and credit unions to know the exact final amount that recipients of remittance transfers will receive before they send the transfer. However, based on comments that banks, credit unions, and their trade associations submitted in response to the 2019 RFI and the Bureau’s own market monitoring, the Bureau believes it is unlikely in the short-to-medium term that the developments described above will be able to fully eliminate reliance on the correspondent banking network as the predominant method for banks and credit unions to send remittance transfers. There are thousands of financial institutions worldwide that could receive remittance transfers. If, as noted above, the different approaches described above share the similarity of replicating some elements of a closed network payment system, they likely would need to enroll all or most of those financial institutions into their platforms to offer banks and credit unions up-front certainty when sending transfers for which they currently rely on the temporary exception. It may be costly, excessively time-consuming, or otherwise difficult to enroll all or even most of these institutions, especially the smaller ones. Accordingly, the Bureau believes that it is unlikely in the short-to-medium term for the developments discussed above to replace the correspondent banking system as the predominant means that banks and credit unions use to send remittance transfers. Comments Received in Response to the 2019 RFI As noted in part III above, the Bureau in the 2019 RFI sought information on the upcoming expiration of the temporary exception and potential options to mitigate its impact. In response to the 2019 RFI, the overwhelming majority of comments came from banks, credit unions, their trade associations, and their service providers. The Bureau received one comment from a ‘‘fintech’’ nonbank remittance transfer provider and one comment from a consumer advocacy group. Comments from credit unions, banks, their trade associations, and their service providers. Many of these PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 industry commenters indicated that insured institutions should still be permitted to estimate the exchange rate and covered third-party fees (and the disclosures that depend on those amounts) after the temporary exception expires. As discussed in more detail below in the section-by-section analyses of proposed § 1005.32(b)(4) and (5), several industry commenters asserted that: (1) The vast majority of international payments sent by banks and credit unions, including commercial cross-border transfers and remittance transfers, are wire transfers sent via correspondent banks in an open network payment system; and (2) as a result, depending on the identity and location of the designated recipient’s institution, insured institutions have difficulty knowing the exact exchange rate and covered third-party fees for all remittance transfers at the time the disclosures required by the Remittance Rule must be given. See the section-bysection analysis of proposed § 1005.32(b)(4) for a discussion of the comments received on the exchange rate, and the section-by-section analysis of proposed § 1005.32(b)(5) for a discussion of the comments received on covered third-party fees. Several industry commenters asserted that insured institutions might stop sending remittance transfers in situations where the insured institutions cannot provide exact disclosures of the exchange rate or covered third-party fees. Several other industry commenters acknowledged that it is possible for them to send certain remittance transfers for consumers via international ACH, or use nonbank service providers, closed network payment systems, or other methods that could allow them to control or eliminate covered third-party fees and thus provide exact amounts of those fees in the disclosures required by the Remittance Rule. They also asserted, however, that none of these methods provide a comprehensive alternative to the correspondent banking system. Several industry commenters asserted that after the temporary exception expires, if the Bureau does not allow insured institutions to continue providing estimates, it will hurt smaller insured institutions and their customers. These industry commenters indicated that if the larger correspondent banks react to the expiration of the temporary exception by limiting or increasing the cost of their offerings, there will likely be a domino effect in the industry that will negatively influence the cost of, or access to, these services for consumers. Several industry commenters indicated that if community banks and credit E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules unions start reducing or eliminating remittance transfer services, customers, especially those in rural communities, would have limited options for remittance transfers and could be left without safe, convenient, and costeffective means to transmit funds. Several industry commenters indicated that insured institutions that continue to offer remittance transfers may see costs increase when sending transfers to certain destinations if insured institutions have to change the ways they provide remittance transfers in order to disclose exact amounts. With respect to the exchange rate, two bank commenters indicated that if banks have to move to providing an exact exchange rate for all wire transfers, banks will have no choice but to build in an extra buffer in the exact exchange rate disclosed, so that they do not lose money on the transactions. One trade association indicated that (1) for credit unions that rely primarily on correspondent institutions to provide exchange rate and fee information, the expiration of the temporary exception could have indirect effects if correspondent banks adopt costlier processes for ensuring accurate disclosure of amounts received; and (2) if the compliance costs of correspondents are passed on to credit unions, this could further challenge credit unions’ ability to offer remittance transfers at reasonable and competitive rates. Several industry commenters asserted that they believed that there is no evidence of consumer harm from disclosing estimates rather than exact amounts. Several trade associations indicated that banks maintain databases of fee information to allow them to provide highly reliable estimates when they are unable to know with certainty the exact covered third-party fees that will be assessed. Based on the concerns discussed above, a number of industry commenters requested that the Bureau exempt all wire transfers from the requirement to disclose the exact exchange rate and covered third-party fees to accommodate the characteristics of remittance transfers sent through correspondent banks in an open network payment system. They asserted that the Bureau could use its general exception and adjustment authority under EFTA section 904(c) to exempt wire transfers from the requirement to provide exact exchange rates or covered third-party fees (and the disclosures that depend on those amounts) when insured institutions are not able to determine exact amounts. In the alternative, several trade associations VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 suggested that the Bureau should use its authority under EFTA section 919(c) to exempt wire transfers where exact amounts cannot reasonably be determined in advance.60 These trade associations asserted that (1) the use of correspondent banks to send remittance transfers in an open network payment system is a method of making the transfers and that this network system does not allow insured institutions to know the amount of currency that will be received by the designated recipient for all transfers; and (2) the correspondent banking network is decentralized and that decentralization places inherent limits on the ability of insured institutions to obtain accurate exchange rate and covered third-party fee information. Relatedly, several industry commenters suggested that the Bureau amend the criteria and process for using the ‘‘countries’’ exception in § 1005.32(b)(1) (which implements EFTA section 919(c)) to make it easier to include countries on the Bureaumaintained ‘‘countries list’’ so that insured institutions can provide estimates of the exchange rate or covered third-party fees for remittance transfers to those countries. (See the end of this part V for the Bureau’s request for comment on this issue.) Other industry commenters discussed other approaches to address concerns specifically related to providing exact exchange rates, and these approaches are discussed below in the section-bysection analysis of proposed § 1005.32(b)(4). Industry suggestions to address concerns specifically relating to providing exact covered third-party fees are discussed below in the section-bysection analysis of proposed § 1005.32(b)(5). Several industry trade associations indicated that, if the Bureau does not extend or make permanent the temporary exception, the Bureau should adopt a one-year transition period to provide a safe harbor for banks’ good faith implementation and compliance efforts. These trade associations indicated that this one-year transition period is needed because of the complexities of determining how any changes in a final rule will affect services to consumers and other banks, the need to communicate those impacts 60 EFTA section 919(c) (implemented in § 1005.32(b)(1)) permits the Bureau to except remittance transfer providers from having to provide exact amounts for transfers to certain nations if the Bureau determines that a recipient country does not legally allow, or the method by which transactions are made in the recipient country does not allow, a remittance transfer provider to know the amount of currency that will be received by the designated recipient. See below for a discussion of this exception. PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 67143 to customers, and the need to create new procedures and training to enable compliance. Comment from a nonbank remittance transfer provider. The one ‘‘fintech’’ nonbank remittance transfer provider that commented on the 2019 RFI indicated that the temporary exception was never intended to be permanent, whether directly or indirectly through an extension of other exceptions. This commenter asserted its belief that extending the exception directly or indirectly will stunt the movement toward transparency and continue the bifurcated regulatory approach under which insured institutions may be able to provide estimates but MSBs cannot. Comment from a consumer advocacy group. The consumer advocacy group that commented on the 2019 RFI indicated that (1) the Remittance Rule is designed to improve accountability and transparency, and through those benefits to consumers, also benefit competition and innovation; (2) the temporary exception was put into place to accommodate existing practices while the market adapted to new standards under the Rule; and (3) evidence from pricing and market innovation indicate that the market has substantially adapted and is poised to move away from a need for the exception. The commenter also encouraged institutions that might consider terminating their remittance transfer services to instead partner with larger institutions or nonbank money transmitters including MSBs to act as a service provider to that withdrawing institution’s customers. The commenter asserted that these partnerships would be especially useful in situations where the institution terminating the remittance transfer services serves a segment of consumers with few alternatives available when sending remittance transfers. Recent Outreach on Impacts of the Expiring Temporary Exception As noted in part III above, the Bureau has engaged in ongoing market monitoring and other outreach to industry and other stakeholders regarding the Remittance Rule. As in their comments on the 2019 RFI, the general consensus from industry in these meetings and discussions was that, if the Bureau does not take steps to allow estimates of the exchange rate or covered third-party fees to mitigate the expiration of the temporary exception, insured institutions may stop sending remittance transfers in situations where, despite reasonable efforts, they cannot provide exact disclosures. One trade association emphasized the difficulties that some E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 67144 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules insured institutions face in providing exact disclosures for certain remittance transfers sent through correspondent banks in an open network payment system. This trade association reiterated the suggestions in its comment letter for potential regulatory solutions, such as the Bureau using its general exception and adjustment authority under EFTA section 904(c), or its authority under EFTA section 919(c), to exempt wire transfers from the requirement to provide exact disclosures when insured institutions are not able to determine accurate amounts. Several large insured institutions provided information on the circumstances in which they use the temporary exception and discussed their concerns about the potential impact its expiration would have on whether they could continue to provide certain remittance transfers. These institutions indicated that they do not rely on the temporary exception to estimate the exchange rate but do rely on it in certain circumstances to estimate covered third-party fees. They also described the actions they have taken or plan to take to mitigate the potential impacts of the expiring temporary exception, and potential measures that the Bureau could take to limit further its impact. One large insured institution also identified the countries where it uses the temporary exception most often to estimate covered third-party fees, and for each of these countries provided information about the number of remittance transfers for which it uses the temporary exception. The Bureau also received a letter from several members of Congress expressing concern that if insured institutions are no longer able to provide estimates of exchange rates and covered third-party fees after the temporary exception expires, many institutions would likely discontinue providing remittance transfer services to their customers because they would be unable to comply with the Remittance Rule. These members of Congress requested that the Bureau use its authority under EFTA section 904(a) and (c), or its authority under EFTA section 919(c), or its authority under section 1032 of the Dodd-Frank Act, to allow insured institutions to continue providing estimates of exchange rates and covered third-party fees in cases where exact disclosures are not possible. These members of Congress stated that a solution should be permanent, not temporary, so insured institutions are able to make long-term decisions regarding the provision of remittance transfer services. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 The Bureau’s Proposal To mitigate the impact of the temporary exception’s expiration, the Bureau is proposing two new permanent exceptions, as discussed in greater detail below in the section-by-section analyses of proposed § 1005.32(b)(4) and (5). The Bureau is retaining the temporary exception in § 1005.32(a)(1), with the current sunset date of July 21, 2020. As discussed in the 2019 RFI, EFTA section 919 expressly limits the length of the temporary exception to July 21, 2020. The Bureau, therefore, is not proposing to extend the exception or make it permanent. As such, the exception will expire on July 21, 2020 unless Congress changes the law. For similar reasons, the Bureau is not proposing to replicate the temporary exception, as some trade association commenters suggested the Bureau should do.61 32(b) Permanent Exceptions 32(b)(4) Permanent Exception for Estimation of the Exchange Rate by an Insured Institution The Bureau is proposing to add a new permanent exception to the Remittance Rule that would permit insured institutions to estimate the exchange rate (and other disclosures that depend on the exchange rate) that must be disclosed in the disclosures required by §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2) in certain circumstances. This proposed exception is designed to help mitigate the impact of the expiration of the temporary exception on consumers’ access to certain remittance transfers. Comments Received on Estimating the Exchange Rate in Response to the 2019 RFI Several industry commenters asserted that insured institutions have difficulty knowing the exact exchange rate at the time they must provide the disclosures required by the Remittance Rule. For example, several industry trade associations indicated that (1) insured institutions can provide the exact exchange rate in the disclosures if the insured institution, its service provider, 61 Specifically, these trade association commenters asked the Bureau to exempt wire transfers generally from the requirement to disclose exact exchange rates or covered third-party fees to accommodate the characteristics of open network transactions when insured institutions are not able to determine exact amounts at the time the disclosures are provided. They also suggested that, under EFTA 919(c), the Bureau should specify that wire transfers are a ‘‘method by which transactions are made in the recipient country’’ that does not allow exact disclosures if such amounts cannot be reasonably determined at the time the disclosures are provided. PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 or its correspondent bank conducts the foreign currency exchange prior to the transfer; they noted, however, that it may be difficult for this to occur for all remittance transfers sent by insured institutions; (2) in many cases, local customs or practices may make foreign currency exchange outside the United States difficult or impossible even if these restrictions are not pursuant to the laws of the receiving country; (3) for some currencies, the market is too small and illiquid, which makes maintenance of a currency-trading desk in the United States difficult or impossible; (4) for other currencies, it may not be economically viable for a correspondent bank to conduct the foreign currency exchange for other reasons, including that some currencies may just simply be difficult or expensive to purchase; and (5) banks generally profit on their foreign currency exchange services, and some foreign banks may refuse to process incoming wire transfers not denominated in U.S. dollars so as not to lose the revenue they receive from exchanging the currency themselves. One bank also indicated that it is expensive to ‘‘lock in’’ an exchange rate for highly volatile currencies because of the fluctuations in those exchange rates. As discussed in more detail above in the section-by-section analysis of § 1005.32(a), several industry commenters indicated that if the Bureau does not adopt an exception that allows insured institutions to continue to estimate the exchange rate in certain circumstances, insured institutions may stop sending remittance transfers in situations where the insured institutions cannot disclose the exact exchange rate. Several other industry commenters indicated that insured institutions that continue to offer remittance transfers may see costs increase when sending transfers to certain countries if insured institutions have to change the ways they provide transfers in order to disclose exact exchange rates. Several trade associations suggested that the Bureau should permit exchange rate estimates for any remittance transfer that involves exchanging a foreign currency if the remittance transfer provider or its foreign currency provider is unable to conduct foreign currency exchange ‘‘in the ordinary course of its business.’’ The trade associations indicated that this suggested exception would cover the following situations: (1) Local customs and practices, rather than specific laws, prevent banks from disclosing the exact exchange rate; (2) currencies with very small or illiquid markets, which makes the maintenance of a currency-trading desk in the U.S. difficult or impossible; E:\FR\FM\06DEP5.SGM 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules and (3) currencies that are difficult or expensive to buy so it is not economically viable for a correspondent bank to conduct the exchange. In addition, one credit union raised a specific issue related to Department of Defense (DoD) regulations that require the credit union to benchmark the exchange rate it offers as a credit union on a military installation in a foreign country to the Military Banking Facility (MBF) rate. For one-time transfers scheduled one to four days in advance, the credit union indicates that it uses the temporary exception to estimate the exchange rate because it does not know the benchmark rate that will apply on the date of transfer and does not qualify for the existing permanent exception in § 1005.32(b)(2), which permits estimates for transfers scheduled five or more business days before the date of transfer when certain conditions are met.62 lotter on DSKBCFDHB2PROD with PROPOSALS5 The Bureau’s Proposal The Bureau is proposing to add a new permanent exception to the Remittance Rule that would permit insured institutions to estimate the exchange rate (and other disclosures that depend on the exchange rate) in certain circumstances. Based on the comments received on the 2019 RFI and other outreach and research, the Bureau is concerned that if it does not adopt any additional exceptions that allow estimates of the exchange rate after the temporary exception expires, some insured institutions may choose to stop sending remittance transfers to recipients in certain countries. These insured institutions may choose to stop providing certain remittance transfers because they deem the costs of determining exact amounts for the exchange rate to be prohibitively expensive. The Bureau is concerned that if these institutions discontinue providing such transfers, consumer access to remittance transfer services for certain countries may be reduced or eliminated. As discussed in more detail above in the section-by-section analysis of § 1005.32(a), it appears increasingly unlikely that any new technologies or partnerships will be able to fully eliminate insured institutions’ reliance on estimates in the short-to-medium term. Also, the Bureau is concerned that, when the temporary exception expires, if the Rule does not allow estimates of the exchange rate in certain circumstances, insured institutions that 62 The Bureau believes that the DoD regulations are not in conflict with the requirements in the Remittance Rule for one-time transfers scheduled one to four days in advance. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 continue to offer remittance transfer services may see costs increase when sending transfers to certain countries if insured institutions have to change the ways they provide remittance transfers in order to disclose exact exchange rates. This would predictably lead to increased prices for consumers. In addition, the Bureau is concerned that prices for consumers may also increase for transfers to certain countries (due to reduced competition) if the number of remittance transfer providers offering remittance transfers to such countries is reduced due to some providers eliminating or curtailing transfer services because they could not determine and disclose exact exchange rates for those countries. Proposed § 1005.32(b)(4)(i) generally provides that for disclosures described in §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2), estimates may be provided for a remittance transfer to a particular country in accordance with § 1005.32(c) for the amounts required to be disclosed under § 1005.31(b)(1)(iv) through (vii) if the designated recipient of the remittance transfer will receive funds in the country’s local currency and all of the following conditions are met: (1) The remittance transfer provider is an insured institution as defined in § 1005.32(a)(3); (2) the insured institution cannot determine the exact exchange rate for that particular remittance transfer at the time it must provide the applicable disclosures; (3) the insured institution made 1,000 or fewer remittance transfers in the prior calendar year to the particular country for which the designated recipients of those transfers received funds in the country’s local currency; and (4) the remittance transfer generally is sent from the sender’s account with the insured institution.63 The Bureau also is proposing conforming changes to the following provisions to reference the proposed exception in § 1005.32(b)(4) where the temporary exception in § 1005.32(a) currently is referenced and pertains to the estimation of the exchange rate: (1) § 1005.32(c); (2) § 1005.33(a)(1)(iii)(A); (3) § 1005.36(b)(3); (4) comment 32–1; (5) comment 32(b)(1)–4.ii; (6) comment 32(d)–1; and (7) comment 36(b)-3. Proposed § 1005.32(b)(4)(i) would generally apply to the following disclosures set forth in § 1005.31(b)(1)(iv) through (vii) respectively: (1) The exchange rate (as applicable); (2) if ‘‘covered third-party 63 For the purposes of the proposed exception in proposed § 1005.32(b)(4), a sender’s account would not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account. PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 67145 fees’’ as defined in § 1005.30(h) are imposed, the total amount that will be transferred to the recipient inclusive of the covered third-party fees; (3) the amount of any covered third-party fees; and (4) the amount that will be received by the designated recipient (after deducting any covered third-party fees). Proposed § 1005.32(b)(4)(ii) makes clear, however, that the total amount that will be transferred to the recipient inclusive of covered third-party fees, the amount of covered third-party fees, and the amount that will be received by the designated recipient (after deducting covered third-party fees) may be estimated under proposed § 1005.32(b)(4)(i) only if the exchange rate is permitted to be estimated under proposed § 1005.32(b)(4)(i) and the estimated exchange rate affects the amount of such disclosures. For example, if a remittance transfer will be received by the designated recipient in the same currency as the one in which the transfer is funded, the insured institution would not disclose an exchange rate for the transfer, and the total amount that will be transferred to the recipient inclusive of covered thirdparty fees, the amount of covered thirdparty fees, and the amount that will be received by the designated recipient (after deducting covered third-party fees) will not be affected by an exchange rate. In that case, an insured institution may not use proposed § 1005.32(b)(4) to estimate those disclosures. The insured institution, however, may be able to use another permanent exception set forth in § 1005.32(b), including the exception in proposed § 1005.32(b)(5), to estimate those disclosures if the conditions of those exceptions are met. Proposed § 1005.32(b)(4) also would apply only if the designated recipient of the remittance transfer will receive funds in the country’s local currency. Current comment 31(b)(1)(iv)–1 provides guidance on how a remittance transfer provider can determine in which currency the designated recipient will receive the funds. The comment provides that for purposes of determining whether an exchange rate is applied to the transfer, if a remittance transfer provider does not have specific knowledge regarding the currency in which the funds will be received, the provider may rely on a sender’s representation as to the currency in which funds will be received. For example, if a sender requests that a remittance transfer be deposited into an account in U.S. dollars, the provider need not disclose an exchange rate, even if the account is denominated in Mexican pesos and the funds are E:\FR\FM\06DEP5.SGM 06DEP5 67146 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 converted prior to deposit into the account. Thus, under this comment, a remittance transfer provider may rely on a sender’s representation as to the currency in which funds will be received for purposes of determining whether an exchange rate is applied to the transfer, unless the remittance transfer provider has actual knowledge regarding the currency in which the funds will be received for the transfer. If a sender does not know the currency in which funds will be received, the provider may assume that the currency in which funds will be received is the currency in which the remittance transfer is funded. Each of the four conditions set forth in proposed § 1005.32(b)(4)(i)(A) through (D) is discussed in more detail below. The Bureau solicits comment generally on this proposed exception, and on each condition as discussed in more detail below. The remittance transfer provider is an insured institution. Proposed § 1005.32(b)(4)(i)(A) provides that the remittance transfer provider must be an insured institution as defined in § 1005.32(a)(3).64 As with the temporary exception, the exception in proposed § 1005.32(b)(4) is primarily designed to address providers’ concerns about knowing the exact exchange rate at the time disclosures are provided for wire transfers sent via correspondent banks in an open network payment system. The Bureau believes that the great majority of these transfers are provided by insured institutions and that, in turn, these open network transfers are the most common type of remittance transfer provided by insured institutions. Nonetheless, the Bureau understands that some remittance transfer providers that are not insured institutions could use the correspondent banking system to send remittance transfers.65 The Bureau solicits comment on whether the Bureau should extend the exception in proposed § 1005.32(b)(4) to apply to remittance transfer providers that are not insured institutions, including 64 The term ‘‘insured institution’’ is defined in § 1005.32(a)(3) to mean insured depository institutions (which includes uninsured U.S. branches and agencies of foreign depository institutions) as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813), and insured credit unions as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752). 65 As noted in the 2019 RFI, a no-action letter issued by staff at the Securities and Exchange Commission (SEC) provided that staff will not take any enforcement action under Regulation E against broker-dealers that provide disclosures consistent with the requirements of the temporary exception. See https://www.sec.gov/divisions/marketreg/mrnoaction/2012/financial-information-forum121412-rege.pdf. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 MSBs and broker-dealers, and the reasons why the proposed exception should apply to these persons. The insured institution cannot determine the exact exchange rate for the transfer at the time it must provide the applicable disclosures. As a condition of using the exception in proposed § 1005.32(b)(4), proposed § 1005.32(b)(4)(i)(B) would require that, at the time the insured institution must provide the disclosure required by § 1005.31(b)(1) through (3) or § 1005.36(a)(1) or (2), as applicable, the insured institution cannot determine the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) for that remittance transfer. Proposed comment 32(b)(4)–1 provides guidance on whether an insured institution cannot determine the exact exchange rate applicable to a remittance transfer at the time the disclosures must be given. Specifically, proposed comment 32(b)(4)–1 explains that for purposes of proposed § 1005.32(b)(4)(i)(B), an insured institution cannot determine the exact exchange rate required to be disclosed under § 100531(b)(1)(iv) for a remittance transfer to a particular country where the designated recipient of the transfer will receive funds in the country’s local currency if the exchange rate for the transfer is set by a person other than (1) the insured institution; (2) an institution that has a correspondent relationship with the insured institution; (3) a service provider for the insured institution; or (4) a person that acts as an agent of the insured institution. The Bureau believes that proposed comment 32(b)(4)–1 sets forth the circumstances in which an insured institution cannot determine the exchange rate for a particular transfer sent through correspondent banks in an open network payment system and seeks comment on this provision. Proposed comment 32(b)(4)–1.i provides an example of when an insured institution cannot determine an exact exchange rate under proposed § 1005.32(b)(4)(i)(B) for a remittance transfer. Proposed comment 32(b)(4)– 1.ii provides two examples of when an insured institution can determine an exact exchange rate under proposed § 1005.32(b)(4)(i)(B) for a remittance transfer, and thus the insured institution may not use the proposed exception in proposed § 1005.32(b)(4) to estimate the disclosures required under § 1005.31(b)(1)(iv) through (vii) for the remittance transfer. The Bureau solicits comment on the condition set forth in proposed § 1005.32(b)(4)(i)(B) generally, and on the guidance and examples set forth in proposed comment 32(b)(4)–1 for whether an insured institution can PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 or cannot determine the exact exchange rate for a remittance transfer for purposes of proposed § 1005.32(b)(4)(i)(B). The insured institution made 1,000 or fewer remittance transfers in the prior calendar year to the particular country for which the designated recipients of those transfers received funds in the country’s local currency. Proposed § 1005.32(b)(4)(i)(C) provides that with respect to the country to which the remittance transfer is being sent, the insured institution must have made 1,000 or fewer remittance transfers in the prior calendar year to the particular country for which the designated recipients of those transfers received funds in the country’s local currency. Proposed comment 32(b)(4)–2.i provides that for purposes of determining whether an insured institution made 1,000 or fewer remittance transfers in the prior calendar year to a particular country pursuant to proposed § 1005.32(b)(4)(i)(C), the number of remittance transfers provided includes transfers in the prior calendar year to that country when the designated recipients of those transfers received funds in the country’s local currency regardless of whether the exchange rate was estimated for those transfers. The proposed comment provides an example to illustrate. Also, proposed comment 32(b)(4)–2.ii provides that for purposes of the 1,000 transfer threshold, the number of remittance transfers does not include remittance transfers to a country in the prior calendar year when the designated recipients of those transfers did not receive the funds in the country’s local currency. The proposed comment provides an example to illustrate. The Bureau is concerned that if an insured institution is sending 1,000 or fewer remittance transfers to a particular country in the country’s local currency, it may be unduly costly for the institution to establish and maintain currency-trading desk capabilities and risk management policies and practices related to foreign exchange trading of that currency, or to use service providers, correspondent institutions, or persons that act as the insured institution’s agent to obtain exact exchange rates for that currency. Based on the comments received on the 2019 RFI and additional outreach and research, the Bureau believes that cost is a primary factor in whether an insured institution will perform the currency exchange and thus whether it would know the exact exchange rate to provide in its disclosures. In these cases where the volume is less than the proposed E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules 1,000-transfer threshold in the previous calendar year to a particular country in the country’s local currency, the Bureau is concerned that if the insured institution cannot estimate the exchange rate for a particular transfer to that country, the institution will no longer continue to make transfers to that country in the country’s local currency because of the costs associated with performing the currency exchange. The Bureau is particularly concerned about smaller financial institutions that may lack the scale for it to be practicable to cover the costs of establishing and maintaining currency-trading desks and managing the risk of exchange rate trading of currency for certain countries, or to use service providers, correspondent institutions, or persons that act as the insured institution’s agent to obtain exact exchange rates for those currencies. The Bureau has received feedback from banks, credit unions, and their trade associations that there are other circumstances in which an insured institution does not perform the foreign currency conversion upfront, and they do not appear to be directly or primarily related to the cost to the insured institution of performing the currency exchange or the scale of an insured institution’s foreign exchange business. For example, some trade association commenters on the 2019 RFI asserted that local customs or practices may make foreign currency exchange outside the United States ‘‘difficult or impossible’’ even if these restrictions are not pursuant to the laws of the receiving country, or that some foreign banks may refuse to process incoming wire transfers not denominated in U.S. dollars so as not to lose the revenue they receive from performing the currency exchange themselves. Based on outreach and its understanding of the market, however, the Bureau believes that insured institutions with foreign currency exchange businesses that have reached a sufficient or large-enough scale may be better-equipped at navigating these situations. As such, the proposed threshold, if adopted, should largely obviate the concerns related to these circumstances.66 The Bureau solicits comment generally on this proposed condition and, in particular, on the proposed 1,000-transfer threshold. The Bureau solicits comment on whether the proposed 1,000-transfer threshold is an appropriate number of transfers to avoid 66 For example, the ‘‘difficulty’’ or ‘‘impossibility’’ some trade association commenters raised with respect to certain local customs or practices may refer to difficulty or impossibility due to disproportionate cost. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 institutions incurring undue costs in establishing and maintaining currencytrading desks and managing the risks related to foreign exchange trading of currency for certain countries, or to use service providers, correspondent institutions, or persons that act as the insured institution’s agent to obtain exact exchange rates for those currencies. The Bureau also solicits comment on whether some other number of transfers would be more appropriate in light of these cost considerations. The Bureau further solicits comment on whether there are other defined conditions which would warrant an exemption. The Bureau notes that the proposed threshold amount focuses on the number of transfers to a particular country (in the country’s local currency) that the insured institution made to that country in the previous calendar year. Unlike covered third-party fees, where the amount of the fees charged vary by institution, the Bureau understands that the exchange rate generally is determined at the country level. Nonetheless, the Bureau recognizes that in some cases, several countries may use the same currency, such as the Euro currency, and that in other cases one country may use more than one currency, such as Bhutan which officially allows both the ngultrum and the Indian rupee currencies to be used in the country.67 The Bureau also notes that in some cases, a designated recipient may receive a transfer in a currency other than the country’s local currency, such as where the transfer is sent to a designated recipient’s institution in South Korea and the designated recipient receives the funds in Japanese yen. The Bureau solicits comment on whether this proposed exception should focus on the number of transfers in a particular currency (as opposed to a particular country in the country’s local currency). For example, under this alternative approach, if more than one country uses the same currency, the insured institution would need to count the number of all the remittance transfers sent in that currency in the prior calendar year for purposes of the threshold amount, regardless of the country to which that transfer was sent. The Bureau solicits comment on whether it would be more 67 See Int’l Monetary Fund, Monetary & Capital Markets Dep’t, Annual Report on Exchange Arrangements and Exchange Restrictions 2018, at 17 (Apr. 16, 2019), https://www.imf.org/en/ Publications/Annual-Report-on-ExchangeArrangements-and-Exchange-Restrictions/Issues/ 2019/04/24/Annual-Report-on-ExchangeArrangements-and-Exchange-Restrictions-2018– 46162. PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 67147 difficult for insured institutions to count the number of remittance transfers sent in a particular currency in the prior calendar year, as opposed to counting the number of remittance transfers sent to a particular country in the country’s local currency in the prior calendar year. The remittance transfer is sent from the sender’s account with the insured institution. Consistent with the temporary exception in § 1005.32(a), proposed § 1005.32(a)(4)(i)(D) provides that the remittance transfer must be sent from the sender’s account with the insured institution; provided, however, for the purposes of proposed § 1005.32(b)(4)(i)(D), a sender’s account does not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account. Currently, prepaid accounts generally are subject to the Remittance Rule, but the temporary exception in § 1005.32(a) does not apply to transfers from these accounts, unless the prepaid account is a payroll card account or a government benefit account, and the other conditions of the temporary exception are met. Proposed § 1005.32(a)(4)(i)(D) is intended to continue the current application of the Remittance Rule to prepaid accounts. Permanent exception. Proposed § 1005.32(b)(4) would be a permanent exception with no sunset date. Based on the comments received on the 2019 RFI and further outreach and research, the Bureau believes that for at least the short-to-medium term it is likely that many insured institutions will depend primarily on the correspondent banking network to send remittance transfers where it may be unduly costly to provide exact exchange rates. As discussed in more detail above in the section-by-section analysis of § 1005.32(a), the Bureau believes that certain developments in the market eventually could make it practicable for insured institutions to disclose exact exchange rates for transfers, although the Bureau cannot forecast when technological and market development will permit this to occur. As such, the Bureau solicits comment on whether the Bureau should include a sunset provision with respect to the exception in proposed § 1005.32(b)(4) and, if so, what that sunset date should be. Legal authority. To effectuate the purposes of EFTA and to facilitate compliance, the Bureau is proposing to use its EFTA section 904(a) and (c) authority to propose a new exception under § 1005.32(b)(4). Under its EFTA section 904(c) authority the Bureau ‘‘may provide for such adjustments and exceptions for any class of electronic E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 67148 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules fund transfers or remittance transfers, as in the judgment of the Bureau are necessary or proper to effectuate the purposes of this subchapter, to prevent circumvention or evasion thereof, or to facilitate compliance therewith.’’ 68 The Bureau believes that this proposed exception would facilitate compliance with EFTA, preserve consumer access, and effectuate its purposes. Specifically, the Bureau interprets ‘‘facilitate compliance’’ to include enabling or fostering continued operation in conformity with the law. The Bureau believes that the proposed exception would facilitate compliance where it may be infeasible or impracticable (due to undue cost) for insured institutions to determine the exchange rate because of an insufficient number of transfers to a particular country. Compliance difficulties or challenges that insured institutions face in providing exact disclosures could cause those institutions to reduce or cease offering transfers to certain countries, which in turn could mean that consumers have less access to remittance transfer services or have to pay more for them. By preserving such access, the proposed exception could also help maintain competition in the marketplace, therefore effectuating one of EFTA’s purposes. If the temporary exception expires without the Bureau taking any mitigation measure, the Bureau believes certain insured institutions may stop sending transfers to certain countries, therefore potentially reducing competition for those transfers. This potential loss of competition could be detrimental to senders because the price of transfers could increase or because it could become less convenient to send them.69 Other approaches suggested by commenters on the 2019 RFI. The Bureau is not proposing to permit estimates for any remittance transfer that involves exchanging a foreign currency if the remittance transfer provider or its foreign currency provider is unable to conduct foreign exchange ‘‘in the ordinary course of its business.’’ The Bureau believes that the exception in proposed § 1005.32(b)(4) is a better approach in that it would create a bright-line threshold with respect to estimating exchange rates. The Bureau believes that the clarity of this standard is more likely than the suggested alternative to reduce uncertainty and 68 15 U.S.C. 1693b(c). the Bureau stated in the 2019 RFI, the Bureau recognizes the value to consumers of being able to send remittance transfers directly from a checking account to the account of a recipient in a foreign country through their bank or credit union. 84 FR 17971, 17974 (Apr. 29, 2019). 69 As VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 promote compliance. The Bureau also believes that its proposed 1,000 threshold may address most of the concerns related to circumstances in which it is difficult for institutions to provide exact exchange rates for certain remittance transfers. 32(b)(5) Permanent Exception for Estimation of Covered Third-Party Fees by an Insured Institution The Bureau is proposing to add a new permanent exception to the Remittance Rule that would permit insured institutions to estimate covered thirdparty fees (and other disclosures that depend on the covered third-party fees) that must be included in certain circumstances in the disclosures required by §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2). This proposed exception is designed to help mitigate the impact of the expiration of the temporary exception on consumers’ access to certain remittance transfers. The term ‘‘covered third-party fees’’ is defined in § 1005.30(h)(1) to mean any fees (other than ‘‘non-covered thirdparty fees’’ described in § 1005.30(h)(2)) that a person other than the remittance transfer provider imposes on the transfer. Fees imposed on a wire transfer by an intermediary institution are covered third-party fees. In addition, fees imposed by a designated recipient’s institution on a wire transfer are covered third-party fees if the designated recipient’s institution acts as an agent for the remittance transfer provider. In contrast, the term ‘‘non-covered third-party fees’’ is defined as any fees imposed by the designated recipient’s institution for receiving a remittance transfer into an account except if the institution acts as an agent of the remittance transfer provider. Fees a designated recipient’s institution imposes on a wire transfer are noncovered third-party fees if the designated recipient’s institution does not act as an agent of the remittance transfer provider. The term ‘‘agent’’ is defined in § 1005.30(a) to mean an agent, authorized delegate, or person affiliated with a remittance transfer provider, as defined under State or other applicable law, when such agent, authorized delegate, or affiliate acts for that remittance transfer provider. Comments Received on Estimating Covered Third-Party Fees in Response to the 2019 RFI Many industry commenters noted that most transfers sent by insured institutions are wire transfers sent through correspondent banks in an open network payment system. Several PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 industry trade associations indicated that currently there are two ways in which an insured institution may know the amount of covered third-party fees for a remittance transfer sent through correspondent banks in an open network payment system. One way is for the insured institution to form correspondent banking relationships with other financial institutions, because such relationships allow the insured institution to know or control the transaction fees that could apply to a remittance transfer. The other way is for the insured institution to send payments to institutions using the cover method as discussed above in the section-by-section analysis of § 1005.32(a) and the ‘‘OUR’’ charge code.70 According to these trade associations, assuming the OUR code is honored,71 the insured institution can disclose the exact transfer amount because in honoring the OUR code the designated recipient’s institution and intermediary institutions will not deduct any transaction fees from the transfer amount. However, these trade associations have asserted that an insured institution is limited in the financial institutions to whom it may send such a payment, because to send a cover payment the insured institution must have a SWIFT relationship management application (RMA) 72 with the designated recipient’s institution.73 Several industry commenters indicated, however, that it is not possible to use correspondent relationships or the cover method for all remittance transfers sent through correspondent banks in an open network payment system. One bank indicated that due to its size and its volume of remittance transfers, it is not feasible for the bank to develop correspondent banking relationships in many foreign countries.74 Several trade 70 The OUR code instructs financial institutions that receive payment instructions sent via SWIFT that the sending institution will bear all of the payment transaction fees and the recipient of the payment will not pay any such fees. 71 The Bureau also notes that, as discussed above in the section-by-section analysis of § 1005.32(a), it understands that by current market practice, financial institutions do not deduct transaction fees from cover payments. 72 When an insured institution sends payment messages through SWIFT, it needs an RMA with the designated recipient’s institution to send certain types of messages to that institution. 73 Similarly, in connection with the Bureau’s 2014 rulemaking to extend the temporary exception, one large bank told the Bureau that it could only send cover payments to institutions with which it has a preexisting agreement or relationship. See 79 FR 23234, 23245 (Jan. 31, 2014). 74 Several trade associations submitted a comment letter to the Bureau in response to the 2017 Assessment Report RFI in which the trade E:\FR\FM\06DEP5.SGM 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 associations indicated that (1) with respect to the cover method, insured institutions are limited in the RMAs they can establish due to anticipated volume, anti-money laundering and other risk management requirements; (2) OUR instructions are market practices, not legally binding requirements; (3) some banks do not honor OUR instructions for a number of reasons, including local custom and the additional cost and complexity to downstream banks of collecting fees from the insured institution; and (4) the nature of an open network payment system does not allow banks to know with certainty at the time the disclosures are given whether other institutions will honor an OUR code, absent sending payments to one’s correspondent bank or sending cover payments. As discussed in more detail above in the section-by-section analysis of § 1005.32(a), several industry commenters indicated that if the Bureau does not adopt any additional exceptions that allow insured institutions to continue to estimate covered third-party fees in certain circumstances, insured institutions may stop sending remittance transfers in situations where the insured institutions cannot provide exact disclosures of covered third-party fees. Several other industry commenters indicated that insured institutions that continue to offer remittance transfers may see costs increase when sending transfers to certain designated recipients’ institutions if insured institutions have to change the ways they provide remittance transfers in order to disclose exact covered third-party fees. One trade association suggested that the Bureau should expand the definition of ‘‘non-covered third-party fees’’ to cover any fees imposed by a third-party that the insured institution cannot determine after reasonable inquiry, thereby no longer requiring the disclosure of those fees. (As discussed above, non-covered third-party fees are not required to be disclosed under the Remittance Rule.) The trade association also suggested that the Bureau should amend the definition of ‘‘error’’ in § 1005.33, or provide relevant interpretive guidance, to ensure that the definition of ‘‘error’’ does not include associations indicated that insured institutions are unable to determine exact amounts for certain destinations because the low volume of transactions and resulting lack of correspondent relationships in such geographies makes the usual means by which insured institutions gather information to enable exact disclosures cost prohibitive or not operationally feasible. These trade associations made similar comments in a letter to the Bureau in response to the 2018 Adopted Regulations RFI. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 instances in which covered third-party fees are charged that were not previously identified during a reasonable review by the remittance transfer provider. The Bureau’s Proposal The Bureau is proposing to add a new permanent exception to the Remittance Rule that would permit insured institutions to estimate the amount of covered third-party fees (and other disclosures that depend on the amount of those fees) in certain circumstances. Based on the comments received on the 2019 RFI and other outreach and research, the Bureau is concerned that if it does not adopt any additional exceptions that allow estimates of covered third-party fees after the temporary exception expires, some insured institutions may choose to stop sending remittance transfers to recipients with accounts at certain designated recipients’ institutions. These insured institutions may choose to stop providing certain remittance transfers because they deem the costs of determining exact covered third-party fees to be prohibitively expensive. The Bureau is concerned that if these institutions discontinue providing such transfers, consumer access to remittance transfer services for certain designated recipients’ institutions may be reduced or eliminated. As discussed in more detail above in the section-by-section analysis of § 1005.32(a), it appears increasingly unlikely that any new technologies or partnerships will be able to fully eliminate insured institutions’ reliance on estimates in the short-tomedium term. Also, the Bureau is concerned that in a scenario where the Bureau provides no additional exceptions that allow estimates of covered third-party fees when the temporary exception expires, insured institutions that continue to offer remittance transfer services may see costs increase when sending transfers to certain designated recipients’ institutions if insured institutions have to change the ways they provide remittance transfers in order to disclose exact covered thirdparty fees. This would predictably lead to increased prices for consumers. In addition, the Bureau is concerned that prices for consumers may also increase for transfers to certain designated recipients’ institutions (due to reduced competition) if the number of remittance transfer providers offering remittance transfers to such designated recipients’ institutions is reduced due to some providers eliminating or curtailing transfer services because they could not determine and disclose exact covered PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 67149 third-party fees for those designated recipients’ institutions. Proposed § 1005.32(b)(5)(i) generally provides that for disclosures described in §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2), estimates may be provided for a remittance transfer to a particular designated recipient’s institution in accordance with § 1005.32(c) for the amounts required to be disclosed under § 1005.31(b)(1)(vi) through (vii), if all of the following conditions are met: (1) The remittance transfer provider is an insured institution, as defined in § 1005.32(a)(3); (2) the insured institution cannot determine the exact covered third-party fees for a remittance transfer to a particular designated recipient’s institution at the time it must provide the applicable disclosures; (3) the insured institution made 500 or fewer remittance transfers in the prior calendar year to that designated recipient’s institution; and (4) the remittance transfer generally is sent from the sender’s account with the insured institution.75 The Bureau is also proposing conforming changes to the following provisions to reference the proposed exception in § 1005.32(b)(5) where the temporary exception in § 1005.32(a) currently is referenced and pertains to the estimation of covered third-party fees: (1) § 1005.32(c); (2) § 1005.33(a)(1)(iii)(A); (3) § 1005.36(b)(3); (4) comment 32–1; (5) comment 32(c)(3)–1; and (6) comment 36(b)–3. Proposed § 1005.32(b)(5)(i) would generally apply to the following disclosures set forth in § 1005.31(b)(1)(vi) through (vii) respectively: (1) The amount of any covered third-party fees; and (2) the amount that will be received by the designated recipient (after deducting any covered third-party fees). Proposed § 1005.32(b)(5)(ii) makes clear, however, that the amount that will be received by the designated recipient (after deducting covered third-party fees) may be estimated under proposed § 1005.32(b)(5)(i) only if covered thirdparty fees are permitted to be estimated under proposed § 1005.32(b)(5)(i) and the estimated covered third-party fees affect the amount of such disclosure. For example, if the covered third-party fees for a remittance transfer may not be estimated under proposed § 1005.32(b)(5), the amount that will be received by the designated recipient (after deducting any covered third-party 75 For the purposes of proposed § 1005.32(b)(5), a sender’s account would not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account. E:\FR\FM\06DEP5.SGM 06DEP5 67150 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 fees) may not be estimated under proposed § 1005.32(b)(5). The insured institution, however, may be able to use another permanent exception set forth in § 1005.32(b), including the proposed exception in § 1005.32(b)(4), to estimate that disclosure if the conditions of those exceptions are met. Each of the four conditions set forth in proposed § 1005.32(b)(5)(i)(A) through (D) is discussed in more detail below. The Bureau solicits comment generally on this proposed exception, and on each condition as discussed in more detail below. The remittance transfer provider is an insured institution. Proposed § 1005.32(b)(5)(i)(A) provides that the remittance transfer provider must be an insured institution as defined in § 1005.32(a)(3).76 The Bureau solicits comment on whether the Bureau should extend this exception to apply to remittance transfer providers that are not insured institutions, including MSBs and broker-dealers, and the reasons why the proposed exception should apply to these persons.77 The insured institution cannot determine the exact covered third-party fees for a remittance transfer to a particular designated recipient’s institution at the time it must provide the applicable disclosures. As a condition of using the exception in proposed § 1005.32(b)(5), proposed § 1005.32(b)(5)(i)(B) would require that, at the time the insured institution must provide, as applicable, the disclosure required by § 1005.31(b)(1) through (3) or § 1005.36(a)(1) or (2), the insured institution cannot determine the exact covered third-party fees required to be disclosed under § 1005.31(b)(1)(vi) for that remittance transfer. Proposed comment 32(b)(5)–1 provides guidance on when an insured institution cannot determine the exact covered third-party fees as applicable to a remittance transfer at the time the disclosures must be given. Specifically, proposed comment 32(b)(5)–1 provides that for purposes of § 1005.32(b)(5)(i)(B), an insured institution cannot determine, at the time it must provide the applicable disclosures, the exact covered thirdparty fees required to be disclosed under § 1005.31(b)(1)(vi) for a 76 The term ‘‘insured institution’’ is defined in § 1005.32(a)(3) to mean insured depository institutions (which includes uninsured U.S. branches and agencies of foreign depository institutions) as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813), and insured credit unions as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752). 77 See the section-by-section analysis of proposed § 1005.32(b)(4) above for a discussion of a similar request for comment related to proposed § 1005.32(b)(4)(i)(A). VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 remittance transfer to a designated recipient’s institution when all of the following conditions are met: (1) The insured institution does not have a correspondent relationship with the designated recipient’s institution; (2) the designated recipient’s institution does not act as an agent of the insured institution; (3) the insured institution does not have an agreement with the designated recipient’s institution with respect to the imposition of covered third-party fees on the remittance transfer (e.g., an agreement whereby the designated recipient’s institution agrees to charge back any covered third-party fees to the insured institution rather than impose the fees on the remittance transfer); and (4) the insured institution does not know at the time the disclosures are given that the only intermediary financial institutions that will impose covered third-party fees on the transfer are those institutions that have a correspondent relationship with or act as an agent for the insured institution, or have otherwise agreed upon the covered third-party fees with the insured institution. The Bureau believes that proposed comment 32(b)(5)–1 sets forth the circumstances in which an insured institution cannot determine the exact covered third-party fees for remittance transfers sent through correspondent banks in an open network payment system and seeks comment on this provision. In contrast, proposed comment 32(b)(5)–2 provides that for purposes of proposed § 1005.32(b)(5)(i)(B), an insured institution can determine, at the time it must provide the applicable disclosures, exact covered third-party fees for a remittance transfer, and thus the insured institution may not use the exception in proposed § 1005.32(b)(5) to estimate the disclosures required under § 1005.31(b)(1)(vi) or (vii) for the transfer, if any of the following conditions are met: (1) An insured institution has a correspondent relationship with the designated recipient’s institution; (2) the designated recipient’s institution acts as an agent of the insured institution; (3) an insured institution has an agreement with the designated recipient’s institution with respect to the imposition of covered third-party fees on the remittance transfer; or (4) an insured institution knows at the time the disclosures are given that the only intermediary financial institutions that will impose covered third-party fees on the transfer are those institutions that have a correspondent relationship with or act as an agent for the insured institution, or have otherwise agreed upon the PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 covered third-party fees with the insured institution. The Bureau believes that proposed comment 32(b)(5)–2 sets forth the circumstances in which an insured institution can determine the exact covered third-party fees for remittance transfers sent through a correspondent banks in an open network payment system and seeks comment on this provision. The Bureau solicits comment on the condition set forth in proposed § 1005.32(b)(5)(i)(B) generally, and on the guidance set forth in proposed comments 32(b)(5)–1 and –2 for whether an insured institution can or cannot determine the exact covered third-party fees for a remittance transfer for purposes of proposed § 1005.32(b)(5)(i)(B). The insured institution made 500 or fewer remittance transfers in the prior calendar year to that designated recipient’s institution. Proposed § 1005.32(b)(5)(i)(C) provides that, with respect to the designated recipient’s institution to which the remittance transfer is being sent, the insured institution must have made 500 or fewer remittance transfers in the prior calendar year to that designated recipient’s institution. The Bureau notes that the proposed threshold amount focuses on the number of transfers to the particular designated recipient’s institution that the insured institution made in the previous calendar year. The Bureau understands that covered thirdparty fees generally are determined by each institution rather than at the country level. Proposed comment 32(b)(5)–3.i provides that for purposes of determining whether an insured institution made 500 or fewer remittance transfers in the prior calendar year to a particular designated recipient’s institution pursuant to proposed § 1005.32(b)(5)(i)(C), the number of remittance transfers provided includes remittance transfers in the prior calendar year to that designated recipient’s institution regardless of whether the covered third-party fees were estimated for those transfers. The proposed comment provides an example to illustrate. Proposed comment 32(b)(5)–3.ii also provides that for purposes of the proposed 500 threshold, the number of remittance transfers includes remittance transfers provided to the designated recipient’s institution in the prior calendar year regardless of whether the designated recipients received the funds in the country’s local currency or in another currency. The proposed comment provides an example to illustrate. E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules The Bureau is concerned that if an insured institution is sending 500 or fewer transfers annually to a given designated recipient’s institution, it may be unduly costly for the insured institution to establish the necessary relationships to know the covered thirdparty fees that will apply to a remittance transfer at the time the disclosures must be given. For example, based on comments received on the 2019 RFI and other outreach and research, the Bureau understands insured institutions sending remittance transfers through correspondent banks in an open network payment system would know the exact amount of covered third-party fees that will apply to a remittance transfer at the time disclosures are given if the insured institution has a correspondent relationship with the designated recipient’s institution. The Bureau understands that another way in which the insured institution may know at the time the disclosures must be given the exact amount of covered thirdparty fees for a particular remittance transfer is through using the cover method under the SWIFT network, as discussed above. To use the cover method, the insured institution would need an RMA with the designated recipient’s institution. The Bureau understands that there are costs to maintaining the relationships that are needed to enable insured institutions to provide exact disclosures of covered third-party fees for remittance transfers.78 Based on comments on the 2019 RFI and other outreach and research, the Bureau believes that anticipated transfer volume from an insured institution to a particular designated recipient’s institution is an important factor in the insured institution’s decision about whether to form and maintain such relationships. The Bureau also recognizes that transfer volume is not the only factor in determining whether an insured institution enters into a correspondent banking relationship or an RMA with another financial institution. Industry commenters on the 2019 RFI identified factors that relate to the insured institution’s risk assessment requirements and asked the Bureau to take these into consideration when contemplating regulatory solutions. It appears that these risk assessment requirements weigh various risk factors, such as cybercrime risk, to the insured institution. Because insured institutions could take significantly different 78 See Financial Stability Board, FSB Correspondent Banking Data Report, at 4, 44 (2017); 2016 BIS Report at 11. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 approaches to managing such risks, based on their risk appetite, the Bureau believes that it would be difficult to adopt specific exceptions to address all of these risk factors and the varying risk appetites across institutions. Thus, with respect to permitting estimates of covered third-party fees, the Bureau is proposing a bright-line threshold of insured institutions making 500 or fewer transfers to a particular designated recipient’s institution in the prior calendar year. The Bureau believes the proposed threshold, if adopted, would obviate a number of the concerns related to these risk factors. The Bureau solicits comment generally on this proposed condition, and in particular, on the proposed 500 transfer threshold amount. The Bureau solicits comment on whether the proposed 500 transfer threshold is appropriate in determining whether it is cost effective for insured institutions to incur the costs of establishing and maintaining the necessary relationships so that they can determine the exact covered third-party fees for remittance transfers to that designated recipient’s institution. The Bureau also solicits comment on whether the transfer threshold should be higher or lower than 500 transfers to achieve this objective. The Bureau further solicits comment on whether there are other defined conditions which would warrant an exemption. The remittance transfer is sent from the sender’s account with the insured institution. Proposed § 1005.32(a)(5)(i)(D) provides that the remittance transfer must be sent from the sender’s account with the insured institution; provided however, for the purposes of proposed § 1005.32(b)(5), a sender’s account would not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account.79 Permanent exception. Proposed § 1005.32(b)(5) would be a permanent exception with no sunset date. The Bureau solicits comment on whether the Bureau should include a sunset provision with respect to the proposed exception in § 1005.32(b)(5) and, if so, what that sunset date should be.80 Legal authority. To effectuate the purposes of EFTA and to facilitate compliance, the Bureau is proposing to use its EFTA section 904(a) and (c) 79 See the section-by-section analysis of proposed § 1005.32(b)(4)(i)(D) above for a discussion of a similar provision related to proposed § 1005.32(b)(4). 80 See the section-by-section analysis of proposed § 1005.32(b)(4) above for a discussion of a similar request for comment related to proposed § 1005.32(b)(4). PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 67151 authority to add a new exception under § 1005.32(b)(5). Under its EFTA section 904(c) authority, the Bureau ‘‘may provide for such adjustments and exceptions for any class of electronic fund transfers or remittance transfers, as in the judgment of the Bureau are necessary or proper to effectuate the purposes of this subchapter, to prevent circumvention or evasion thereof, or to facilitate compliance therewith.’’ 81 The Bureau believes that the proposed exception would facilitate compliance with EFTA, preserve consumer access, and effectuate its purposes. Specifically, the Bureau interprets ‘‘facilitate compliance’’ to include enabling or fostering continued operation in conformity with the law. The Bureau believes that the proposed exception would facilitate compliance where it may be infeasible or impracticable (due to disproportionate cost) for insured institutions to determine covered thirdparty fees because of insufficient volume to a particular designated recipient’s institution. Compliance difficulties or challenges that insured institutions face in providing exact covered third-party fees could cause those institutions to reduce or cease offering transfers to certain designated recipients’ institutions, which in turn could mean that consumers have less access to remittance transfer services. By preserving such access, the proposed exception also could help maintain competition in the marketplace, therefore effectuating one of EFTA’s purposes. If the temporary exception expires without the Bureau taking any mitigation measure, the Bureau believes certain insured institutions may stop sending transfers to particular designated recipients’ institutions, therefore reducing competition for those transfers. This potential loss of market participants could be detrimental to senders because it could increase the price of remittance transfers or such transfer services could become less convenient.82 Other approaches suggested by commenters on the 2019 RFI. The Bureau is not proposing to expand the definition of ‘‘non-covered third-party fees’’ to include any fees imposed by a third-party that the insured institution cannot determine after reasonable inquiry, thereby no longer requiring the disclosure of those fees. (Non-covered third-party fees are not required to be 81 15 U.S.C. 1693b(c). the Bureau stated in the 2019 RFI, the Bureau recognizes the value to consumers of being able to send remittance transfers directly from a checking account to the account of a recipient in a foreign country though their bank or credit union. 84 FR 17971, 17974 (Apr. 29, 2019). 82 As E:\FR\FM\06DEP5.SGM 06DEP5 67152 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 disclosed under the Remittance Rule.) The Bureau is likewise not proposing to amend the definition of ‘‘error’’ in § 1005.33 to exclude instances in which a covered third-party fee is charged that was not previously identified during a reasonable review by the remittance transfer provider. The Bureau believes proposed § 1005.32(b)(5) is a better approach in that it would create a bright-line threshold with respect to estimating covered third-party fees. The proposed approach would allow insured institutions to provide estimates of covered third-party fees where it may not be cost effective for those institutions to continue providing such transfers if they could not provide estimates. Also, the Bureau believes that the proposed approach would benefit consumers more than the suggested alternative related to ‘‘non-covered third-party fees’’ because the sender of the transfer would receive an estimate of the covered third-party fees if the conditions of proposed § 1005.32(b)(5) are met, rather than not receiving any information about the fees if these fees were deemed to be ‘‘non-covered thirdparty fees.’’ Additional Issue for Comment: The Permanent Exception in § 1005.32(b)(1) and the Bureau’s Safe Harbor Countries List As discussed above, EFTA generally requires a remittance transfer provider to disclose the exact exchange rate to be applied to a remittance transfer.83 Also as described above, an exception to this requirement (in section 919(c) of EFTA) allows the Bureau to write regulations specific to transfers to certain countries if it has determined that the recipient country does not legally allow, or the method by which transactions are made in the recipient country do not allow, a remittance transfer provider to know the amount of currency the designated recipient will receive. If these conditions are met, the provider may use a reasonably accurate estimate of the foreign currency to be received, based on the exchange rate the provider conveyed to the sender at the time the sender initiated the transaction.84 The Bureau implemented section 919(c) of EFTA in § 1005.32(b)(1), creating a ‘‘permanent exception for transfers to certain countries.’’ The exception is available in two situations. First, § 1005.32(b)(1)(i) permits providers to use estimates if they cannot determine exact amounts because (A) 83 EFTA section 919(a)(2)(A)(iii), codified at 15 U.S.C. 1693o–1(a)(2)(A)(iii). 84 EFTA section 919(c)(2), codified at 15 U.S.C. 1693o–1(c)(2). VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 the laws of the recipient country do not permit such a determination, or (B) the method by which transactions are made in the recipient country does not permit such determination. Comment 32(b)(1)– 2.i explains that, for example, under the first category, the laws do not permit exact disclosures when the exchange rate is determined after the provider sends the transfer or at the time of receipt. Comment 32(b)(1)–3 offers an example of a situation that qualifies for the methods exception. The example provided is a situation where transactions are sent via international ACH on terms negotiated between the U.S. government and the recipient country’s government, under which the exchange rate is a rate set by the recipient country’s central bank or other governmental authority after the provider sends the remittance transfer. Comments 32(b)(1)–4.i through iii provide additional examples of situations that do and do not qualify for the methods exception. Second, § 1005.32(b)(1)(ii) offers a safe harbor allowing remittance transfer providers to disclose estimates instead of exact amounts for remittance transfers to certain countries as determined by the Bureau. Notably, however, the Rule does not allow a remittance transfer provider to use the safe harbor if the provider has information that a country’s laws or the method by which transactions are conducted in that country permits a determination of the exact disclosure amount. In 2012, the Bureau issued a list of five countries—Aruba, Brazil, China, Ethiopia, and Libya—that qualify for this safe harbor.85 The list contains countries whose laws the Bureau has decided prevent providers from determining, at the time the required disclosures must be provided, the exact exchange rate on the date of availability for a transfer involving a currency exchange.86 The Bureau also explained that the safe harbor countries list was subject to change, and provided instructions for contacting the Bureau to request that countries be added or removed from the list.87 Since 2012, the Bureau has not added any additional countries to this list. The Bureau has received feedback over the years from some remittance transfer providers and their trade 85 Bureau of Consumer Fin. Prot., Remittance Rule Safe Harbor Countries List (Sept. 26, 2012), http://files.consumerfinance.gov/f/201209_CFPB_ Remittance-Rule-Safe-Harbor-Countries-List.pdf. The Bureau subsequently published that list in the Federal Register. 78 FR 66251 (Nov. 5, 2013). 86 Id. at 3. 87 Id. at 3–4. PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 associations regarding the Bureau’s countries list. In the 2019 RFI, the Bureau again sought comment on what other countries, if any, should be added to the list because their laws do not permit the determination of exact amounts at the time the pre-payment disclosure must be provided.88 In response, several industry commenters, including trade associations, banks, and a credit union, made various requests, primarily suggesting that particular countries or regions be added to the list. A few of these commenters requested that the Bureau make other changes to the permanent exception in § 1005.32(b)(1) to address, for example, difficulties in obtaining accurate fee and exchange rate information that they assert occur when sending open network transfers. A group of trade association commenters also suggested that the Bureau loosen and revise its requirements for the inclusion of additional countries on the countries list as a way to mitigate the expiration of the temporary exception. The Bureau again seeks comment on the permanent exception in § 1005.32(b)(1) and the Bureau’s process for adding countries to the list. The Bureau requests that any commenters seeking to have particular countries added to the list describe how the relevant laws or method prevent such a determination. The Bureau is particularly interested in whether these countries are ones for which remittance transfer services are not currently being provided, or whether providers are currently relying on estimates for providing disclosures required by the Rule. The Bureau has, to date, only put countries on the list where the laws of the country prevent determining the exact exchange rate, although EFTA and the Rule permit the Bureau to add counties to the list if there is an issue with the method as well. As noted above, some have suggested that the Bureau amend § 1005.32(b)(1)(i) to provide that wire transfers are a ‘‘method by which transactions are made in the recipient country’’ that does not allow exact disclosures if such amounts cannot be reasonably determined at the time the disclosures are provided. However, for reasons discussed above in the section-bysection analysis of § 1005.32(a), the Bureau is not proposing to do so. 88 The Bureau also asked that commenters describe how the relevant laws prevent such a determination, and whether the countries were ones for which remittance transfer services were not currently being provided, or whether providers were relying on estimates. 84 FR 17971, 17977 (Apr. 29, 2019). E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules Nonetheless, the Bureau is interested in suggestions regarding possible changes to the substantive criteria by which it adds countries to the countries list, whether based on the laws or method. For example, the law of a country precluding determining exact amounts could mean both the express terms of the law or the law as applied. The Bureau is also interested in suggestions regarding possible changes to the processes and standards by which it adds countries to the countries list, including standards related to the nature or quantum of evidence needed for the Bureau to determine that the law or method of transfer to a country precludes providing exact disclosures. Currently, the Bureau’s instructions to persons wishing to have countries considered for the countries list is to send feedback regarding whether the Bureau should make changes to the list, and any supporting materials (in English), to a specified email or mailing address. The Bureau has only included countries on the countries list where it has been able to verify that the law or regulation warrants inclusion. The Bureau has not, historically, added countries to the list when it has not been able to verify that they merit inclusion. The Bureau seeks comment on whether, in order to facilitate its review of countries list requests, it should articulate a more detailed list of information and documents (such as copies of relevant laws and regulations, as well as affidavits) that an applicant might submit to make such a request of the Bureau. Given the new permanent exceptions proposed herein to address the expiration of the temporary exception, the Bureau seeks comment on whether insured institutions expect that proposed § 1005.32(b)(4) and (5) will address their concerns regarding providing estimates or whether they would additionally need to rely on § 1005.32(b)(1). The Bureau relatedly requests comment on the volume of transfers that remittance transfer providers send to the countries that are currently on the countries list as well as to those that they are requesting be added. Finally, the Bureau seeks comment on whether any remittance transfer providers use estimates pursuant to § 1005.32(b)(1)(i) with respect to any countries that are not on the countries list. As the Bureau has stated in the past, that provision permits a remittance transfer provider to make its own determination that the laws of other recipient countries not on the list, or the method of sending transfers to such countries, do not permit a determination VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 of exact amounts.89 If providers are not relying on § 1005.32(b)(1)(i) to provide estimates, the Bureau requests comment on why they are not doing so. The Bureau notes that its focus in this rulemaking is to address the expiration of the temporary exception and the safe harbor threshold. Accordingly, the Bureau cautions that, in light of its time frame for doing so, it will give priority to addressing those issues over the issues relating to the countries list. VI. Effective Date The Bureau is proposing that any final rule take effect on July 21, 2020. The Bureau anticipates that at least 30 days prior to July 21, 2020, it will publish any final rule in the Federal Register, as required under section 553(d) of the Administrative Procedure Act.90 As discussed above, the temporary exception in § 1005.32(a) expires on July 21, 2020. The Bureau is proposing that its modifications to the Rule, which are intended to mitigate the effects of the expiration of the temporary exception, become effective on the day the temporary exception expires. The Bureau’s proposed change to the safe harbor threshold in § 1005.30(f)(2) will also, among other things, mitigate the effect of the temporary exception’s expiration on insured institutions that provide between 100 and 500 remittance transfers per year. Given the Bureau’s expected timing for publication of a final rule addressing the safe harbor threshold and provisions to mitigate the expiration of the temporary exception, and the interplay between the safe harbor threshold and the temporary exception, the Bureau is likewise proposing that the change to the safe harbor threshold become effective on July 21, 2020. The Bureau seeks comment on this aspect of the proposal. The Bureau also seeks comment on whether a mid-year change in the safe harbor threshold would pose any complications for providers or cause confusion, and if so, whether the Bureau should make the change to the safe harbor threshold effective on some later date, such as January 1, 2021. The Bureau also solicits comment on any compliance issues that might arise for insured institutions when transitioning from use of the temporary exception to use of the two new 89 78 FR 66251, 66252 (Nov. 5, 2013). U.S.C. 553(d). Under the Congressional Review Act (5 U.S.C. 801 through 808), if the Office of Management and Budget determines that a rule constitutes a ‘‘major rule’’ as defined in 5 U.S.C. 804(2), the rule may not take effect until the later of 60 days after it is received by Congress or published in the Federal Register. 5 U.S.C. 801(a)(3)(A). 90 5 PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 67153 proposed exceptions set forth in proposed § 1005.32(b)(4) and (5). After considering comments on this proposal, the Bureau intends to publish a final rule with respect to the safe harbor threshold and provisions to mitigate the expiration of the temporary exception. VII. Dodd-Frank Act Section 1022(b) Analysis A. Overview In developing the proposed rule, the Bureau has considered the potential benefits, costs, and impacts.91 The Bureau also consulted with appropriate Federal agencies regarding the consistency of the proposed rule with prudential, market, or systemic objectives administered by such agencies as required by section 1022(b)(2)(B) of the Dodd-Frank Act.92 The Bureau requests comment on the preliminary analysis presented below as well as submissions of additional data that could inform the Bureau’s analysis of the benefits, costs, and impacts. The proposed rule would amend several elements of the Remittance Rule. (1) It would raise the safe harbor threshold for providing remittance transfers in the normal course of business from 100 transfers to 500 transfers. Under this proposed change, a person that provided 500 or fewer remittance transfers in the previous calendar year and provides 500 or fewer remittance transfers in the current calendar year would be deemed not to be providing remittance transfers in the normal course of its business and thus is not subject to the Rule. (2) It would provide a permanent exception that would allow insured institutions to estimate the exchange rate (and other disclosures that depend on the exchange rate) under certain conditions when sending to a country, principally that the designated recipient of the remittance transfer will receive funds in the country’s local currency and (a) the insured institution made 1,000 or fewer 91 Specifically, section 1022(b)(2)(A) of the DoddFrank Act (12 U.S.C. 5512(b)(2)(A)) requires the Bureau to consider the potential benefits and costs of the regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact of the proposed rule on insured depository institutions and insured credit unions with $10 billion or less in total assets as described in section 1026 of the Dodd-Frank Act (12 U.S.C. 5516); and the impact on consumers in rural areas. 92 Section 1022(b)(2)(B) of the Dodd-Frank Act (12 U.S.C. 5512(b)(2)(B)) requires that the Bureau consult with the appropriate prudential regulators or other Federal agencies prior to proposing a rule and during the comment process regarding consistency of the proposed rule with prudential, market, or systemic objectives administered by such agencies. E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 67154 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules transfers in the prior calendar year to that country where the designated recipients received funds in the country’s local currency and (b) the insured institution cannot determine the exact exchange rate for that particular transfer at the time it must provide the applicable disclosures. (3) It would provide a permanent exception that would permit insured institutions to estimate covered third-party fees (and disclosures that depend on the amount of those fees) under certain conditions when sending to a designated recipient’s institution, principally that the insured institution (a) made 500 or fewer remittance transfers to that designated recipient’s institution in the prior calendar year and (b) the insured institution cannot determine the exact covered third-party fees for that particular transfer at the time it must provide the applicable disclosures. The Bureau would generally consider the benefits, costs, and impacts of the proposed rule against the baseline in which the Bureau takes no action. Under that approach, the baseline would be premised on an assumption that the Rule’s existing temporary exception allowing certain insured institutions to disclose estimates instead of exact amounts to consumers would expire and the normal course of business safe harbor threshold would remain at 100 transfers. However, if the Bureau adopts the proposal as set forth herein, certain entities currently benefitting from the temporary exception would be exempt from the Rule entirely because of the expansion of the normal course of business safe harbor threshold. These entities would obtain no additional reduction in burden from the permanent exceptions for exchange rates and covered thirdparty fees because they would be excepted entirely from the Rule. Given this, the Bureau believes it is appropriate to consider the reduction in burden from the proposed permanent exceptions against a baseline in which the Bureau has amended the normal course of business safe harbor threshold as proposed. In other words, the Bureau considers the potential benefits, costs, and impacts of the proposed permanent exceptions only on insured institutions that provide more than 500 transfers in the prior and current calendar years. The impact analysis therefore discusses two baselines in sequence, as follows: (1) For purposes of considering the proposed normal course of business safe harbor threshold of 500 transfers, the Bureau uses a no-action baseline that assumes the temporary exception will expire and no permanent exceptions VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 will be adopted; and (2) for purposes of considering the proposed permanent exceptions for exchange rates and covered third-party fees, the Bureau uses a baseline in which the temporary exception has expired and the agency has amended the normal course of business safe harbor threshold as proposed, so entities that provide 500 or fewer transfers in the previous and current calendar years are excluded. With respect to the provisions of the proposed rule, the Bureau’s analysis considers the benefits and costs to remittance transfer providers (covered persons) and as well as to senders (consumers). The Bureau has discretion in any rulemaking to choose an appropriate scope of analysis with respect to benefits, costs, and impacts, as well as an appropriate baseline or baselines. B. Data Limitations and Quantification of Benefits, Costs, and Impacts The discussion in this impact analysis relies on data the Bureau obtained from industry, other regulatory agencies, and publicly available sources. The Bureau has done extensive outreach on many of the issues the proposal raises, including conducting the Assessment and issuing the Assessment Report as required under section 1022(d) of the DoddFrank Act, issuing the 2019 RFI, holding discussions with a number of remittance transfer providers that are banks and credit unions of different sizes, and consulting with other stakeholders. However, as discussed further below, the data with which to quantify the potential costs, benefits, and impacts of the proposed rule are generally limited. Quantifying the benefits of the proposed rule for consumers presents certain challenges. As discussed further below, the proposed rule would tend to preserve access to wire transfers, the great majority of which are provided by insured institutions, and would tend to hold steady the pricing of wire transfers for certain, but not necessarily all, consumers who send wire transfers. The proposed rule would allow some insured institutions to continue using estimates in disclosures while other insured institutions would have to provide exact amounts in disclosures. Determining the number of consumers experiencing these different effects would require representative marketwide data on the prevalence of consumers who receive exact amounts versus estimated amounts in disclosures as well as the costs to providers of conveying this information to consumers in compliance with the Rule and the Bureau’s proposed amendments thereto. The Bureau would then need to PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 predict the responses of providers to these costs and the prevalence of consumers who would receive exact information versus estimated information in disclosures under the proposed rule. The Bureau does not have the data needed to quantify these effects, nor could it readily quantify the benefits to consumers of these effects. The Bureau asks interested parties to provide data, research results, and other factual information that would allow the Bureau to further quantify the effects of the proposed rule. In light of these data limitations, the analysis below provides both a quantitative and qualitative discussion of the potential benefits, costs, and impacts of the proposed rule. Where possible given the data available, the Bureau has made quantitative estimates based on economic principles. Where the data is limited or not available, the Bureau relies on general economic principles and the Bureau’s experience and expertise in consumer financial markets to provide a qualitative discussion of the benefits, costs, and impacts of the proposed rule. C. Potential Benefits and Costs to Covered Persons and Consumers As discussed above in explaining the baseline, the cost to certain insured institutions of the expiration of the temporary exception would be mitigated, although to differing extents, by the proposed increase in the normal course of business safe harbor threshold and the proposed permanent exceptions that would permit insured institutions to provide estimates of exchange rates and covered third-party fees in certain circumstances. In particular, insured institutions that currently provide between 101 and 500 transfers 93 in the prior and current calendar years would no longer be covered by the Rule and would therefore no longer need to provide any disclosures at all. If the Bureau were to adopt all of the proposed provisions, the permanent exceptions permitting estimation of exchange rates and covered third-party fees would not have any additional effect on the insured institutions (and their customers) that the Rule would no longer cover. The Bureau therefore believes that it is appropriate to consider the benefits and costs to consumers and covered persons of the proposed rule through considering: (1) The proposed permanent exceptions that would increase the normal course of business safe harbor threshold; and 93 As noted above in the section-by-section analysis of § 1005.30(f), ‘‘between 101 and 500’’ means 101 or more and 500 or fewer. E:\FR\FM\06DEP5.SGM 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules (2) the effects of the proposals to allow certain insured institutions to provide estimates in certain disclosures under certain circumstances on banks and credit unions that currently provide more than 500 transfers annually. As explained above, the Bureau is not aware of any nonbank remittance transfer providers that would qualify for exclusion from the Rule under the proposed 500-transfer normal course of business safe harbor threshold. In particular, the Bureau believes that all MSBs that provide remittance transfers provide more than 500 transfers annually. Further, the two proposed permanent exceptions would apply only to insured institutions and would not apply to nonbank remittance transfer providers like MSBs. In light of the above, the proposed rule overall could affect MSBs only indirectly, through shifts in the volume of remittance transfers sent by MSBs relative to the volume sent by insured institutions. The Bureau believes, however, that these shifts would be limited because MSBs provide a somewhat different service than banks and credit unions to meet different consumer demands. For example, as discussed in part II above, in the Assessment Report, the Bureau found that the dollar value of the average remittance transfer provided by MSBs is typically much smaller (approximately $381 on average) than the dollar value of transfers (more than approximately $6,500 on average) provided by banks or credit unions.94 Thus, in general, if certain insured institutions increase the cost of sending remittance transfers or cease sending remittance transfers to certain countries and/or designated recipients’ institutions when the temporary exception expires, the Bureau believes that consumers who had been using these insured institutions to send wire transfers would generally shift to other insured institutions and not to MSBs. The Bureau therefore expects only a modest impact relative to the market today on MSBs from the expiration of the temporary exception, with or without the proposals herein. Thus, the Bureau expects only a modest impact on MSBs from the proposals relative to the assumed baseline.95 94 Assessment Report at 68, 73. besides insured institutions and traditional MSBs can be remittance transfer providers, including broker-dealers. The Bureau lacks data on the number of remittance transfers sent by these entities. The Bureau understands that broker-dealers may use wire services provided by banks for remittance transfers and that a brokerdealer’s reliance on the temporary exception may mirror that of the banks with whom they are associated. As discussed above in the section-bysection analysis of proposed § 1005.32(b)(4), there lotter on DSKBCFDHB2PROD with PROPOSALS5 95 Entities VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 1. Raising the Normal Course of Business Safe Harbor Threshold to 500 Transfers Annually The proposed rule would raise the normal course of business safe harbor threshold for Rule coverage from 100 transfers to 500 transfers. Under the proposed rule, a person that provided 500 or fewer remittance transfers in the previous calendar year and provides 500 or fewer remittance transfers in the current calendar year would be deemed not to be providing remittance transfers in the normal course of its business and thus would not be subject to the Rule. Based on their respective Call Reports,96 414 banks and 247 credit unions provided between 101 and 500 transfers in either 2017 or 2018, but not more than 500 in either year.97 These banks and credit unions are currently covered by the Remittance Rule but would not be covered if the 500-transfer threshold was adopted as proposed. These institutions represent 55 percent of banks providing more than 100 transfers and 62 percent of credit unions providing more than 100 transfers. Thus, under the proposed rule, 661 previously covered institutions would no longer need to provide exact disclosures or meet any of the other requirements of the Rule. Comparing these numbers to calculations from 2017 and earlier in the Assessment Report, the number of banks and credit unions providing between 101 and 500 transfers has not changed much from year to year, so are likely to be representative of the impact going forward. Benefits and Costs to Insured Institutions As discussed above, 414 banks and 247 credit unions subject to the Rule under the no-action baseline would no longer incur the compliance costs of the Rule if the 500-transfer safe harbor threshold were adopted as proposed. The Bureau does not have a precise is an SEC no-action letter that concluded SEC staff will not recommend enforcement actions to the SEC under Regulation E if a broker-dealer provides disclosures as though the broker-dealer were an insured institution for purposes of the temporary exception. The Bureau declines to speculate on the potential impact of the proposed rule on these entities but welcomes comment on this point. 96 As noted above in the section-by-section analysis of § 1005.30(f), banks and credit unions are required to submit quarterly ‘‘Call Reports’’ by the FFIEC and the NCUA, respectively. For a more detailed description of these reporting requirements, see Assessment Report at 24. 97 The 2018 transfers of a bank or credit union is included in this calculation if it provided between 101 and 500 transfers in either year, even if, for example, it transferred 100 or fewer transfers in 2018. Similarly, it is excluded if it provided more than 500 transfers in either year. PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 67155 estimate of the costs these institutions would stop incurring if the Bureau adopts the 500-transfer normal course of business safe harbor threshold. However, the Assessment Report discusses the kinds of compliance costs faced by providers covered by the Rule.98 These costs include staff training costs, information acquisition costs for disclosures, and error investigation and resolution costs. In addition, if any banks and credit unions were restricting the number of remittance transfers that they provide to 100 or fewer in order to qualify for the existing normal course of business safe harbor threshold, it is possible they may decide to start providing more remittance transfers if the threshold were increased to 500 transfers as proposed. However, the Assessment Report indicates that banks and credit unions did not limit the number of transfers to stay under the existing normal course of business safe harbor threshold, nor did banks or credit unions appear to cease providing remittance transfers because of the Rule.99 These facts suggest it is unlikely that many institutions would start providing more remittance transfers if the normal course of business safe harbor threshold were increased from 100 to 500 transfers as proposed. Finally, it is possible that some insured institutions would see effects from an increased normal course of business safe harbor threshold because of the preferences of their customers. One possibility is that the customers of insured institutions that would be excluded from coverage if the Bureau were to increase the normal course of business safe harbor threshold to 500 transfers, might decide to start transferring with insured institutions that would remain subject to the Rule. These customers might prefer receiving the pre-payment disclosure and receipts or having the error resolution rights required under the Rule, even if they have to pay more to send remittance transfers. Conversely, if the price of sending remittance transfers is lower with the newly non-covered institutions, some customers may switch to those institutions. Given the inconvenience of changing remittance transfer providers, and the analysis of the impact of the 100-transfer normal course of business safe harbor threshold in the Assessment Report,100 the Bureau expects that the net change in transfers and market participation would likely be small for insured institutions that 98 Id. at 117–20. at 133–38. 100 Id. at 133–37. 99 Id. E:\FR\FM\06DEP5.SGM 06DEP5 67156 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules would be no longer covered by the Rule if the normal course of business safe harbor threshold was set at 500 transfers as proposed. Benefits and Costs to Consumers lotter on DSKBCFDHB2PROD with PROPOSALS5 In 2018, insured institutions that would not have been covered if the normal course of business safe harbor threshold was set at 500 transfers provided approximately 141,900 transfers.101 These transfers represent 1.2 percent of 2018 transfers by insured institutions providing more than 100 transfers in either 2017 or 2018.102 The Assessment Report found that these numbers have been fairly stable from year to year before 2018, so are likely to be representative of the impact going forward.103 The proposed rule has potential benefits and costs to the remittance customers of banks and credit unions providing between 101 and 500 remittance transfers annually. The benefits include potentially lower prices for consumers if the remittance transfer provider passes on any reduction in regulatory compliance costs. As discussed in the Assessment Report, at least some bank and credit union providers reported to the Bureau that in response to the Rule, they increased the price they charged consumers to send remittance transfers.104 Excepting such entities from the Rule’s coverage could result in decreased prices by these banks and credit unions for sending remittance transfers. The costs to customers of banks and credit unions providing between 101 and 500 remittance transfers annually are the potential loss of the Rule’s prepayment disclosures, which may facilitate comparison shopping, and other Rule protections, including cancellation and error resolution rights. The Bureau does not have the information necessary to quantify these costs. The Bureau has received relatively few complaints from consumers arising from transfers provided by banks and credit unions not covered by Rule.105 The Assessment 101 From the bank and credit union Call Reports. The total represents approximately 92,600 bank transfers and 49,300 credit union transfers. 102 From the bank and credit union Call Reports. The dollar volume of the transfers provided by banks providing between 101 and 500 transfers in either 2017 or 2018, but not more than 500 in either year, was $2 billion. Credit unions do not report their dollar volume. 103 Id. at 76–77, 83–84. 104 Id. at 94. 105 About 0.4 percent of complaints the Bureau has received are about ‘‘international money transfers’’ including remittance transfers. Id. at 113– 16. As noted above, the number of complaints may be low because providers are complying with the VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 Report found that consumers asserted errors for as many as 1.9 percent of transfers and cancelled between 0.29 and 4.5 percent of transfers depending on the provider.106 Some banks and credit unions providing between 101 and 500 remittance transfers annually may continue to provide certain of these protections to their customers, although perhaps in a more limited manner than required by the Rule. As noted above, it is possible that, to the extent any banks and credit unions intentionally provide 100 or fewer transfers (so as to qualify for the existing normal course of business safe harbor), it is possible they may decide to start providing more if the proposed rule was adopted. The Assessment Report did not find that banks or credit unions were limiting the number of transfers they provided to stay under the existing 100transfer normal course of business safe harbor threshold or that banks or credit unions had stopped providing remittance transfers because of the Rule.107 Thus, the Bureau does not believe that there would be much if any increase in access to remittance transfer services resulting from the proposed increase in the normal course of business safe harbor threshold. Alternatives The Bureau is considering an alternative 200-transfer threshold for the normal course of business safe harbor threshold. There were 156 banks and 138 credit unions in 2018 that provided between 101 and 200 transfers in either 2017 or 2018, but not more than 200 in either year, based on their respective Call Reports. As reported above, the corresponding numbers under the proposed rule are 414 banks and 247 credit unions. Thus, the proposed rule more than doubles the number of banks that would not be subject to the Rule relative to the alternative. The corresponding relative increase under the proposed rule for credit unions is 79 percent. Under the alternative, the banks and credit unions that would not be subject to the Rule represent 21 percent of banks providing more than 100 transfers in either 2017 or 2018 and 35 percent of credit unions providing more than 100 transfers in either 2017 or 2018. As reported above, the corresponding numbers under the proposed rule are 55 percent for banks law. Another possibility is that some consumers who send remittance transfers may have limited English proficiency, and therefore, be less likely to know that they can submit complaints to the Bureau or may be less likely to seek help from a government agency than other consumers. 106 Id. at 126, 131. 107 Id. at 133–38. PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 and 62 percent for credit unions. The other impacts as described above for a 500-transfer normal course of business safe harbor threshold would follow for a 200-transfer threshold. The total number of transfers in 2018 for banks and credit unions that provided between 101 and 200 transfers in either 2017 or 2018, but not more than 200 in either year, were 19,900 bank transfers and 18,200 credit union transfers. As reported above, the corresponding numbers under the proposed rule are approximately 92,600 bank transfers and 49,300 credit union transfers. Thus, the proposed rule would more than quadruple the number of bank transfers and would more than double the number of credit unions transfers that would not be subject to the Rule relative to the alternative. Under the alternative, the bank and credit union transfers in 2018 that would not be subject to the proposed rule represent 0.18 percent of transfers by banks providing more than 100 transfers in either 2017 or 2018, and 2.31 percent of transfers by credit unions providing more than 100 transfers in either 2017 or 2018. Overall this is 0.32 percent of transfers in 2018 by insured institutions providing greater than 100 transfers in either 2017 or 2018. The corresponding numbers under the proposed rule are 0.83 percent for bank transfers and 6.3 percent for credit union transfers. As reported above, this is 1.2 percent of all 2018 transfers by insured institutions providing more than 100 transfers in either 2017 or 2018. Again, the other impacts as described above for a 500transfer normal course of business safe harbor threshold would follow for a 200-transfer threshold. The Bureau has also considered, and is soliciting comment on, whether it should adopt any alternate or additional measures for the ‘‘normal course of business’’ safe harbor. As stated above, the Bureau particularly seeks comment on whether to base the term ‘‘normal course of business’’ on the percentage of an entity’s customers that send remittance transfers, and if so, what the appropriate percentage of customers should be and why. In addition, the Bureau seeks comment on the time frame over which any such alternate metric should be tracked and the timing for any transitional provisions that might be necessary using such a metric. The Bureau also seeks comment on the potential burden to entities, or challenges that could arise, in basing the safe harbor on an approach other than the annual number of remittance transfers. E:\FR\FM\06DEP5.SGM 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 A limitation on the ability of the Bureau to consider the impacts of this alternative is the lack of institutionallevel data or representative averages for groups of institutions on, among other things, the percentage of customers that send remittance transfers, the average number of remittance transfers sent by customers who send remittance transfers, and the distribution of transfers across customers (e.g., whether sending remittance transfers is concentrated among a small share of customers or dispersed). The numbers of consumers and covered persons affected by different per-consumer thresholds would depend on this information. The qualitative effects on consumers and covered persons that would be not be covered by the Rule at different normal course of business safe harbor thresholds would be as described above. The Bureau requests data and other information that would be useful for quantifying the number of affected consumers and persons sending remittance transfers and the benefits and costs on the affected consumers and persons. 2. Proposed Permanent Exceptions This section considers the benefits, costs, and impacts of the two permanent exceptions proposed by the Bureau that would allow remittance transfer providers that are insured institutions to estimate exchange rates and covered third-party fees in certain circumstances. This analysis proceeds in two steps. First, it examines the information available to the Bureau to determine the likely impact of the expiration of the existing temporary exception. The analysis then considers the likely benefits, costs, and impacts of the proposed permanent exceptions. For reasons explained above, the analysis generally considers only the impacts of the expiration and proposed permanent exceptions on banks and credit unions that provide more than 500 transfers annually. According to their Call Reports, of 343 banks providing more than 500 transfers in 2017 or 2018, 48 (14 percent) reported using the temporary exception in 2018.108 These 48 banks estimate they used the temporary exception for approximately 770,000 transfers in 2018, representing approximately 7.0 percent of all transfers by banks providing more than 500 transfers annually. The Bureau does not have comparable information on the use of 108 It is possible that there are more banks using the temporary exception than report it on their Call Reports. For example, smaller bank providers that rely on a larger service provider may not accurately report their usage. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 the temporary exception for credit unions. Under the circumstances, the Bureau considers it appropriate to assume that credit union usage is similar to that of banks.109 Specifically, assuming that the same proportion of credit unions providing more than 500 transfers annually use the temporary exception as banks and use the temporary exception for the same proportion of transfers as banks, around 21 credit unions would have used the temporary exception for 52,000 transfers. Thus, absent any mitigation to address the potential impact of the expiration of the temporary exception (other than the expansion of the normal course of business safe harbor threshold described above), it is reasonable to estimate that 70 insured institutions using the temporary exception for approximately 822,000 transfers would need to undertake certain adjustments.110 Bank Call Reports do not differentiate between the use of the temporary exception for exchange rates and covered third-party fees. From discussions with some large banks and a trade association representing a number of the largest banks, the Bureau understands that the temporary exception generally is not used by very large banks to estimate exchange rates because providing the exact exchange rate is not difficult for such banks. Accordingly, the analysis assumes that a substantial majority of the remittance transfers and institutions using the temporary exception are using it exclusively for covered third-party fees. The Bureau requests additional data and other information on the share of remittance transfers that rely on the temporary exception to estimate exchange rates alone, covered thirdparty fees alone, and both exchange rates and covered third-party fees. Proposed Permanent Exception for Estimation of the Exchange Rate by an Insured Institution The proposed rule would provide a permanent exception that would allow insured institutions to estimate the 109 The Bureau requests data and other information on the use of the temporary exception by credit unions, and in particular by credit unions providing more than 500 transfers annually. 110 According to their Call Reports, 34 banks providing between 101 and 500 remittance transfers annually relied on the temporary exception for 6,500 transfers. Assuming proportional use for credit unions providing between 101 and 500 remittance transfers annually approximately 20 credit unions relied on the temporary exception for 3,500 transfers. For a baseline in which the normal course of business safe harbor threshold was not increased, the impacts on consumers and covered persons considered would also apply to these transfers and covered persons. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 67157 exchange rate (and other disclosures that depend on the exchange rate) under certain conditions when sending to a country. Principally, these conditions are that the designated recipient of the remittance transfer will receive funds in the country’s local currency and (a) the insured institution made 1,000 or fewer transfers in the prior calendar year to that country where the designated recipients received funds in the country’s local currency and (b) the insured institution cannot determine the exact exchange rate for that particular transfer at the time it must provide the applicable disclosures. The information available to the Bureau indicates that the predominant use of the temporary exception is for estimating covered third-party fees. However, as discussed below, the Bureau understands that certain insured institutions may incur additional costs in order to disclose exact exchange rates. Further, these costs, as well as the willingness to incur them, may differ across insured institutions. Thus, under the baseline in which the temporary exception expires and the Bureau raises the normal course of business safe harbor threshold to 500 transfers as proposed, it is possible that the requirement to disclose exact exchange rates may cause some insured institutions to cease providing transfers to certain countries. The proposed permanent exception for estimating exchange rates would tend to mitigate cost increases and reductions in the provision of remittance transfers at any particular insured institution. Benefits and Costs to Insured Institutions Under the baseline, insured institutions that are covered by the Rule and have been using the temporary exception to estimate exchange rates would either need to provide exact exchange rate disclosures or stop sending those transfers. To provide exact exchange rate disclosures, these insured institutions would incur certain costs. An insured institution may need to establish and maintain currencytrading desk capabilities and risk management policies and practices related to the foreign currency and country or to use service providers, correspondent institutions, or persons that act as the insured institution’s agent. These additional costs may also differ across insured institutions, due to differences in existing arrangements with service providers or correspondent banks, the ability to negotiate changes in those arrangements, the expertise of existing staff, and the likely volume of transfers. Insured institutions may also E:\FR\FM\06DEP5.SGM 06DEP5 67158 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 differ in the level of commitment to sending remittance transfers to particular countries, based on the needs of their customers, and thus their willingness to incur additional costs. Overall, the requirement to disclose exact exchange rates under the baseline may cause some insured institutions to cease providing transfers to certain countries. These effects would likely differ across insured institutions. The Bureau believes that the proposed permanent exception for estimating the exchange rate would tend to mitigate these costs and impacts. The Bureau lacks information about the percentage of transfers by recipient country that rely on the temporary exception for exchange rates and the portion of those transfers that could rely on the permanent exception being proposed. However, the Bureau understands that insured institutions are predominantly using the temporary exception to estimate covered third-party fees, rather than exchange rates. Thus, the Bureau believes that the additional costs under the baseline may be relatively modest overall, and the proposed permanent exception could mitigate most of the increase that would otherwise occur. Further, it is the Bureau’s understanding from discussion with some large banks and a trade association representing a number of the largest banks that providing exact exchange rates is not difficult for very large banks. Thus, to the extent that very large banks would have an advantage under the baseline in sending transfers to particular countries, the proposed permanent exception would mitigate this advantage by allowing smaller institutions to continue to estimate exchange rates in disclosures for certain remittance transfers. Some insured institutions that currently provide exact exchange rates might have been able to accommodate customers from other insured institutions that currently use the temporary exception and that would choose not to begin providing exact exchange rates under the baseline. Under the proposed permanent exception for estimation of exchange rates, these insured institutions will not obtain the benefit of these new customers. Benefits and Costs to Consumers Under the baseline in which the temporary exception expires and the Bureau raises the normal course of business safe harbor threshold to 500 transfers as proposed, the preferred insured institution for some consumers might not be able to provide an exact exchange rate disclosure for transfers to VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 certain countries. Some consumers, therefore, would need to seek out an alternate remittance transfer provider to send transfers to those countries. As noted above, it is the Bureau’s understanding from discussion with some large banks and a trade association representing a number of the largest banks that providing the exact exchange rate is not difficult for very large banks. Thus, to the extent that a consumer’s preferred insured institution cannot provide the exact exchange rate, there would likely be a less preferred insured institution that could provide the exact exchange rate and send the transfer.111 Under the proposed permanent exception for estimating the exchange rate, more consumers would be able to continue to use their preferred insured institution to send transfers. These consumers may also potentially be able to do so at lower prices if, for example, an insured institution decided to pass on the higher costs incurred to obtain exact exchange rate information. The cost to these consumers is that they will not receive exact disclosures. Disclosures that include exact exchange rate information make it easier for a consumer to know whether a designated recipient is going to receive an intended sum of money, or the amount in U.S. dollars that the consumer must send to deliver a specific amount of foreign currency to a designated recipient. Requiring the disclosure of exact exchange rates may also make it easier for consumers to compare prices across providers. The proposed permanent exception for estimating exchange rates may therefore impose a cost on certain consumers in the form of these foregone benefits. Overall, the evidence available to the Bureau suggests that the costs to consumers of allowing providers to use estimates for exchange rates are not likely to be significant. Certain consumers may be less likely to engage in comparison shopping or the comparison shopping may be less effective. However, as discussed above, the Bureau believes the proposed permanent exception for estimating exchange rates would be used for only a small portion of all remittance transfers sent by insured institutions. 111 These consumers may also consider using an MSB to send transfers if it is too difficult or expensive to find an insured institution that can send the transfer. MSBs are generally able to provide exact exchange rate information for the reasons discussed in part II above. However, MSBs provide a somewhat different service than banks and credit unions to meet different consumer demands. The Bureau therefore considers that there would be relatively few consumers, under the baseline, who use an MSB because they find it too difficult or expensive to use an insured institution. PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 Further, as discussed in the Assessment Report and noted above, the Bureau reviewed evidence from its complaints database and did not find evidence of significant consumer complaints regarding the use of estimates for exchange rates or for covered third-party fees.112 Proposed Permanent Exception for Estimation of Covered Third-Party Fees by an Insured Institution As noted above, under the baseline in which the temporary exception expires and the Bureau raises the normal course of business safe harbor threshold to 500 transfers as proposed, the Bureau estimates that approximately 70 insured institutions would need to stop providing estimated disclosures for 822,000 transfers. Based on its analysis of available information, the Bureau expects that many of these insured institutions could form additional relationships or set up new systems to provide exact fee disclosures for a large portion of the transfers currently using the temporary exception for estimating covered third-party fees. The Bureau held discussions with banks and a trade association representing a number of the largest banks, reviewed comments from the 2019 RFI, and analyzed Call Reports from banks that have reduced their reliance on the temporary exception. Based on the information received from these sources, banks appear to be willing to set up the relationships or establish other systems (such as international ACH) necessary to reduce their reliance on estimates to around half of the number of transfers for which they used the temporary exception in 2018.113 The Bureau has no information that would suggest a different conclusion for credit unions. Forming these relationships would allow these insured institutions to provide exact disclosures and continue to send these transfers and their customers would gain the benefit of receiving exact disclosures. However, forming these relationships comes at some cost to insured institution providers, and some of these costs could be passed on to consumers. Note that these costs are not costs of the proposed rule; they are costs incurred under the baseline in which the temporary exception expires and the Bureau increases the normal course of business safe harbor threshold as proposed. There are a limited number of outcomes for the remaining half of 112 Assessment Report at 113–16. Bureau cautions that this prediction is not necessarily accurate and is based on limited information. 113 The E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules transfers for which insured institutions used the temporary exception in 2018 and which could not be sent with estimated disclosures under the baseline. Consumers requesting these transfers would need to find an alternative remittance transfer provider. The Bureau understands that the alternative remittance transfer provider would most likely be an insured institution that sends enough remittance transfers to the designated recipient’s institution that the sending insured institution either has relationships or would form additional relationships or set up new systems to provide exact covered third-party fee disclosures. The alternative provider might also be an MSB. As discussed above, however, MSBs provide a somewhat different service than banks and credit unions to meet different consumer demands. This would tend to reduce any substitution from insured institutions to MSBs. In either case, these consumers would lose the convenience and other benefits of transferring with their preferred bank or credit union. Finally, it is hypothetically possible that no insured institution or MSB (or combination of MSBs), at any price, could transfer a consumer’s preferred amount to certain designated recipients’ institutions. This would occur if no insured institution is able to provide exact disclosures and no MSB (or combination of MSBs) is able to transfer high enough amounts to certain designated recipients’ institutions. The Bureau does not have the information necessary to quantify how many transfers would fall into each category. For purposes of the analysis below, the Bureau assumes that under the baseline, customers of an insured institution that would no longer send remittance transfers to a designated recipient’s institution would generally search for and find a different insured institution that would send the transfer. The Bureau considers it unlikely that no insured institution or MSB (or combination of MSBs), at any price, could send the desired amount of funds to a designated recipient’s institution. Under the proposed permanent exception for estimating covered thirdparty fees, transfers covered by the Rule fall into two main categories: (1) Transfers that are below the threshold for covered third-party fees, and therefore disclose estimates, but under the baseline would have been provided with exact disclosures at a higher price or by a remittance transfer provider other than the consumer’s first choice; or (2) transfers that are above the threshold for covered third-party fees, and so will be provided with exact VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 disclosures for fees under both the proposed rule and baseline. Relative to the baseline, in which all bank or credit union transfers that take place would have exact disclosures, only (1) represents a change considered for the costs or benefits of the proposed permanent exception for estimating covered third-party fees. Benefits and Costs to Insured Institutions As stated above, under the baseline in which the temporary exception expires and the Bureau raises the normal course of business safe harbor threshold to 500 transfers as proposed, the Bureau estimates that approximately 70 insured institutions would need to stop providing estimated disclosures for 822,000 transfers. While the Bureau does not have market-wide information, information provided by certain large banks suggests that there are few designated recipient banks to which these large banks individually send more than 500 transfers and with which these large banks would not be able or willing to set up a relationship sufficient to provide exact disclosures. Based on this information, the Bureau expects that under both the baseline and the proposed permanent exception for estimating covered third-party fees, these 70 institutions will form roughly the same number of relationships and will provide exact disclosures for about half of these transfers. Forming these relationships comes at some cost to insured institution providers, and some of these costs could be passed on to consumers. As explained above, under the baseline, the other half of the remittance transfers with estimated disclosures would no longer be provided by the insured institutions that currently send them but would be sent by different insured institutions. Based on the information available from certain large banks, under the proposed permanent exception for estimating covered thirdparty fees, the Bureau expects that the insured institutions that currently send these transfers would continue to send them. These transfers (category (1) above) provide estimated disclosures, so these insured institutions would not need to form additional relationships. These insured institutions would benefit from not turning away potential customers and by being able to continue providing a valuable service to their customers. These benefits might be significant, although they are difficult quantify. PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 67159 Benefits and Costs to Consumers Under category (1) above, certain remittance transfers would have been provided with exact disclosures under the baseline but at higher price or by a remittance transfer provider other than the consumer’s first choice. As discussed above, the Bureau expects that the proposed permanent exception for estimating covered third-party fees when an insured institution makes 500 or fewer transfers to the designated recipient’s institution in the prior calendar year would mitigate all or almost all of the costs to consumers from the loss of access to transfers to certain designated recipient’s institutions under the baseline. These remittance transfers represent the most important benefit of the proposed permanent exception for consumers. While the Bureau does not have the information to quantify the number of transfers in this category or the exact value to consumers, the benefit to consumers of continued access is potentially large. Under category (1) above, consumers will receive disclosures containing estimates. As discussed above in considering the impact of the proposed permanent exception for exchange rates, the use of estimates for covered thirdparty fees may make it more difficult for consumers to engage in comparison shopping and impose a cost on consumers by making disclosures less accurate. Alternative For purposes of considering the effects of the proposed permanent exceptions that allow institutions to estimate exchange rates and covered third-party fees, the Bureau used a baseline in which the temporary exception expired and the Bureau amended the normal course of business safe harbor threshold as proposed. If instead the Bureau maintains the existing normal course of business safe harbor threshold at 100 transfers, then this provision of the current Rule would be part of the baseline, along with the expiration of the temporary exception. Under this baseline, the proposed permanent exceptions that would allow institutions to estimate exchange rates and covered third-party fees would have effects on insured institutions that provide between 101 and 500 remittance transfers per year and the consumers on whose behalf these institutions send remittance transfers. These effects would be in addition to the effects on insured institutions that provide more than 500 remittance transfers per year and the consumers on E:\FR\FM\06DEP5.SGM 06DEP5 67160 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules whose behalf these insured institutions send remittance transfers. As discussed above, 414 banks and 247 credit unions provided between 101 and 500 transfers in either 2017 or 2018, but not more than 500 in either year. In 2018, they respectively sent about 92,600 and 49,300 transfers. These banks and credit unions would remain covered by the Rule under the alternative since the normal course of business safe harbor threshold remains at 100 transfers. However, all of these insured institutions would necessarily meet the respective 500-transfer and 1,000-transfer threshold requirements in the proposed permanent exceptions. Thus, all of these insured institutions could continue to disclose estimates for exchange rates and covered third-party fees to the extent that they already do so. The ability to disclose estimates under the proposed permanent exceptions would mitigate costs relative to the baseline used here. These insured institutions currently provide error resolution rights and meet the other conditions of the Rule. These insured institutions would continue to do so under both the baseline used here and under the alternative proposed rule, that provided only the permanent exceptions for estimating exchange rates and covered third-party fees. D. Potential Specific Impacts of the Proposed Rule lotter on DSKBCFDHB2PROD with PROPOSALS5 1. Depository Institutions and Credit Unions With $10 Billion or Less in Total Assets, as Described in Section 1026 As stated above, based on their Call Reports, 414 banks and 247 credit unions provided between 101 and 500 transfers in either 2017 or 2018, but not more than 500 in either year. Of these, 386 banks and all 247 credit unions had $10 billion or less in total in assets in 2018. Some of these insured institutions currently provide exact disclosures (based on Call Report data) and all of them would have to provide exact disclosures under the baseline expiration of the temporary exception. None of these insured institutions would be covered by the Rule under the proposed increase in the normal course of business safe harbor threshold. It follows that the large majority of the banks and all of the credit unions affected by the proposed change in the normal course of business safe harbor threshold have $10 billion or less in assets. Thus, the impacts of the proposed increase in the normal course of business safe harbor threshold, described above, are also generally the specific impacts for depository VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 institutions and credit unions with $10 billion or less in total assets. In addition, 190 banks and 142 credit unions with $10 billion or less in assets in 2018 provided more than 500 transfers in 2017 or 2018. As above, some of these banks and credit unions currently provide exact disclosures, and all of them would have to provide exact disclosures under the baseline expiration of the temporary exception. These banks and credit unions would not be directly affected by the proposed change in the normal course of business safe harbor threshold. They might be affected, compared to the baseline expiration of the temporary exception, by the proposed permanent exceptions for estimating the exchange rate and covered third-party fees. According to the bank Call Report data, only 18 of these banks reported using the temporary exception, and they did so for approximately 66,600 transfers. As discussed above, the Bureau understands that remittance transfer providers that are smaller depository institutions and credit unions obtain information about exchange rates and covered third-party fees from a limited number of service providers that are either very large insured institutions or large nonbank service providers. Given this reliance, the impacts of the proposed permanent exceptions, described above, are also generally the specific impacts for depository institutions and credit unions with $10 billion or less in total assets. 2. Impact of the Proposed Provisions on Consumers in Rural Areas Consumers in rural areas may experience different impacts from the proposed rule than other consumers. The Bureau has discretion to define rural areas as appropriate for this impact analysis. For the impact analysis in this section, the Bureau used its 2018 rural counties list.114 The Bureau compared the address each bank and credit union reported on its Call Report with this rural county list to determine if that bank or credit union was located in a rural county. This comparison is limited to the location listed in the Call Report, which is generally the headquarters of the bank or credit union. There are likely rural branches of insured institutions with headquarters located in non-rural areas, so this comparison captures only a portion of the impact of the proposed rule on consumers in rural areas. 114 See https://www.consumerfinance.gov/policycompliance/guidance/rural-and-underservedcounties-list/. PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 According to the Call Reports, 83 banks provided between 101 and 500 remittance transfers in either 2017 or 2018, but not more than 500 in either year, and were headquartered in rural counties. These banks provided 17,000 transfers in 2018. Further, 15 credit unions provided between 101 and 500 remittance transfers in either 2017 or 2018, but not more than 500 in either year, and were located in rural counties. These credit unions provided 2,200 transfers. Finally, three banks provided more than 500 transfers in either 2017 or 2018, were located in rural areas, and reported relying on the temporary exception. These banks reported that they relied on the temporary exception for 2,000 transfers total. Assuming reliance on the temporary exception is similar for credit unions, the four credit unions that provided more than 500 transfers in either 2017 or 2018 and were located in rural areas would have used the temporary exception for approximately 900 transfers. Consumers in rural areas may have access to fewer remittance transfers providers and therefore may benefit more than other consumers from a rule change that keeps more insured institutions in the market or helps reduce costs to the extent that cost reductions are passed on to consumers. However, these consumers will also disproportionately lose consumer protections relative to other consumers, under the baseline in which the temporary exception expires, to the extent that the banks and credit unions that provide remittance transfers to these consumers are disproportionately excluded from the Rule or use the permanent exceptions under the proposed rule. As stated above, the 414 banks and 247 credit unions that provided between 101 and 500 transfers in either 2017 or 2018, but not more than 500 in either year, represent 55 percent of the banks and 62 percent of the credit unions that provided more than 100 transfers in both years. In rural areas, the corresponding 83 banks and 15 credit unions represented 75 percent of the banks and 79 percent of the credit unions that provided more than 100 transfers in both years in rural areas. Thus, the proposed increase in the normal course of business safe harbor threshold would have somewhat larger effects in rural areas in both preserving access to remittance transfer providers and possibly reducing the protections provided by the Rule, as described previously. E:\FR\FM\06DEP5.SGM 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 VIII. Regulatory Flexibility Act Analysis 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.115 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.116 Potentially affected small entities include insured institutions that have $550 million or less in assets and that provide remittance transfers in the normal course of their business.117 The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.118 The Bureau also is subject to certain additional procedures under the RFA involving the convening of a panel to consult with small business representatives prior to proposing a rule for which an IRFA is required.119 An IRFA is not required for this proposal because the proposal, if adopted, would not have a significant economic impact on a substantial number of small entities. The Bureau does not expect the final rule to impose costs on small entities relative to the baseline. Under the baseline, the temporary exception expires, and therefore no remittance transfer providers—including small entities— would be able to provide estimates using that exception. Under the proposed rule, certain small entities that would otherwise be covered by the Remittance Rule would not be covered by the Rule and certain other small entities would be able to provide estimates in certain circumstances. Thus, the Bureau believes that the proposed rule would only reduce 115 5 U.S.C. 601 et seq. The Bureau is not aware of any small governmental units or not-for-profit organizations to which the proposal would apply. 116 5 U.S.C. 601(3) (the Bureau may establish an alternative definition after consultation with the Small Business Administration and an opportunity for public comment). 117 Small Bus. Admin., Table of Small Business Size Standards Matched to North American Industry Classification System Codes, https:// www.sba.gov/sites/default/files/files/Size_ Standards_Table.pdf. 118 5 U.S.C. 603 through 605. 119 5 U.S.C. 609. VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 burden on small entities relative to the baseline.120 Accordingly, the undersigned certifies that this proposal, if adopted, would not have a significant economic impact on a substantial number of small entities. The Bureau requests comment on its analysis of the impact of the proposed rule on small entities and requests any relevant data. IX. Paperwork Reduction Act Under the Paperwork Reduction Act of 1995 (PRA),121 Federal agencies are generally required to seek approval from the Office of Management and Budget (OMB) for information collection requirements prior to implementation. Under the PRA, the Bureau may not conduct or sponsor, and, notwithstanding any other provision of law, a person is not required to respond to, an information collection unless the information collection displays a valid control number assigned by OMB. As explained below, the Bureau has determined that this proposed rule does not contain any new or substantively revised information collection requirements other than those previously approved by OMB under that OMB control number. The proposed rule would amend 12 CFR part 1005 (Regulation E), which implements EFTA. The Bureau’s OMB control number for Regulation E is 3170–0014. Under Regulation E, the Bureau generally accounts for the paperwork burden for the following respondents pursuant to its administrative 120 In general, given the expiration of the temporary exception and assuming the adoption of the proposed rule, some small entities that currently provide estimates would be able to continue to provide estimates for some or all of their remittance transfers and some would need to begin providing exact disclosures. Using the bank Call Reports, however, the Bureau finds that no small banks would need to begin providing exact disclosures. Specifically, the Bureau finds that there were 75 banks in 2018 with assets under $550 million covered by the Rule (because they provided greater than 100 transfers in 2017 or 2018). Of these banks, only 12 would be covered by the Rule if the normal course of business safe harbor threshold was adopted as proposed. Further, none of these banks currently report relying on the temporary exception. Thus, no small banks would need to begin providing exact disclosures even if the proposed exceptions on use of estimates were not adopted. Using the credit union Call Reports, the Bureau finds that there were 120 credit unions covered by the Rule in 2018 (because they provided more than 100 transfers in 2017 or 2018). Of these credit unions, only 29 would be covered by the Rule if the normal course of business safe harbor threshold was adopted as proposed. The credit union Call Reports do not report utilization of the temporary exception. However, since none of the 12 small banks that would remain covered by the proposed rule use the temporary exception, the Bureau considers it reasonable to suppose that that few or none of the 29 small credit unions that would remain covered by the proposed rule use the temporary exception. 121 44 U.S.C. 3501 et seq. PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 67161 enforcement authority: Federally insured depository institutions with more than $10 billion in total assets, their depository institution affiliates, and certain non-depository institutions. The Bureau and the FTC generally both have enforcement authority over nondepository institutions subject to Regulation E. Accordingly, the Bureau has allocated to itself half of the proposed rule’s estimated reduction in burden on non-depository financial institutions subject to Regulation E. Other Federal agencies, including the FTC, are responsible for estimating and reporting to OMB the paperwork burden for the institutions for which they have enforcement and/or supervision authority. They may use the Bureau’s burden estimation methodology, but need not do so. The Bureau does not believe that this proposed rule would impose any new or substantively revised collections of information as defined by the PRA. Specifically, based on the above analysis, the Bureau believes that the overall impact of the proposal to increase the normal course of business safe harbor threshold to 500 and to allow limited use of estimates for covered third-party fee and exchange rate disclosures is small. The Bureau recognizes, however, that it lacks data with which to determine the precise impact of the proposal. Comments are specifically requested concerning information that would assist the Bureau with making a determination on the impact of allowing limited use of estimates in certain disclosures on the Bureau’s current collection of information pursuant to Regulation E. Current Total Annual Burden Hours on Bureau Respondents, Regulation E: 3,445,033. Current Total Annual Burden Hours on Bureau Respondents, Subpart B only: 1,471,808. Estimated Total Annual Burden Hours on Bureau Respondents Under the Proposed Rule, Subpart B only: 1,448,938. Estimated Change in Total Annual Burden Hours on Bureau Respondents Under the Proposed Rule: ¥22,870. In addition, the Bureau estimates that Bureau respondents will incur one-time costs of $6.886 million under the proposed rule, mostly to form new relationships with designated recipients’ institutions. The Bureau has determined that the proposed rule does not contain any new or substantively revised information collection requirements as defined by the PRA and that the burden estimate for the previously approved information collections should be revised as E:\FR\FM\06DEP5.SGM 06DEP5 67162 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules explained above. The Bureau welcomes comments on these determinations or any other aspect of the proposal for purposes of the PRA. Comments should be submitted as outlined in the ADDRESSES section above. All comments will become a matter of public record. List of Subjects in 12 CFR Part 1005 Automated teller machines, Banking, Banks, Consumer protection, Credit unions, Electronic fund transfers, National banks, Remittance transfers, Reporting and recordkeeping requirements, Savings associations. Authority and Issuance For the reasons set forth above, the Bureau proposes to amend 12 CFR part 1005 as set forth below: PART 1005—ELECTRONIC FUND TRANSFERS (REGULATION E) 1. The authority citation for part 1005 continues to read as follows: ■ Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1693b. Subpart B is also issued under 12 U.S.C. 5601 and 15 U.S.C. 1693o–1. Subpart B—Requirements for Remittance Transfers 2. Amend § 1005.30 by revising paragraphs (f)(2)(i)(A) and (B) and (f)(2)(ii), and adding paragraph (f)(2)(iii) to read as follows: ■ § 1005.30 Remittance transfer definitions. lotter on DSKBCFDHB2PROD with PROPOSALS5 * * * * * (f) * * * (2) * * * (i) * * * (A) Provided 500 or fewer remittance transfers in the previous calendar year; and (B) Provides 500 or fewer remittance transfers in the current calendar year. (ii) Transition period—coming into compliance. If, beginning on July 21, 2020, a person that provided 500 or fewer remittance transfers in the previous calendar year provides more than 500 remittance transfers in the current calendar year, and if that person is then providing remittance transfers for a consumer in the normal course of its business pursuant to paragraph (f)(1) of this section, the person has a reasonable period of time, not to exceed six months, to begin complying with this subpart. Compliance with this subpart will not be required for any remittance transfers for which payment is made during that reasonable period of time. (iii) Transition period—qualifying for the safe harbor. If a person who previously provided remittance transfers in the normal course of its VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 business in excess of the safe harbor threshold set forth in this paragraph (f)(2) determines that, as of a particular date, it will qualify for the safe harbor, it may cease complying with the requirements of this subpart with respect to any remittance transfers for which payment is made after that date. The requirements of the Act and this part, including those set forth in §§ 1005.33 and 1005.34, as well as the requirements set forth in § 1005.13, continue to apply to transfers for which payment is made prior to that date. * * * * * ■ 3. In § 1005.32: ■ a. Add paragraphs (b)(4) and (5); and ■ b. Remove ‘‘(a) or (b)(1)’’ and add in its place ‘‘(a) or (b)(1), (4), or (5)’’ in the first sentence of paragraph (c) introductory text. The additions read as follows: § 1005.32 Estimates. * * * * * (b) * * * (4) Permanent exception for estimation of the exchange rate by an insured institution. (i) Except as provided in paragraph (b)(4)(ii) of this section, for disclosures described in §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2), estimates may be provided for a remittance transfer to a particular country in accordance with paragraph (c) of this section for the amounts required to be disclosed under § 1005.31(b)(1)(iv) through (vii), if the designated recipient of the remittance transfer will receive funds in the country’s local currency and all of the following conditions are met: (A) The remittance transfer provider is an insured institution as defined in paragraph (a)(3) of this section; (B) At the time the insured institution must provide, as applicable, the disclosure required by § 1005.31(b)(1) through (3) or § 1005.36(a)(1) or (2), the insured institution cannot determine the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) for that remittance transfer; (C) The insured institution made 1,000 or fewer remittance transfers in the prior calendar year to the particular country for which the designated recipients of those transfers received funds in the country’s local currency; and (D) The remittance transfer is sent from the sender’s account with the insured institution; provided however, for the purposes of this paragraph (b)(4)(i)(D), a sender’s account does not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account. PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 (ii) The disclosures in § 1005.31(b)(1)(v) through (vii) may be estimated under paragraph (b)(4)(i) of this section only if the exchange rate is permitted to be estimated under paragraph (b)(4)(i) of this section and the estimated exchange rate affects the amount of such disclosures. (5) Permanent exception for estimation of covered third-party fees by an insured institution. (i) Except as provided in paragraph (b)(5)(ii) of this section, for disclosures described in §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2), estimates may be provided for a remittance transfer to a particular designated recipient’s institution in accordance with paragraph (c) of this section for the amounts required to be disclosed under § 1005.31(b)(1)(vi) through (vii), if all of the following conditions are met: (A) The remittance transfer provider is an insured institution as defined in paragraph (a)(3) of this section; (B) At the time the insured institution must provide, as applicable, the disclosure required by § 1005.31(b)(1) through (3) or § 1005.36(a)(1) or (2), the insured institution cannot determine the exact covered third-party fees required to be disclosed under § 1005.31(b)(1)(vi) for that remittance transfer; (C) The insured institution made 500 or fewer remittance transfers in the prior calendar year to that designated recipient’s institution; and (D) The remittance transfer is sent from the sender’s account with the insured institution; provided however, for the purposes of this paragraph (b)(5)(i)(D), a sender’s account does not include a prepaid account, unless the prepaid account is a payroll card account or a government benefit account. (ii) The disclosure in § 1005.31(b)(1)(vii) may be estimated under paragraph (b)(5)(i) of this section only if covered third-party fees are permitted to be estimated under paragraph (b)(5)(i) of this section and the estimated covered third-party fees affect the amount of such disclosure. * * * * * § 1005.33 [Amended] 4. Amend § 1005.33(a)(1)(iii)(A) by removing ‘‘(a), (b)(1) or (b)(2)’’ and adding in its place ‘‘(a) or (b)(1), (2), (4), or (5)’’. ■ § 1005.36 [Amended] 5. Amend § 1005.36(b)(3) by removing ‘‘(a) or (b)(1)’’ and adding in its place ‘‘(a) or (b)(1), (4), or (5)’’. ■ 6. In supplement I to part 1005: ■ E:\FR\FM\06DEP5.SGM 06DEP5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules a. Under Section 1005.30— Remittance Transfer Definitions, revise 30(f) Remittance Transfer Provider. ■ b. Under Section 1005.32—Estimates: ■ i. Revise introductory text paragraph 1 and 32(b)(1) Permanent Exceptions for Transfers to Certain Countries; ■ ii. Add 32(b)(4) Permanent Exception for Estimation of the Exchange Rate by an Insured Institution, and 32(b)(5) Permanent Exception for Estimation of Covered Third-Party Fees by an Insured Institution; and ■ iii. Revise 32(c)(3) Covered ThirdParty Fees, and 32(d) Bases for Estimates for Transfers Scheduled Before the Date of Transfer; and ■ d. Under Section 1005.36—Transfers Scheduled Before the Date of Transfer, revise 36(b) Accuracy. The revisions and additions read as follows: ■ Supplement I to Part 1005—Official Interpretations * * * * * Section 1005.30—Remittance Transfer Definitions lotter on DSKBCFDHB2PROD with PROPOSALS5 * * * * * 30(f) Remittance Transfer Provider 1. Agents. A person is not deemed to be acting as a remittance transfer provider when it performs activities as an agent on behalf of a remittance transfer provider. 2. Normal course of business. i. General. Whether 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. For example, if a financial institution generally does not make remittance transfers available to customers, but sends a couple of such transfers in a given year as an accommodation for a customer, the institution does not provide remittance transfers in the normal course of business. In contrast, if a financial institution makes remittance transfers generally available to customers (whether described in the institution’s deposit account agreement, or in practice) and makes transfers more frequently than on an occasional basis, the institution provides remittance transfers in the normal course of business. ii. Safe harbor. On July 21, 2020, the safe harbor threshold in § 1005.30(f)(2)(i) changed from 100 transfers to 500 transfers. Under § 1005.30(f)(2)(i), beginning on July 21, 2020, a person that provided 500 or fewer remittance transfers in the previous calendar year and provides 500 VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 or fewer remittance transfers in the current calendar year is deemed not to be providing remittance transfers in the normal course of its business. Accordingly, a person that qualifies for the safe harbor in § 1005.30(f)(2)(i) is not a ‘‘remittance transfer provider’’ and is not subject to the requirements of subpart B of this part. For purposes of determining whether a person qualifies for the safe harbor under § 1005.30(f)(2)(i), the number of remittance transfers provided includes any transfers excluded from the definition of ‘‘remittance transfer’’ due simply to the safe harbor. In contrast, the number of remittance transfers provided does not include any transfers that are excluded from the definition of ‘‘remittance transfer’’ for reasons other than the safe harbor, such as small value transactions or securities and commodities transfers that are excluded from the definition of ‘‘remittance transfer’’ by § 1005.30(e)(2). iii. Transition period. A person may cease to satisfy the requirements of the safe harbor described in § 1005.30(f)(2)(i) if, beginning on July 21, 2020, the person provides in excess of 500 remittance transfers in a calendar year. For example, if a person that provided 500 or fewer remittance transfers in the previous calendar year provides more than 500 remittance transfers in the current calendar year, the safe harbor applies to the first 500 remittance transfers that the person provides in the current calendar year. For any additional remittance transfers provided in the current calendar year and for any remittance transfers provided in the subsequent calendar year, whether the person provides remittance transfers for a consumer in the normal course of its business, as defined in § 1005.30(f)(1), and is thus a remittance transfer provider for those additional transfers, depends on the facts and circumstances. Section 1005.30(f)(2)(ii) provides a reasonable period of time, not to exceed six months, for such a person to begin complying with subpart B of this part, if that person is then providing remittance transfers in the normal course of its business. At the end of that reasonable period of time, such person would be required to comply with subpart B unless, based on the facts and circumstances, the person is not a remittance transfer provider. iv. Examples. A. Example of safe harbor and transition period for 100transfer safe harbor threshold effective prior to July 21, 2020. Assume that a person provided 90 remittance transfers in 2012 and 90 such transfers in 2013. The safe harbor applied to the person’s PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 67163 transfers in 2013, as well as the person’s first 100 remittance transfers in 2014. However, if the person provided a 101st transfer on September 5, 2014, the facts and circumstances determine whether the person provided remittance transfers in the normal course of business and was thus a remittance transfer provider for the 101st and any subsequent remittance transfers that it provided in 2014. Furthermore, the person would not have qualified for the safe harbor described in § 1005.30(f)(2)(i) in 2015 because the person did not provide 100 or fewer remittance transfers in 2014. However, for the 101st remittance transfer provided in 2014, as well as additional remittance transfers provided thereafter in 2014 and 2015, if that person was then providing remittance transfers for a consumer in the normal course of business, the person had a reasonable period of time, not to exceed six months, to come into compliance with subpart B of this part. Assume that in this case, a reasonable period of time is six months. Thus, compliance with subpart B was not required for remittance transfers made on or before March 5, 2015 (i.e., six months after September 5, 2014). After March 5, 2015, the person was required to comply with subpart B if, based on the facts and circumstances, the person provided remittance transfers in the normal course of business and was thus a remittance transfer provider. B. Example of safe harbor for a person that provided 500 or fewer transfers in 2019 and provides 500 or fewer transfers in 2020. On July 21, 2020, the safe harbor threshold in § 1005.30(f)(2)(i) changed from 100 transfers to 500 transfers. Thus, beginning on July 21, 2020, pursuant to § 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 500 or fewer remittance transfers in the previous calendar year and provides 500 or fewer remittance transfers in the current calendar year. If a person provided 500 or fewer transfers in 2019 and provides 500 or fewer remittance transfers in 2020, that person qualifies for the safe harbor threshold in 2020. For example, assume that a person provided 200 remittance transfers in 2019 and 400 remittance transfers in 2020. The safe harbor will apply to the person’s transfers in 2020 beginning on July 21, 2020, as well as the person’s first 500 transfers in 2021. See comment 30(f)-2.iv.C for an example regarding the transition period if the 500-transfer safe harbor is exceeded. C. Example of safe harbor and transition period for the 500-transfer E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 67164 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules safe harbor threshold beginning on July 21, 2020. Assume that a person provided 490 remittance transfers in 2020 and 490 such transfers in 2021. The safe harbor will apply to the person’s transfers in 2021, as well as the person’s first 500 remittance transfers in 2022. However, if the person provides a 501st transfer on September 5, 2022, the facts and circumstances determine whether the person provides remittance transfers in the normal course of business and is thus a remittance transfer provider for the 501st and any subsequent remittance transfers that it provides in 2022. Furthermore, the person would not qualify for the safe harbor described in § 1005.30(f)(2)(i) in 2023 because the person did not provide 500 or fewer remittance transfers in 2022. However, for the 501st remittance transfer provided in 2022, as well as additional remittance transfers provided thereafter in 2022 and 2023, if that person is then providing remittance transfers for a consumer in the normal course of business, the person will have a reasonable period of time, not to exceed six months, to come into compliance with subpart B of this part. Assume that in this case, a reasonable period of time is six months. Thus, compliance with subpart B is not required for remittance transfers made on or before March 5, 2023 (i.e., six months after September 5, 2022). After March 5, 2023, the person is required to comply with subpart B if, based on the facts and circumstances, the person provides remittance transfers in the normal course of business and is thus a remittance transfer provider. v. Continued compliance for transfers for which payment was made before a person qualifies for the safe harbor. Section 1005.30(f)(2)(iii) addresses situations where a person who previously was required to comply with subpart B of this part newly qualifies for the safe harbor in § 1005.30(f)(2)(i). That section states that the requirements of EFTA and Regulation E, including those set forth in §§ 1005.33 and 1005.34 (which address procedures for resolving errors and procedures for cancellation and refund of remittance transfers, respectively), as well as the requirements set forth in § 1005.13 (which, in part, governs record retention), continue to apply to transfers for which payment is made prior to the date the person qualifies for the safe harbor in § 1005.30(f)(2)(i). Qualifying for the safe harbor in § 1005.30(f)(2)(i) likewise does not excuse compliance with any other applicable law or regulation. For example, if a remittance transfer is also an electronic fund VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 transfer, any requirements in subpart A of Regulation E that apply to the transfer continue to apply, regardless of whether the person must comply with subpart B. Relevant requirements in subpart A may include, but are not limited to, those relating to initial disclosures, change-interms notices, liability of consumers for unauthorized transfers, and procedures for resolving errors. 3. Multiple remittance transfer providers. If the remittance transfer involves more than one remittance transfer provider, only one set of disclosures must be given, and the remittance transfer providers must agree among themselves which provider must take the actions necessary to comply with the requirements that subpart B of this part imposes on any or all of them. Even though the providers must designate one provider to take the actions necessary to comply with the requirements that subpart B imposes on any or all of them, all remittance transfer providers involved in the remittance transfer remain responsible for compliance with the applicable provisions of the EFTA and Regulation E. * * * * * Section 1005.32—Estimates 1. Disclosures where estimates can be used. Sections 1005.32(a) and (b)(1), (4), and (5) permit estimates to be used in certain circumstances for disclosures described in §§ 1005.31(b)(1) through (3) and 1005.36(a)(1) and (2). To the extent permitted in § 1005.32(a) and (b)(1), (4), and (5), estimates may be used in the pre-payment disclosure described in § 1005.31(b)(1), the receipt disclosure described in § 1005.31(b)(2), the combined disclosure described in § 1005.31(b)(3), and the pre-payment disclosures and receipt disclosures for both first and subsequent preauthorized remittance transfers described in § 1005.36(a)(1) and (2). Section 1005.32(b)(2) permits estimates to be used for certain information if the remittance transfer is scheduled by a sender five or more business days before the date of the transfer, for disclosures described in § 1005.36(a)(1)(i) and (a)(2)(i). * * * * * 32(b) Permanent Exceptions 32(b)(1) Permanent Exceptions for Transfers to Certain Countries 1. Laws of the recipient country. The laws of the recipient country do not permit a remittance transfer provider to determine exact amounts required to be disclosed when a law or regulation of the recipient country requires the PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 person making funds directly available to the designated recipient to apply an exchange rate that is: i. Set by the government of the recipient country after the remittance transfer provider sends the remittance transfer or ii. Set when the designated recipient receives the funds. 2. Example illustrating when exact amounts can and cannot be determined because of the laws of the recipient country. i. The laws of the recipient country do not permit a remittance transfer provider to determine the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) when, for example, the government of the recipient country, on a daily basis, sets the exchange rate that must, by law, apply to funds received and the funds are made available to the designated recipient in the local currency the day after the remittance transfer provider sends the remittance transfer. ii. In contrast, the laws of the recipient country permit a remittance transfer provider to determine the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) when, for example, the government of the recipient country ties the value of its currency to the U.S. dollar. 3. Method by which transactions are made in the recipient country. The method by which transactions are made in the recipient country does not permit a remittance transfer provider to determine exact amounts required to be disclosed when transactions are sent via international ACH on terms negotiated between the United States government and the recipient country’s government, under which the exchange rate is a rate set by the recipient country’s central bank or other governmental authority after the provider sends the remittance transfer. 4. Example illustrating when exact amounts can and cannot be determined because of the method by which transactions are made in the recipient country. i. The method by which transactions are made in the recipient country does not permit a remittance transfer provider to determine the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) when the provider sends a remittance transfer via international ACH on terms negotiated between the United States government and the recipient country’s government, under which the exchange rate is a rate set by the recipient country’s central bank on the business day after the provider has sent the remittance transfer. E:\FR\FM\06DEP5.SGM 06DEP5 lotter on DSKBCFDHB2PROD with PROPOSALS5 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules ii. In contrast, a remittance transfer provider would not qualify for the § 1005.32(b)(1)(i)(B) methods exception if it sends a remittance transfer via international ACH on terms negotiated between the United States government and a private-sector entity or entities in the recipient country, under which the exchange rate is set by the institution acting as the entry point to the recipient country’s payments system on the next business day. However, a remittance transfer provider sending a remittance transfer using such a method may qualify for the § 1005.32(a) temporary exception or the exception set forth in § 1005.32(b)(4). iii. A remittance transfer provider would not qualify for the § 1005.32(b)(1)(i)(B) methods exception if, for example, it sends a remittance transfer via international ACH on terms negotiated between the United States government and the recipient country’s government, under which the exchange rate is set by the recipient country’s central bank or other governmental authority before the sender requests a transfer. 5. Safe harbor list. If a country is included on a safe harbor list published by the Bureau under § 1005.32(b)(1)(ii), a remittance transfer provider may provide estimates of the amounts to be disclosed under § 1005.31(b)(1)(iv) through (vii). If a country does not appear on the Bureau’s list, a remittance transfer provider may provide estimates under § 1005.32(b)(1)(i) if the provider determines that the recipient country does not legally permit or method by which transactions are conducted in that country does not permit the provider to determine exact disclosure amounts. 6. Reliance on Bureau list of countries. A remittance transfer provider may rely on the list of countries published by the Bureau to determine whether the laws of a recipient country do not permit the remittance transfer provider to determine exact amounts required to be disclosed under § 1005.31(b)(1)(iv) through (vii). Thus, if a country is on the Bureau’s list, the provider may give estimates under this section, unless a remittance transfer provider has information that a country on the Bureau’s list legally permits the provider to determine exact disclosure amounts. 7. Change in laws of recipient country. i. If the laws of a recipient country change such that a remittance transfer provider can determine exact amounts, the remittance transfer provider must begin providing exact amounts for the required disclosures as VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 soon as reasonably practicable if the provider has information that the country legally permits the provider to determine exact disclosure amounts. ii. If the laws of a recipient country change such that a remittance transfer provider cannot determine exact disclosure amounts, the remittance transfer provider may provide estimates under § 1005.32(b)(1)(i), even if that country does not appear on the list published by the Bureau. * * * * * 32(b)(4) Permanent Exception for Estimation of the Exchange Rate by an Insured Institution 1. Determining the exact exchange rate. For purposes of § 1005.32(b)(4)(i)(B), an insured institution cannot determine, at the time it must provide the applicable disclosures, the exact exchange rate required to be disclosed under § 1005.31(b)(1)(iv) for a remittance transfer to a particular country where the designated recipient of the transfer will receive funds in the country’s local currency if a person other than the insured institution sets the exchange rate for that transfer, except where that person has a correspondent relationship with the insured institution, that person is a service provider for the institution, or that person acts as an agent of the insured institution. i. Example where an insured institution cannot determine the exact exchange rate. The following example illustrates when an insured institution cannot determine an exact exchange rate under § 1005.32(b)(4)(i)(B) for a remittance transfer: A. An insured institution or its service provider does not set the exchange rate required to be disclosed under § 1005.31(b)(1)(iv), and the rate is set when the funds are deposited into the recipient’s account by the designated recipient’s institution that does not have a correspondent relationship with, and does not act as an agent of, the insured institution. ii. Examples where an insured institution can determine the exact exchange rate. The following examples illustrate when an insured institution can determine an exact exchange rate under § 1005.32(b)(4)(i)(B) for a remittance transfer, and thus the insured institution may not use the exception in § 1005.32(b)(4) to estimate the disclosures required under § 1005.31(b)(1)(iv) through (vii) for the remittance transfer: A. An insured institution has a correspondent relationship with an intermediary financial institution (or the intermediary financial institution acts as PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 67165 an agent of the insured institution) and that intermediary financial institution sets the exchange rate required to be disclosed under § 1005.31(b)(1)(iv) for a remittance transfer. B. An insured institution or its service provider converts the funds into the local currency to be received by the designated recipient for a remittance transfer using an exchange rate that the insured institution or its service provider sets. The insured institution can determine the exact exchange rate for purposes of § 1005.32(b)(4)(i)(B) for the remittance transfer even if the insured institution does not have a correspondent relationship with an intermediary financial institution in the transmittal route or the designated recipient’s institution, and an intermediary financial institution in the transmittal route or the designed recipient’s institution does not act as an agent of the insured institution. 2. Threshold. For purposes of determining whether an insured institution made 1,000 or fewer remittance transfers in the prior calendar year to a particular country pursuant to § 1005.32(b)(4)(i)(C): i. The number of remittance transfers provided includes transfers in the prior calendar year to that country when the designated recipients of those transfers received funds in the country’s local currency regardless of whether the exchange rate was estimated for those transfers. For example, an insured institution exceeds the 1,000 threshold in the prior calendar year if the insured institution provided 700 remittance transfers to a country in the prior calendar year when the designated recipients of those transfers received funds in the country’s local currency when the exchange rate was estimated for those transfers and also sends 400 remittance transfers to the same country in the prior calendar year when the designated recipients of those transfers received funds in the country’s local currency and the exchange rate for those transfers was not estimated. ii. The number of remittance transfers does not include remittance transfers to a country in the prior calendar year when the designated recipients of those transfers did not receive the funds in the country’s local currency. For example, an insured institution does not exceed the 1,000 threshold in the prior calendar year if the insured institution provides 700 remittance transfers to a country in the prior calendar year when the designated recipients of those transfers received funds in the country’s local currency and also sends 400 remittance transfers to the same country in the prior calendar year when the designated E:\FR\FM\06DEP5.SGM 06DEP5 67166 Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules recipients of those transfers did not receive funds in the country’s local currency. lotter on DSKBCFDHB2PROD with PROPOSALS5 32(b)(5) Permanent Exception for Estimation of Covered Third-Party Fees by an Insured Institution 1. Insured institution cannot determine the exact covered third-party fees. For purposes of § 1005.32(b)(5)(i)(B), an insured institution cannot determine, at the time it must provide the applicable disclosures, the exact covered thirdparty fees required to be disclosed under § 1005.31(b)(1)(vi) for a remittance transfer to a designated recipient’s institution when all of the following conditions are met: i. The insured institution does not have a correspondent relationship with the designated recipient’s institution; ii. The designated recipient’s institution does not act as an agent of the insured institution; iii. The insured institution does not have an agreement with the designated recipient’s institution with respect to the imposition of covered third-party fees on the remittance transfer (e.g., an agreement whereby the designated recipient’s institution agrees to charge back any covered third-party fees to the insured institution rather than impose the fees on the remittance transfer); and iv. The insured institution does not know at the time the disclosures are given that the only intermediary financial institutions that will impose covered third-party fees on the transfer are those institutions that have a correspondent relationship with or act as an agent for the insured institution, or have otherwise agreed upon the covered third-party fees with the insured institution. 2. Insured institution can determine the exact covered third-party fees. For purposes of § 1005.32(b)(5)(i)(B), an insured institution can determine, at the time it must provide the applicable disclosures, exact covered third-party fees, and thus the insured institution may not use the exception in § 1005.32(b)(5) to estimate the disclosures required under § 1005.31(b)(1)(vi) or (vii) for the transfer, if any of the following conditions are met: i. An insured institution has a correspondent relationship with the designated recipient’s institution; ii. The designated recipient’s institution acts as an agent of the insured institution; iii. An insured institution has an agreement with the designated recipient’s institution with respect to VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 the imposition of covered third-party fees on the remittance transfer; or iv. An insured institution knows at the time the disclosures are given that the only intermediary financial institutions that will impose covered third-party fees on the transfer are those institutions that have a correspondent relationship with or act as an agent for the insured institution, or have otherwise agreed upon the covered third-party fees with the insured institution. 3. Threshold. For purposes of determining whether an insured institution made 500 or fewer remittance transfers in the prior calendar year to a particular designated recipient’s institution pursuant to § 1005.32(b)(5)(i)(C): i. The number of remittance transfers provided includes remittance transfers in the prior calendar year to that designated recipient’s institution regardless of whether the covered thirdparty fees were estimated for those transfers. For example, an insured institution exceeds the 500 threshold in the prior calendar year if an insured institution provides 300 remittance transfers to the designated recipient’s institution in the prior calendar year when the covered third-party fees were estimated for those transfers and also sends 400 remittance transfers to the designated recipient’s institution in the prior calendar year and the covered third-party fees for those transfers were not estimated. ii. The number of remittance transfers includes remittance transfers provided to the designated recipient’s institution in the prior calendar year regardless of whether the designated recipients received the funds in the country’s local currency or in another currency. For example, an insured institution exceeds the 500 threshold in the prior calendar year if the insured institution provides 300 remittance transfers to the designated recipient’s institution in the prior calendar year when the designated recipients of those transfers received funds in the country’s local currency and also sends 400 remittance transfers to the same designated recipient’s institution in the prior calendar year when the designated recipients of those transfers did not receive funds in the country’s local currency. * * * * * designated recipient’s institution may take several routes, depending on the correspondent relationships each institution in the transmittal route has with other institutions. In providing an estimate of the fees required to be disclosed under § 1005.31(b)(1)(vi) pursuant to the § 1005.32(a) temporary exception or the exception under § 1005.32(b)(5), an insured institution may rely upon the representations of the designated recipient’s institution and the institutions that act as intermediaries in any one of the potential transmittal routes that it reasonably believes a requested remittance transfer may travel. 32(c) Bases for Estimates 36(b) Accuracy 1. Use of estimates. In providing the disclosures described in § 1005.36(a)(1)(i) or (a)(2)(i), remittance transfer providers may use estimates to the extent permitted by any of the exceptions in § 1005.32. When estimates * * * * * 32(c)(3) Covered Third-Party Fees 1. Potential transmittal routes. A remittance transfer from the sender’s account at an insured institution to the PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 32(d) Bases for Estimates for Transfers Scheduled Before the Date of Transfer 1. In general. When providing an estimate pursuant to § 1005.32(b)(2), § 1005.32(d) requires that a remittance transfer provider’s estimated exchange rate must be the exchange rate (or estimated exchange rate) that the remittance transfer provider would have used or did use that day in providing disclosures to a sender requesting such a remittance transfer to be made on the same day. If, for the same-day remittance transfer, the provider could utilize an exception permitting the provision of estimates in § 1005.32(a) or (b)(1) or (4), the provider may provide estimates based on a methodology permitted under § 1005.32(c). For example, if, on February 1, the sender schedules a remittance transfer to occur on February 10, the provider should disclose the exchange rate as if the sender was requesting the transfer be sent on February 1. However, if at the time payment is made for the requested transfer, the remittance transfer provider could not send any remittance transfer until the next day (for reasons such as the provider’s deadline for the batching of transfers), the remittance transfer provider can use the rate (or estimated exchange rate) that the remittance transfer provider would have used or did use in providing disclosures that day with respect to a remittance transfer requested that day that could not be sent until the following day. * * * * * Section 1005.36—Transfers Scheduled Before the Date of Transfer * E:\FR\FM\06DEP5.SGM * * 06DEP5 * * Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS5 are permitted, however, they must be disclosed in accordance with § 1005.31(d). 2. Subsequent preauthorized remittance transfers. For a subsequent transfer in a series of preauthorized remittance transfers, the receipt provided pursuant to § 1005.36(a)(1)(i), except for the temporal disclosures in that receipt required by § 1005.31(b)(2)(ii) (Date Available) and (b)(2)(vii) (Transfer Date), applies to each subsequent preauthorized remittance transfer unless and until it is superseded by a receipt provided pursuant to § 1005.36(a)(2)(i). For each subsequent preauthorized remittance transfer, only the most recent receipt provided pursuant to § 1005.36(a)(1)(i) VerDate Sep<11>2014 19:37 Dec 05, 2019 Jkt 250001 or (a)(2)(i) must be accurate as of the date each subsequent transfer is made. 3. Receipts. A receipt required by § 1005.36(a)(1)(ii) or (a)(2)(ii) must accurately reflect the details of the transfer to which it pertains and may not contain estimates pursuant to § 1005.32(b)(2). However, the remittance transfer provider may continue to disclose estimates to the extent permitted by § 1005.32(a) or (b)(1), (4), or (5). In providing receipts pursuant to § 1005.36(a)(1)(ii) or (a)(2)(ii), § 1005.36(b)(2) and (3) do not allow a remittance transfer provider to change figures previously disclosed on a receipt provided pursuant to § 1005.36(a)(1)(i) or (a)(2)(i), unless a figure was an estimate or based on an estimate PO 00000 Frm 00037 Fmt 4701 Sfmt 9990 67167 disclosed pursuant to § 1005.32. Thus, for example, if a provider disclosed its fee as $10 in a receipt provided pursuant to § 1005.36(a)(1)(i) and that receipt contained an estimate of the exchange rate pursuant to § 1005.32(b)(2), the second receipt provided pursuant to § 1005.36(a)(1)(ii) must also disclose the fee as $10. * * * * * Dated: November 25, 2019. Kathleen L. Kraninger, Director, Bureau of Consumer Financial Protection. [FR Doc. 2019–25944 Filed 12–5–19; 8:45 am] BILLING CODE 4810–AM–P E:\FR\FM\06DEP5.SGM 06DEP5

Agencies

[Federal Register Volume 84, Number 235 (Friday, December 6, 2019)]
[Proposed Rules]
[Pages 67132-67167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25944]



[[Page 67131]]

Vol. 84

Friday,

No. 235

December 6, 2019

Part V





Bureau of Consumer Financial Protection





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12 CFR Part 1005





Remittance Transfers Under the Electronic Fund Transfer Act (Regulation 
E); Proposed Rule

Federal Register / Vol. 84, No. 235 / Friday, December 6, 2019 / 
Proposed Rules

[[Page 67132]]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1005

[Docket No. CFPB-2019-0058]
RIN 3170-AA96


Remittance Transfers Under the Electronic Fund Transfer Act 
(Regulation E)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule with request for public comment.

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SUMMARY: The Electronic Fund Transfer Act (EFTA), as amended by the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act), establishes certain protections for consumers sending 
international money transfers, or remittance transfers. The Bureau of 
Consumer Financial Protection's (Bureau) remittance rule in Regulation 
E (Remittance Rule or Rule) implements these protections. The Bureau is 
proposing changes to the Rule to mitigate the effects of the expiration 
of a statutory exception that allows insured institutions to disclose 
estimates instead of exact amounts to consumers. That exception expires 
on July 21, 2020. In addition, the Bureau is proposing to increase a 
safe harbor threshold in the Rule related to whether a person makes 
remittance transfers in the normal course of its business, which would 
have the effect of reducing compliance costs for entities that make a 
limited number of remittance transfers annually.

DATES: Comments must be received on or before January 21, 2020.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2019-
0058 or RIN 3170-AA96, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include Docket No. 
CFPB-2019-0058 or RIN 3170-AA96 in the subject line of the message.
     Mail/Hand Delivery/Courier: Comment Intake--Remittances, 
Bureau of Consumer Financial Protection, 1700 G Street NW, Washington, 
DC 20552.
    Instructions: The Bureau encourages the early submission of 
comments. All submissions should include the agency name and docket 
number or Regulatory Information Number (RIN) for this rulemaking. 
Because paper mail in the Washington, DC area and at the Bureau is 
subject to delay, commenters are encouraged to submit comments 
electronically. In general, all comments received will be posted 
without change to https://www.regulations.gov. In addition, comments 
will be available for public inspection and copying at 1700 G Street 
NW, Washington, DC 20552, on official business days between the hours 
of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment to 
inspect the documents by telephoning 202-435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Proprietary information or sensitive personal information, such as 
account numbers or Social Security numbers, or names of other 
individuals, should not be included. Comments will not be edited to 
remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Yaritza Velez, Counsel, or Kristine M. 
Andreassen, Krista Ayoub, or Jane Raso, Senior Counsels, Office of 
Regulations, at 202-435-7700. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rule

    The Bureau is proposing several amendments to the Remittance 
Rule,\1\ which implements EFTA section 919 governing international 
remittance transfers. First, the Bureau is proposing to increase a safe 
harbor threshold in the Rule which would have the effect of reducing 
compliance costs for entities that make a limited number of remittance 
transfers annually. Under both EFTA and the Rule, the term ``remittance 
transfer provider'' is defined, in part, to mean any person that 
provides remittance transfers for a consumer in the normal course of 
its business.\2\ The Rule also provides a safe harbor, stating that 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.\3\ The Bureau is proposing to adjust the safe harbor threshold 
from 100 transfers to 500 transfers annually. The Bureau's proposed 
changes to the safe harbor threshold appear in the definition of 
remittance transfer provider in Sec.  1005.30(f) and related 
commentary.
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    \1\ 77 FR 6194 (Feb. 7, 2012); as amended on 77 FR 40459 (July 
10, 2012), 77 FR 50243 (Aug. 20, 2012), 78 FR 6025 (Jan. 29, 2013), 
78 FR 30661 (May 22, 2013), 78 FR 49365 (Aug. 14, 2013), 79 FR 55970 
(Sept. 18, 2014), 81 FR 70319 (Oct. 12, 2016), and 81 FR 83934 (Nov. 
22, 2016) (together, Remittance Rule or Rule).
    \2\ EFTA section 919(g)(3), codified at 15 U.S.C. 1693o-1(g)(3); 
12 CFR 1005.30(f)(1).
    \3\ 12 CFR 1005.30(f)(2)(i).
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    Second, the Bureau is proposing changes to the Rule to mitigate the 
effects of the expiration of a statutory exception that allows insured 
institutions to disclose estimates to consumers of the exchange rate 
and covered third-party fees instead of exact amounts. That exception 
expires on July 21, 2020. Specifically, with respect to the exchange 
rate, the Bureau is proposing to adopt a permanent exception that would 
permit insured institutions to estimate the exchange rate for a 
remittance transfer to a particular country if, among other things, the 
designated recipient will receive funds in the country's local currency 
and the insured institution made 1,000 or fewer remittance transfers in 
the prior calendar year to that country when the designated recipients 
received funds in the country's local currency. With respect to covered 
third-party fees, the Bureau is proposing to adopt a permanent 
exception that would permit insured institutions to estimate covered 
third-party fees for a remittance transfer to a particular designated 
recipient's institution if, among other things, the insured institution 
made 500 or fewer remittance transfers to that designated recipient's 
institution in the prior calendar year. The temporary exception and its 
statutorily mandated expiration date are in existing Sec.  
1005.32(a)(1) and (2); the Bureau's proposed changes to mitigate the 
expiration of that exception appear in proposed Sec.  1005.32(b)(4) and 
(5) and related commentary, along with conforming changes in Sec. Sec.  
1005.32(c), 1005.33(a)(1)(iii)(A), and 1005.36(b)(3) and in the 
commentary accompanying Sec. Sec.  1005.32, 1005.32(b)(1), (c)(3), and 
(d), and 1005.36(b).
    Finally, the Bureau is also seeking comment on a permanent 
exception in the Rule (in Sec.  1005.32(b)(1)) permitting providers to 
use estimates for transfers to certain countries and the process for 
adding countries to the safe harbor countries list maintained by the 
Bureau.
    The Bureau has received a number of suggestions for other changes 
to the Remittance Rule to improve its effectiveness in helping 
consumers or to reduce the burden on providers. However, in light of 
the time sensitivity of the expiration of the temporary exception, this 
proposal is limited to the issues described above.
    Due to changes in requirements by the Office of the Federal 
Register, when amending commentary the Bureau is

[[Page 67133]]

now required to reprint certain subsections being amended in their 
entirety rather than providing more targeted amendatory instructions. 
The sections of commentary included in this document show the language 
of those sections if the Bureau adopts its changes as proposed. The 
Bureau is releasing an unofficial, informal redline to assist industry 
and other stakeholders in reviewing the changes that it is proposing to 
make to the regulatory text and commentary of the Remittance Rule.\4\
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    \4\ This redline can be found on the Bureau's regulatory 
implementation page for the Remittance Rule, at https://www.consumerfinance.gov/policy-compliance/guidance/remittance-transfer-rule/. If any conflicts exist between the redline and the 
text of the Remittance Rule or this proposed rule, the rules 
themselves, as published in the Federal Register, are the 
controlling documents.
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II. Background

A. Market Overview

    Consumers in the United States send billions of dollars in 
remittance transfers to recipients in foreign countries each year. The 
term ``remittance transfers'' is sometimes used to describe consumer-
to-consumer transfers of small amounts of money, often made by 
immigrants supporting friends and relatives in other countries. The 
term may also include, however, payments of larger amounts, for 
instance, to pay bills, tuition, or other expenses.
    Money services businesses (MSBs) as well as banks and credit unions 
send remittance transfers on behalf of consumers. MSBs, however, 
provide the overwhelming majority of remittance transfers for consumers 
in the United States. For example, in the Bureau's October 2018 
Remittance Rule Assessment Report,\5\ which is discussed in greater 
detail below, the Bureau observed that in 2017, MSBs provided 
approximately 95.5 percent of all remittance transfers for consumers. 
The average amount of a remittance transfer sent by MSBs on behalf of 
consumers was approximately $381.
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    \5\ Bureau of Consumer Fin. Prot., Remittance Rule Assessment 
Report (Oct. 2018, rev. Apr. 2019) (Assessment Report), https://www.consumerfinance.gov/documents/7561/bcfp_remittance-rule-assessment_report_corrected_2019-03.pdf. The Bureau's initial rule 
and certain amendments took effect in October 2013. As explained in 
the Assessment Report, the Assessment Report considers all rules 
that took effect through November 2014 and refers to them 
collectively as the Remittance Rule. See Assessment Report at 115.
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    Banks and credit unions generally send fewer remittance transfers 
on behalf of consumers than MSBs. The Bureau found that in 2017, banks 
and credit unions conducted 4.2 and 0.2 percent of all remittance 
transfers, respectively. However, the average amount that banks and 
credit unions transferred was much greater than the average amount 
transferred by MSBs. For example, based on the Bureau's analysis, the 
average transfer size of a bank-sent remittance transfer was more than 
$6,500.\6\ As such, based on information it received as part of its 
assessment of the Remittance Rule in connection with the Assessment 
Report, while banks and credit unions provide a small percentage of the 
overall number of remittance transfers, because the average amount of 
the transfers they send is higher than MSBs, banks and credit unions 
collectively sent approximately 45 percent of the dollar volume of all 
remittance transfers sent for consumers in the United States (43 
percent attributed to banks and 2 percent attributed to credit unions).
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    \6\ Id. at 73.
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    In addition, MSBs differ from banks and credit unions in the means 
by which they provide remittance transfers. Traditionally, MSBs sending 
remittance transfers have predominantly relied on a storefront model 
and a network of the MSBs' employees and agents (such as grocery stores 
and neighborhood convenience stores).\7\ Because MSBs receive and 
disburse funds either through their own employees or agents, the 
payment system by which MSBs facilitate remittance transfers is 
typically referred to as a ``closed network'' payment system. A single 
entity in this system--the MSB--exerts a high degree of end-to-end 
control over a transaction. Such level of control means, among other 
things, that an entity that uses a closed network payment system to 
send remittance transfers can disclose to its customers precise and 
reliable information about the terms and costs of a remittance transfer 
before the entity sends the remittance transfer on its customer's 
behalf.
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    \7\ Id. at 54. As noted in the Assessment Report, increased 
access to digital devices has impacted the traditional MSB model by 
enabling more MSB-facilitated transfers to be conducted via the 
internet. See also id. at 102.
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    In contrast to MSBs, banks and credit unions have predominantly 
utilized an ``open network'' payment system made up of the 
correspondent banking network \8\ to send remittance transfers on 
behalf of consumers.\9\ The open network payment system based on the 
correspondent banking network lacks a single, central operator. This 
feature distinguishes it from closed network payment systems. The 
correspondent banking network is a decentralized network of bilateral 
banking relationships between the world's tens of thousands of banks 
and credit unions. Most institutions only maintain relationships with a 
relatively small number of correspondent banks but can nonetheless 
ensure that their customers' remittance transfers are able to reach a 
wide number of recipient financial institutions worldwide even if the 
institution does not have control over, or a relationship with, all of 
the participants involved in the transmission of a remittance transfer. 
As discussed in greater detail in the section-by-section analysis of 
Sec.  1005.32(a) below, the decentralized nature of the correspondent 
banking system has presented certain challenges to the ability of banks 
and credit unions to disclose precise and reliable information about 
the terms and costs of remittance transfers to its customers before 
these institutions send remittance transfers on their customers' 
behalf.
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    \8\ Generally speaking, a correspondent banking network is made 
up of individual correspondent banking relationships, which consist 
of bilateral arrangements under which one bank (correspondent) holds 
deposits owned by other banks (respondents) and provides payment and 
other services to those respondent banks. See, e.g., Bank for Int'l 
Settlements, Correspondent Banking, at 9 (2016) (2016 BIS Report), 
https://www.bis.org/cpmi/publ/d147.pdf.
    \9\ The Bureau notes that some methods of sending cross-border 
money transfers, including remittance transfers, include elements of 
closed and open payment networks and some providers may also rely on 
both types of systems to facilitate different transfers. For 
example, the Bureau understands that banks may offer low-cost 
international fund transfers to its commercial clients through the 
use of the automated clearing house (ACH) system, and a minority of 
banks also offer international ACH to their consumer clients. See 
Bd. of Governors of the Fed. Reserve Sys., Report to Congress on the 
Use of the ACH System and Other Payment Mechanisms for Remittance 
Transfers to Foreign Countries, at 7 (May 2019), https://www.federalreserve.gov/publications/2019-may-ach-report-other-payment-mechanisms.htm.
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B. Remittance Rulemaking Under Section 1073 of the Dodd-Frank Act

    Prior to the Dodd-Frank Act, remittance transfers fell largely 
outside of the scope of Federal consumer protection laws. Section 1073 
of the Dodd-Frank Act amended EFTA by adding a new section 919, which 
created a comprehensive system for protecting consumers in the United 
States who send remittance transfers to individuals and businesses in 
foreign countries.\10\ EFTA applies broadly in terms of the types of 
remittance transfers it covers. EFTA section 919(g)(2) defines 
``remittance transfer'' as the electronic transfer of funds by a sender 
in any State to designated recipients located in foreign countries

[[Page 67134]]

that are initiated by a remittance transfer provider; only small dollar 
transactions are excluded from this definition.\11\ EFTA also applies 
broadly in terms of the providers subject to it, including MSBs, banks, 
and credit unions.
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    \10\ 15 U.S.C. 1693 et seq. EFTA section 919 is codified at 15 
U.S.C. 1693o-1.
    \11\ 15 U.S.C. 1693o-1(g)(2). As adopted in the Remittance Rule, 
the term ``remittance transfer'' means: ``[The] electronic transfer 
of funds requested by a sender to a designated recipient that is 
sent by a remittance transfer provider. The term applies regardless 
of whether the sender holds an account with the remittance transfer 
provider, and regardless of whether the transaction is also an 
electronic fund transfer, as defined in [subpart A of Regulation 
E].'' The Rule's definition specifically excludes (1) transfer 
amounts of $15 or less and (2) certain securities and commodities 
transfers. 12 CFR 1005.30(e).
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    The Bureau adopted subpart B of Regulation E to implement EFTA 
section 919 through a series of rulemakings that were finalized in 2012 
and 2013, and which became effective on October 28, 2013.\12\ The 
Bureau subsequently amended subpart B several times.\13\ The Rule 
provides three significant consumer protections: It specifies the 
information that must be disclosed to consumers who send remittance 
transfers, including information related to the exact cost of a 
remittance transfer; it provides consumers with cancellation and refund 
rights; and it specifies procedures and other requirements for 
providers to follow in resolving errors.
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    \12\ 77 FR 6194 (Feb. 7, 2012); as amended on 77 FR 40459 (July 
10, 2012); 77 FR 50243 (Aug. 20, 2012); 78 FR 6025 (Jan. 29, 2013); 
78 FR 30661 (May 22, 2013); and 78 FR 49365 (Aug. 14, 2013).
    \13\ 79 FR 55970 (Sept. 18, 2014), 81 FR 70319 (Oct. 12, 2016), 
and 81 FR 83934 (Nov. 22, 2016).
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III. Assessment Report, Requests for Information, and Other Outreach

    The Bureau has received feedback regarding the Remittance Rule over 
time through both formal and informal channels. The following is a 
brief summary of some of the Bureau's requests for information 
regarding the Rule and recent informal feedback received by the Bureau 
outside those channels.
    Assessment and 2017-2018 RFIs. The Bureau conducted an assessment 
of the Remittance Rule (Assessment), as required pursuant to section 
1022(d) of the Dodd-Frank Act. Section 1022(d) requires the Bureau to 
conduct an assessment of each significant rule or order adopted by the 
Bureau under Federal consumer financial law and to publish a report of 
such assessment not later than five years after the rule or order's 
effective date.\14\ In 2017, the Bureau issued a request for 
information (RFI) in connection with the Assessment (2017 Assessment 
RFI) and received approximately 40 comments in response.\15\ As 
referenced above, in October 2018, the Bureau published the results of 
the Assessment in the Assessment Report, providing insights into the 
effectiveness of the Rule and its provisions.
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    \14\ 12 U.S.C. 5512(d).
    \15\ 82 FR 15009 (Mar. 24, 2017). These comment letters are 
available on the public docket at https://www.regulations.gov/document?D=CFPB-2017-0004-0001. See also Assessment Report at 149.
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    Separately, in 2018, the Bureau issued a series of RFIs as part of 
a call for evidence to ensure the Bureau is fulfilling its proper and 
appropriate functions to best protect consumers.\16\ One of the 2018 
RFIs concerned whether the Bureau should amend any rules it has issued 
since its creation or exercise new rulemaking authorities provided for 
by the Dodd-Frank Act; another concerned whether the Bureau should 
amend rules or exercise the rulemaking authorities that it inherited 
from other Federal government agencies (together, the 2018 Adopted/
Inherited Regulations RFIs).\17\ The Bureau received a total of 
approximately 34 comments on the Remittance Rule in response to these 
two RFIs.
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    \16\ See https://www.consumerfinance.gov/policy-compliance/notice-opportunities-comment/archive-closed/call-for-evidence/.
    \17\ See 83 FR 12286 (Mar. 21, 2018) and 83 FR 12881 (Mar. 26, 
2018). The comment letters from these RFIs are available on the 
public dockets at https://www.regulations.gov/docket?D=CFPB-2018-0011 and https://www.regulations.gov/document?D=CFPB-2018-0012-0001.
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    Industry commenters that responded to the three RFIs mentioned 
above suggested a variety of modifications to the Rule. Many 
recommended changing the scope of coverage of the Rule in various 
ways,\18\ including raising the 100-transfer safe harbor threshold, 
because, they said, the current threshold is too low and causes 
consumer harm. Consumer advocacy groups conversely cautioned against 
changes to the Rule, including to the safe harbor threshold. Industry 
commenters suggested other scope-related changes as well, such as 
exempting transfers in excess of a certain amount (such as $10,000) 
from the Rule's definition of ``remittance transfer'' or creating 
blanket exemptions from the Rule for certain types of entities, such as 
for regulated entities with total assets under $10 billion or for all 
credit unions. A group of consumer advocates and a number of industry 
commenters also addressed the July 21, 2020 expiration of the temporary 
exception that allows disclosure of estimates instead of exact amounts 
in certain circumstances. Some industry commenters expressed concerns 
about the impact of the temporary exception's eventual expiration and 
urged the Bureau to make the exception permanent, while consumer 
advocacy groups expressed concern about the use of estimates permitted 
by the temporary exception and urged the Bureau to let the exception 
expire. Some industry commenters also requested that the Bureau expand 
the list of ``safe harbor'' countries that have laws impacting their 
ability to disclose exact exchange rates, arguing an expanded countries 
list would help alleviate some of the challenges certain providers will 
face when the temporary exception expires. Industry and consumer 
advocacy group commenters also raised other issues about various 
aspects of the Rule, including regarding other disclosure requirements, 
error resolution, and the 30-minute cancellation period.
---------------------------------------------------------------------------

    \18\ See, e.g., Assessment Report at 154-61.
---------------------------------------------------------------------------

    2019 RFI. The Bureau published an RFI on April 29, 2019 (2019 
RFI),\19\ seeking information on several aspects of the Rule. First, 
based on comments and other feedback from various remittance transfer 
providers and their trade associations, as well as its own analysis, 
the Bureau was concerned about the potential negative effects of the 
expiration of the temporary exception. The Bureau thus sought 
information about the upcoming expiration of the temporary exception 
and potential options to mitigate its impact.
---------------------------------------------------------------------------

    \19\ 84 FR 17971 (Apr. 29, 2019).
---------------------------------------------------------------------------

    The Bureau was also concerned about the Rule's effects on certain 
remittance transfer providers that account for a small portion of the 
overall number of remittance transfers but nonetheless are subject to 
the Rule because they provide more than 100 transfers annually and thus 
are unable to rely on the current normal course of business safe 
harbor. The Bureau thus sought information in the 2019 RFI on possible 
changes to the current safe harbor threshold in the Rule \20\ and 
whether an exception for ``small financial institutions'' may be 
appropriate.
---------------------------------------------------------------------------

    \20\ As discussed above, the phrase ``normal course of 
business'' in the definition of ``remittance transfer provider'' 
determines whether a person providing remittance transfers is 
covered by the Rule. Also, as discussed, the Rule contains a safe 
harbor that clarifies that certain persons are deemed not to provide 
transfers in the ``normal course of business'' because they provide 
100 or fewer transfers per year in both the previous and current 
calendar years.
---------------------------------------------------------------------------

    The Bureau received approximately 44 comments on the 2019 RFI.\21\ 
The overwhelming majority of comments came from banks and credit 
unions,

[[Page 67135]]

their trade associations, and their service providers. As discussed in 
greater detail below, these commenters generally urged the Bureau to 
replicate the temporary exception and raise the normal course of 
business safe harbor threshold. A number of them also supported a small 
financial institution exception. The Bureau received one comment letter 
from a ``fintech'' nonbank remittance transfer provider and one comment 
letter from a consumer advocacy group. These commenters generally did 
not support extending the temporary exception or making it permanent. 
They asserted that the Remittance Rule was intended to improve 
accountability and transparency, and said that continuing to permit 
estimates could stunt the movement toward realizing those objectives. 
Additionally, the nonbank remittance transfer provider also expressed 
concern that the temporary exception has helped to perpetuate a 
bifurcated regulatory approach, as only insured banks and credit unions 
are permitted to use the temporary exception. Several commenters also 
specifically addressed the existing permanent exception allowing 
estimates for transfers to certain countries and the related Bureau-
established safe harbor countries list.
---------------------------------------------------------------------------

    \21\ These comment letters are available on the public docket 
for the 2019 RFI at https://www.regulations.gov/docket?D=CFPB-2019-0018.
---------------------------------------------------------------------------

    Ongoing market monitoring and other outreach. The Bureau has 
engaged in ongoing market monitoring and other outreach to industry and 
other stakeholders regarding the Remittance Rule. For example, in June 
2019, Bureau staff met with the Bureau's Consumer Advisory Board, 
Community Bank Advisory Council, and Credit Union Advisory Council to 
discuss several topics, including the 2019 RFI.\22\ The Bureau 
discusses feedback received through these various channels that is 
relevant to this proposal throughout this document.
---------------------------------------------------------------------------

    \22\ Minutes of these meetings are available at https://www.consumerfinance.gov/documents/7852/201906_cfpb_CAB-Meeting-Minutes.pdf, https://www.consumerfinance.gov/documents/7853/201906_cfpb_CBAC-meeting-minutes.pdf, and https://www.consumerfinance.gov/documents/7854/201906_cfpb_CUAC-meeting-minutes.pdf.
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IV. Legal Authority

    Section 1073 of the Dodd-Frank Act created a new section 919 of 
EFTA requiring remittance transfer providers to provide disclosures to 
senders of remittance transfers, pursuant to rules prescribed by the 
Bureau. In particular, providers must give a sender a written pre-
payment disclosure containing specified information applicable to the 
sender's remittance transfer, including the amount to be received by 
the designated recipient. The provider must also provide a written 
receipt that includes the information provided on the pre-payment 
disclosure, as well as additional specified information.\23\ In 
addition, EFTA section 919(d) directs the Bureau to promulgate rules 
regarding appropriate error resolution standards and cancellation and 
refund policies.
---------------------------------------------------------------------------

    \23\ EFTA section 919(a); 15 U.S.C. 1693o-1(a).
---------------------------------------------------------------------------

    In addition to the Dodd-Frank Act's statutory mandates, EFTA 
section 904(a) authorizes the Bureau to prescribe regulations necessary 
to carry out the purposes of EFTA. The express purposes of EFTA, as 
amended by the Dodd-Frank Act, are to establish ``the rights, 
liabilities, and responsibilities of participants in electronic fund 
and remittance transfer systems'' and to provide ``individual consumer 
rights.'' \24\ EFTA section 904(c) further provides that regulations 
prescribed by the Bureau may contain any classifications, 
differentiations, or other provisions, and may provide for such 
adjustments or exceptions for any class of electronic fund transfers or 
remittance transfers that the Bureau deems necessary or proper to 
effectuate the purposes of the title, to prevent circumvention or 
evasion, or to facilitate compliance. As described in more detail 
below, the changes herein are proposed pursuant to the Bureau's 
authority under EFTA sections 904(a) and (c).
---------------------------------------------------------------------------

    \24\ EFTA section 902(b); 15 U.S.C. 1693(b).
---------------------------------------------------------------------------

V. Section-by-Section Analysis

1005.30 Remittance Transfer Definitions
30(f) Remittance Transfer Provider
    EFTA section 919(g)(3) defines ``remittance transfer provider'' to 
be a person or financial institution providing remittance transfers for 
a consumer in the ``normal course of its business.'' The Rule uses a 
similar definition.\25\ It states that whether a person provides 
remittance transfers in the normal course of its business depends on 
the facts and circumstances, including the total number and frequency 
of transfers sent by the provider.\26\ The Rule currently contains a 
safe harbor whereby a person that provides 100 or fewer remittance 
transfers in each of the previous and current calendar years is deemed 
not to be providing remittance transfers in the normal course of its 
business, and therefore is outside of the Rule's coverage.\27\
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    \25\ See 12 CFR 1005.30(f)(1).
    \26\ Comment 30(f)-2.i.
    \27\ 12 CFR 1005.30(f)(2)(i).
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    When the Bureau finalized the normal course of business 100-
transfer safe harbor threshold in August 2012, it stated that it 
intended to monitor that threshold over time.\28\ The Bureau 
acknowledged, among other things, that the administrative record 
contained little data on the overall distribution and frequency of 
remittance transfers to support treating any particular number of 
transactions as outside the normal course of business.\29\ After 
explaining the limitations in the data it did have, the Bureau stated 
that it did not believe it could rely on the data received to describe 
the number of remittance transfers provided by ``typical'' entities or 
to identify a clear pattern in the distribution of providers by the 
number of transfers provided.\30\ The Bureau concluded that the data 
collected at the time provided some additional support for the 100 
threshold, and that the threshold was ``not so low as to be 
meaningless.'' \31\ The Bureau determined that a threshold of 100 was 
high enough that persons would not risk exceeding the safe harbor based 
on making transfers for just two or three customers each month, while 
low enough to serve as a reasonable basis for identifying persons who 
occasionally provide remittance transfers, but not in the normal course 
of their business. The Bureau also noted that 100 transfers per year is 
equivalent to an average of approximately two transfers per week, or 
the number of transfers needed to satisfy the needs of a handful of 
customers sending money abroad monthly.\32\
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    \28\ 77 FR 50243, 50252 (Aug. 20, 2012).
    \29\ Id. at 50251-52.
    \30\ Id. at 50251-52.
    \31\ Id. at 50252.
    \32\ Id. at 50251.
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    Since August 2012, the Bureau has received feedback suggesting that 
the 100-transfer safe harbor threshold is too low, including in 
response to several RFIs issued by the Bureau as well as during market 
monitoring and other outreach to industry. (See part III above for more 
information on these RFIs and other outreach.)

Comments Received in Response to the 2019 RFI

    Comments on the safe harbor threshold. As noted above, the Bureau 
in the 2019 RFI sought information on possible changes to the current 
normal course of business 100-transfer safe harbor threshold. A variety 
of industry commenters as well as a consumer advocacy group responded 
to questions regarding coverage of certain remittance transfer 
providers in the 2019 RFI, primarily focusing on changing the 100-
transfer safe harbor threshold.

[[Page 67136]]

    The consumer advocacy group opposed any changes to the threshold, 
asserting that there is insufficient evidence to make such changes.\33\ 
A number of industry commenters, on the other hand, including credit 
unions, banks, trade associations, and a payments service provider to 
banks and credit unions, suggested increasing the threshold; specific 
threshold suggestions ranged from 200 to 1,200 transfers annually. 
These industry commenters stated that credit unions and community banks 
offer remittance transfers as an accommodation for their customers and 
generally do not provide enough transfers to recover operational and 
compliance costs. A trade association commenter stated that the impact 
of compliance costs on small providers is especially significant as 
they are unable to spread their costs over a large volume of 
transactions.
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    \33\ For example, the consumer advocacy group stated that the 
Bureau would need additional information to raise the safe harbor 
threshold, such as the size and location of entities providing just 
above 100 transfers, the number of transfers above 100 that those 
entities provide, and other options in the market for sending 
remittance transfers and their cost.
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    Several industry commenters also asserted, among other things, that 
complying with the Remittance Rule has caused credit unions and 
community banks to exit the remittance transfer market, limit the 
number of transfers that they provide, or increase the price of 
transfers, which they asserted has resulted in consumer harm in the 
form of reduced access and other inconveniences. Several industry 
commenters offered anecdotes of one or two customers sending a high 
volume of transfers that pushed a bank or credit union beyond the 100-
transfer safe harbor threshold. Some industry commenters suggested that 
raising the threshold may encourage banks and credit unions that have 
stopped or limited providing remittance transfers to begin offering 
them again or relax the limits. A number of industry commenters also 
stated that raising the threshold would promote competition and thus 
increase options for consumers and possibly lower prices. In addition, 
several industry commenters asserted that raising the threshold would 
increase consumer access to remittance transfer services, especially 
for consumers in rural areas or locations serviced primarily by local 
banks or credit unions.
    Several industry commenters, including credit unions, banks, and 
trade associations, alternatively or additionally suggested basing the 
safe harbor threshold on something other than the number of transfers. 
Suggestions included, among other things, basing the threshold on the 
percentage of an entity's customers that send remittance transfers, or 
the percentage of an entity's transfers that are remittance transfers. 
A few industry commenters suggested setting a dollar amount threshold 
(e.g., applying the Rule only to transfers over $1,000 or $10,000, or 
only to transfers under $500).
    A few industry commenters noted the overlap between the expiration 
of the temporary exception and coverage of certain remittance transfer 
providers under the Rule. Several trade associations stated that 
raising the normal course of business safe harbor threshold would 
address concerns from credit unions and community banks regarding the 
expiration of the temporary exception. These commenters asserted that a 
small number of credit unions have already stopped providing remittance 
transfers anticipating the temporary exception's expiration in July 
2020, and that community banks will discontinue providing transfers if 
they can no longer disclose estimates.
    Comments on exempting small financial institutions. In the 2019 
RFI, the Bureau sought information on a possible exemption from the 
Rule for small financial institutions. In response, a consumer advocacy 
group asserted that market data and the results of the Bureau's 
Assessment do not support creating such an exemption. Conversely, a 
number of industry commenters, including credit unions, banks, trade 
associations, and a payments service provider to banks and credit 
unions, supported a small financial institution exemption. They 
asserted that small institutions have fewer opportunities than larger 
institutions to offset the cost of compliance with the Remittance Rule 
and indicating that such an exemption would help small financial 
institutions serve their customers at a lower cost. A few industry 
commenters also asserted that a small financial institution exemption 
would be particularly helpful for community banks in underserved or 
rural areas. Industry commenters suggested a small financial 
institution exemption based on an asset size threshold of $500 million, 
$1 billion, $3 billion, or $10 billion. A credit union suggested that 
the Bureau increase the safe harbor threshold to 1,000 transfers 
annually for financial institutions with an asset size of less than $50 
billion, explaining that the Dodd-Frank Act classifies ``large banks'' 
as those with more than $50 billion in assets. Another industry 
commenter stated that in addition to asset size, the particular markets 
served by the institution should also be considered for creating a 
small financial institution exemption.
    Several banks, credit unions, credit union trade associations, and 
a payments service provider to banks and credit unions suggested 
exempting from the Remittance Rule credit unions or financial 
institutions altogether, arguing that such institutions account for a 
small percentage of the total number of remittance transfers sent and 
therefore do not actually provide remittance transfers in the normal 
course of their business.
Recent Outreach Regarding Coverage
    As discussed in part III above, the Bureau has engaged in ongoing 
market monitoring and other outreach to industry and other stakeholders 
regarding the Remittance Rule. As in their comments on the 2019 RFI, 
the general consensus from industry representatives in these meetings 
and discussions was that the 100-transfer safe harbor threshold is too 
low. Representatives from two credit unions suggested raising the 
threshold to 500 transfers annually. One also suggested the Bureau 
create an accommodation for recurring transfers and stated that it did 
not believe a small financial institution exemption would be helpful. 
Several other entities' representatives noted that market dynamics 
(e.g., mergers and consolidations) and customer demand can cause banks 
and credit unions to get close to crossing the 100-transfer safe harbor 
threshold.
    Representatives of several entities suggested other metrics for a 
safe harbor. A representative for a credit union stated that whether an 
entity provides remittance transfers in the ``normal course of 
business'' should be based on the entity's proportion of customers 
sending remittance transfers to total customers overall, while 
representatives of several other credit unions offered ideas for tying 
the safe harbor to an entity's asset size. Similarly, a representative 
of a bank suggested using relative size measures, such as the 
percentage of an entity's total transactions that are remittance 
transfers, or the percentage of an entity's revenue that is earned from 
providing remittance transfers.
    Representatives of several banks offered insights as to the kind of 
information that entities not subject to the Rule provide or would 
provide to consumers. The representative for a bank currently subject 
to the Rule stated that if the bank no longer had to comply with the 
Rule, it would end its correspondent banking relationship

[[Page 67137]]

(which it had established to provide the disclosures required by the 
Rule) and provide consumers with information about its own fees for 
sending remittance transfers but likely not the exchange rate or the 
date of availability. Representatives of two banks not currently 
subject to the Remittance Rule indicated that the only information they 
provide to their remittance customers are the amount of funds debited 
from the customer's account and their banks' wire transfer fees.
The Bureau's Proposal
    The Bureau has monitored the normal course of business 100-transfer 
safe harbor threshold in the years since the Rule became effective. 
Based on comments received on the 2019 RFI, other previous RFIs, the 
results of the Assessment, and other informal feedback received over 
time, the Bureau is preliminarily persuaded that the safe harbor 
threshold should be increased to 500 transfers and that such a change 
is appropriate to implement Congress' definition of remittance transfer 
provider in EFTA section 919(g)(3) as a person or financial institution 
providing remittance transfers in the normal course of its business, 
whether or not the consumer holds an account with such person. The 
Bureau believes that a threshold of 500 transfers may be more 
appropriate to identify persons who occasionally provide remittance 
transfers, but not in the normal course of their business, and would 
remove them from coverage under the Rule. Five hundred transfers 
annually would be equivalent to an average of approximately 10 
transfers per week, which the Bureau believes would allow entities to 
send a relatively limited number of transfers without having to incur 
the costs of developing and implementing processes and procedures to 
comply with the Rule or the costs of continued compliance with the 
Rule. The Bureau believes that, at this volume, entities are generally 
offering remittance transfers as an accommodation for their account-
holding customers rather than operating a separate remittance transfers 
line of business. In addition, the Bureau believes that raising the 
safe harbor threshold would mitigate any issues that insured 
institutions currently providing between 101 and 500 transfers annually 
\34\ might otherwise encounter with respect to the upcoming expiration 
of the temporary exception.
---------------------------------------------------------------------------

    \34\ As used in this document, ``between 101 and 500'' means 101 
or more and 500 or fewer--that is, above the current safe harbor 
threshold but at or below the proposed threshold.
---------------------------------------------------------------------------

    The Bureau seeks comment on its proposal to increase the normal 
course of business safe harbor threshold. Specifically, the Bureau 
seeks comment on its proposed 500-transfer safe harbor threshold, as 
well as on whether a different threshold, such as 200 or a number 
between 200 and 500, would be more appropriate. In particular, the 
Bureau requests data or other evidence that would assist it in 
determining what number would be most appropriate for the safe harbor 
threshold in the Remittance Rule. The Bureau also seeks comment on 
whether its proposal to increase the safe harbor threshold would in 
fact help reduce burden for banks and credit unions that provide 
transfers only as an accommodation to their customers. The Bureau also 
recognizes that any safe harbor interpreting the phrase ``normal course 
of business'' could limit the protections afforded to some consumers 
and seeks data and other information demonstrating the nature and 
magnitude of any harm to consumers as a result of such a limit.
    The Bureau believes that raising the safe harbor threshold to 500 
transfers would appropriately implement the purposes of EFTA section 
919, including the statutory definition of remittance transfer 
provider, by helping to reduce burden for banks and credit unions that 
provide transfers only as an accommodation to their customers, thereby 
ensuring that banks and credit unions continue to offer the service to 
benefit consumers and do not bear a disproportionate cost to do so. The 
data now available through Call Reports \35\ indicate that a 
substantial proportion of banks and credit unions make between 101 and 
500 remittance transfers per year (i.e., above the current safe harbor 
threshold but within the proposed threshold), although their percentage 
of the overall annual volume of remittance transfers is quite small.
---------------------------------------------------------------------------

    \35\ Banks and credit unions are required to submit quarterly 
``Call Reports'' by the Federal Financial Institutions Examination 
Council (FFIEC) and the National Credit Union Administration (NCUA), 
respectively. For a more detailed description of these reporting 
requirements, see Assessment Report at 24.
---------------------------------------------------------------------------

    Specifically, based on the Bureau's analysis of the 2018 Call 
Report data, raising the threshold from 100 to 500 transfers would 
remove approximately 414 banks and 247 credit unions (which represent 
54.6 percent and 62.3 percent of such entities currently covered by the 
Remittance Rule, respectively). These entities account for 0.8 percent 
(92,600) of bank transfers and 6.2 percent (49,300) of credit union 
transfers, for a total of approximately 141,900 transfers that would no 
longer be covered by the Rule. Given that MSBs provide more than 95 
percent of remittance transfers annually (discussed in greater detail 
in part II above), the combined number of bank and credit union 
transfers that would no longer be covered at a threshold of 500 
represents only a minimal percentage of all transfers--specifically, 
under 0.059 percent of all remittance transfers.
    If the Bureau were to raise the threshold from 100 to 200 
transfers, it would remove 156 banks and 138 credit unions (which 
represent 20.6 percent and 34.8 percent of such entities currently 
covered by the Remittance Rule, respectively). These entities account 
for 0.18 percent (19,900) of bank transfers and 2.31 percent (18,200) 
of credit union transfers, for a total of approximately 38,100 
transfers that would no longer be covered by the Rule. As with the 
proposed increase from 100 transfers to 500 transfers, given that MSBs 
provide more than 95 percent of remittance transfers annually, the 
combined number of bank and credit union transfers that would no longer 
be covered at a threshold of 200 represents only a minimal percentage 
of all transfers--specifically, under 0.016 percent of all remittance 
transfers.\36\
---------------------------------------------------------------------------

    \36\ In the Assessment Report, the Bureau estimated the number 
of remittance transfers in 2017 to be 325 million (see id. at 63-64) 
and that more than 95 percent of transfers were provided by MSBs in 
2017. The Bureau does not have an estimate of the total transfers in 
2018, but assumed that 95 percent of transfers were provided by MSBs 
in 2018 to calculate this proportion.
---------------------------------------------------------------------------

    The Bureau notes that the safe harbor, as it currently exists in 
the Rule as well as with the proposed modification, is not limited to 
depository institutions but rather is applicable to all persons. 
However, the types of entities that would qualify for the proposed safe 
harbor are predominantly banks and credit unions. MSBs provide far 
greater numbers of transfers annually. The Bureau is not aware of any 
MSBs providing such a low volume of remittance transfers that they 
would qualify for the proposed 500-transfer safe harbor threshold, much 
less a 200-transfer safe harbor threshold.\37\ The Bureau seeks comment 
on whether there are any MSBs, or other persons, that

[[Page 67138]]

provide remittance transfers as their primary business that would 
qualify for the safe harbor at the proposed revised threshold.
---------------------------------------------------------------------------

    \37\ The Bureau's information on MSBs that provide a small 
number of remittance transfers is incomplete. States that license 
MSBs collect information on the ``international transfers'' that are 
sent by MSBs, which may not be ``remittance transfers'' as defined 
by the Remittance Rule. Therefore, it is challenging to determine 
which MSBs are ``remittance transfer providers,'' as defined by the 
Rule, and the number of remittance transfers they provide. However, 
few MSBs provide 500 or fewer transfers annually and to the best of 
the Bureau's knowledge, none of them are remittance transfer 
providers under the Rule.
---------------------------------------------------------------------------

    As noted above, some industry representatives have claimed that 
some community banks and credit unions have stopped or limited 
remittance transfer services due to the Remittance Rule. The Bureau in 
its Assessment found no evidence that, on net, banks or credit unions 
ceased or limited providing remittance transfers because of the safe 
harbor threshold.\38\ To the extent that this has occurred, however, 
the Bureau expects a likely result of raising the safe harbor threshold 
might be that at least some of those entities would resume their 
offering of transfers. The Bureau seeks comment on whether any banks or 
credit unions actually exited the market or limited the number of 
remittance transfers provided as a result of compliance costs 
associated with the Remittance Rule and, if so, whether they would 
reenter the market or lift the limits they placed on their remittance 
transfer services if the Bureau raised the safe harbor threshold as 
proposed.
---------------------------------------------------------------------------

    \38\ Assessment Report at 133-35.
---------------------------------------------------------------------------

    The Bureau acknowledges that raising the safe harbor threshold 
would likely result in a reduction of protections for some consumers, 
because consumers that send remittance transfers from entities that 
newly qualify for the safe harbor would likely receive less information 
about the exchange rates and fees related to their remittance 
transfers, and those entities would likely not give the same 
cancellation rights or error resolution protections as required under 
the Remittance Rule. However, based on the results of the Assessment, 
as well as the updated analysis contained herein, the Bureau 
understands that the number of affected consumers would likely be 
relatively small, given that the banks and credit unions that would no 
longer be covered by the Rule if the Bureau raised the safe harbor 
threshold to 500 transfers account for a very small proportion of all 
remittance transfers annually.\39\ The Bureau also notes that it has 
received relatively few consumer complaints related to any providers of 
remittance transfers,\40\ including the subset of providers that would 
newly qualify for the safe harbor under this proposal. It is not clear 
why the Bureau does not receive many complaints about possible 
violations of the Remittance Rule. One possibility is that providers 
are complying with the law and therefore the Bureau receives few 
complaints.\41\ Another possibility is that some consumers who send 
remittance transfers may have limited English proficiency and, 
therefore, be less likely to know that they can submit complaints to 
the Bureau or may be less likely to seek help from a government agency 
than other consumers. The Bureau seeks comment on whether entities that 
would no longer be covered under the Remittance Rule would discontinue 
providing the disclosures, cancellation rights, or error resolution 
protections that they are currently required to provide pursuant to the 
Rule. If such entities would continue providing consumer protections 
for some or all of their remittance transfers, the Bureau seeks comment 
on what those protections would be.
---------------------------------------------------------------------------

    \39\ Per the Assessment Report, only about 20 percent of banks 
and about 25 percent of credit unions that offered remittance 
transfer services were covered by the Remittance Rule at the time of 
the report; a large portion of banks and credit unions either 
offered no remittance transfer services or provided 100 or fewer 
transfers per year and thus were excluded from coverage under the 
Remittance Rule by virtue of the current safe harbor threshold. Id. 
at 79 n.200.
    \40\ The Bureau's complaint form lists ``international money 
transfers'' as an option for consumers to select when submitting a 
complaint, which is the closest available approximation for 
``remittance transfers'' as defined by the Remittance Rule. From 
April 1, 2013 through December 31, 2017, the Bureau received 
approximately 1,260,600 consumer complaints, including 4,700 
international money transfer complaints representing about 0.4 
percent of the total complaints received. Id. at 114.
    \41\ Bureau examinations have uncovered mixed levels of 
compliance among persons under the Bureau's supervision that provide 
remittance transfers, including general compliance at certain 
institutions as well as individual and wholesale violations. See 
Bureau of Consumer Fin. Prot., Supervisory Highlights, at 11-14 
(Issue 10, Mar. 2016), https://files.consumerfinance.gov/f/201603_cfpb_supervisory-highlights.pdf.
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    Based on the data the Bureau currently has, and in order to 
effectuate the purposes of EFTA and to facilitate compliance, the 
Bureau is proposing to raise the safe harbor threshold from 100 to 500 
remittance transfers. Specifically, the Bureau is proposing to revise 
existing Sec.  1005.30(f)(2)(i) to state that a person is deemed not to 
be providing remittance transfers for a consumer in the normal course 
of its business (and thus not subject to the Remittance Rule), if the 
person provided 500 or fewer transfers in the previous calendar year 
and provides 500 or fewer transfers in the current calendar year. The 
Bureau is also proposing to revise part of existing Sec.  
1005.30(f)(2)(ii) regarding the safe harbor transition period to 
reflect the proposed 500-transfer safe harbor threshold and the 
proposed effective date for this rulemaking. (The proposed effective 
date is discussed in more detail in part VI below.) Specifically, the 
proposed revision to Sec.  1005.30(f)(2)(ii) states that if, beginning 
on July 21, 2020, a person that provided 500 or fewer remittance 
transfers in the previous calendar year provides more than 500 
remittance transfers in the current calendar year, and if that person 
is then providing remittance transfers for a consumer in the normal 
course of its business pursuant to Sec.  1005.30(f)(1), the person has 
a reasonable period of time, not to exceed six months, to begin 
complying with subpart B.
    The Bureau is also proposing to add new Sec.  1005.30(f)(2)(iii) to 
address the transition period for persons qualifying for the safe 
harbor. Proposed Sec.  1005.30(f)(2)(iii) states that if a person who 
previously provided remittance transfers in the normal course of its 
business in excess of the safe harbor threshold set forth in Sec.  
1005.30(f)(2) determines that, as of a particular date, it will qualify 
for the safe harbor, it may cease complying with the requirements of 
subpart B of Regulation E with respect to any remittance transfers for 
which payment is made after that date. The requirements of EFTA and 
Regulation E, including those set forth in Sec. Sec.  1005.33 and 
1005.34, as well as the requirements set forth in Sec.  1005.13, 
continue to apply to transfers for which payment is made prior to that 
date.
    The Bureau notes that existing language in Sec.  1005.30(f)(2)(ii) 
regarding the six month transitional period for coming into compliance 
after ceasing to qualify for the safe harbor, as well as the proposed 
language in Sec.  1005.30(f)(2)(iii) regarding newly qualifying for the 
safe harbor, both peg their requirements for particular transfers based 
on when payment is made for such transfers. The phrase ``payment is 
made'' is used numerous times throughout the Rule, and the Bureau 
believes that it provides a clear test as to whether any particular 
transfer is or is not subject to the Rule.\42\ The Bureau is concerned 
that hinging the standard on, for example, when a transfer is made may 
not provide adequate certainty, in particular for transfers that are 
scheduled in advance. The Bureau seeks comment on whether when 
``payment is made'' is the appropriate standard on which to hinge these 
provisions, or whether a different

[[Page 67139]]

standard would be better and, if so, why.
---------------------------------------------------------------------------

    \42\ For example, the phrase ``payment is made'' is used in the 
portion of existing Sec.  1005.30(f)(2)(ii) (that the Bureau is not 
proposing to modify) which states that compliance with subpart B of 
Regulation E will not be required for any remittance transfers for 
which payment is made during the reasonable period of time that a 
person has to transition in to compliance with the Rule once that 
person no longer qualifies for the safe harbor. See also, e.g., 
comment 31(e)-2, which discusses the timing of certain disclosure 
requirements.
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    With respect to transfers scheduled before the date of transfer 
pursuant to Sec.  1005.36, in particular for a series of transfers that 
are scheduled in advance, the Bureau notes that remittance transfer 
providers subject to the Rule are required to give consumers 
disclosures in accordance with the Rule's requirements, including but 
not limited to consumers' cancellation and error resolution rights. The 
Bureau notes that the transition from being covered by the Rule to 
qualifying for the safe harbor is not a new issue presented by this 
proposal, and seeks comment on what persons that were remittance 
transfer providers subject to the Rule before qualifying for the safe 
harbor have done--or expect to do--with respect to any transfers 
scheduled in advance after they qualify for the safe harbor. The Bureau 
further seeks comment on whether it is necessary and appropriate for 
the Bureau to prescribe specific notice obligations in this situation 
and, if so, what those obligations should be. The Bureau notes that if 
a provider gives consumers the required disclosures under the Rule, but 
does not subsequently inform consumers of its changed compliance 
obligations with respect to what it has previously disclosed, that 
person risks exposing itself to potential liability under the Dodd-
Frank Act or other laws.
    With respect to the commentary accompanying Sec.  1005.30(f), 
first, the Bureau is proposing to revise the last sentence in existing 
comment 30(f)-2.i in order to avoid potential conflict or confusion 
with the proposed safe harbor threshold of 500 transfers. The Bureau is 
also proposing to revise existing comments 30(f)-2.ii and iii regarding 
the safe harbor and transition period for consistency with the proposed 
changes to Sec.  1005.30(f)(2)(i) and (ii). In addition, the Bureau is 
proposing to add a sentence in comment 30(f)-2.ii that states that on 
July 21, 2020, the safe harbor threshold in Sec.  1005.30(f)(2)(i) 
changed from 100 transfers to 500 transfers, to memorialize the change. 
The Bureau is also proposing to renumber existing comment 30(f)-2.iv as 
30(f)-2.iv.A (in order to add two additional examples, described 
below), to revise the heading for this comment to make clear that it 
provides an example of the safe harbor and transition period for the 
100-transfer safe harbor threshold that was effective prior to the 
proposed effective date of July 21, 2020, and to change the verb tense 
from present to past throughout the example. The Bureau requests 
comment on whether it is useful to retain this example, as it has 
proposed to do, or whether the example should be eliminated.
    The Bureau is proposing to add new comment 30(f)-2.iv.B to provide 
an example of the safe harbor for a person that provided 500 or fewer 
transfers in 2019 and provides 500 or fewer transfers in 2020. The 
Bureau is also proposing to add new comment 30(f)-2.iv.C, which 
provides an example of the safe harbor and transition period for the 
500-transfer threshold that would be effective beginning on the 
proposed effective date of July 21, 2020. This proposed comment is 
based on the example in existing comment 30(f)-2.iv, with modifications 
to reflect the changes the Bureau is proposing to Sec.  1005.30(f)(2).
    Finally, the Bureau is proposing to add new comment 30(f)-2.v to 
address continued obligations under the Rule with respect to transfers 
for which payment was made before a person qualifies for the safe 
harbor. The proposed comment states that proposed Sec.  
1005.30(f)(2)(iii) addresses situations where a person who previously 
was required to comply with subpart B of Regulation E newly qualifies 
for the revised safe harbor in proposed Sec.  1005.30(f)(2)(i). It 
explains that proposed Sec.  1005.30(f)(2)(iii) states that the 
requirements of EFTA and Regulation E, including those set forth in 
Sec. Sec.  1005.33 and 1005.34 (which address procedures for resolving 
errors and procedures for cancellation and refund of remittance 
transfers, respectively), as well as the requirements set forth in 
Sec.  1005.13 (which, in part, governs record retention), continue to 
apply to transfers for which payment is made prior to the date the 
person qualifies for the safe harbor in Sec.  1005.30(f)(2)(i). The 
comment also explains that qualifying for the safe harbor in Sec.  
1005.30(f)(2)(i) likewise does not excuse compliance with any other 
applicable law or regulation. For example, if a remittance transfer is 
also an electronic fund transfer, any requirements in subpart A of 
Regulation E that apply to the transfer continue to apply, regardless 
of whether the person must comply with subpart B. Relevant requirements 
in subpart A of Regulation E may include, but are not limited to, those 
relating to initial disclosures, change-in-terms notices, liability of 
consumers for unauthorized transfers, and procedures for resolving 
errors.
    The Bureau seeks comment on its proposed revisions and additions to 
commentary, as described above. The Bureau also requests comment on 
whether any additional clarification or guidance regarding the proposed 
revised safe harbor threshold is needed and, if so, what specifically 
should be addressed. In particular, the Bureau seeks comment on whether 
and to what extent providers have encountered transitional issues when 
qualifying for the existing safe harbor after complying with the Rule, 
as well as whether providers who expect to qualify for the proposed 
revised safe harbor anticipate any transitional issues. The Bureau also 
solicits comment on whether providers anticipate any particular issues 
with a mid-year effective date (July 21, 2020) for its proposed change 
to the safe harbor threshold (see also the discussion of the proposed 
effective date in part VI below). Finally, the Bureau seeks comment on 
whether there are any other provisions in existing commentary that 
should be modified or removed in light of the changes proposed herein.
    Other potential approaches considered by the Bureau. As noted 
above, several industry commenters responded to the Bureau's query in 
the 2019 RFI as to whether there were any other factors the Bureau 
should consider in determining whether a person is providing remittance 
transfers in the ``normal course of its business.'' Suggestions 
included basing the term on the percentage of an entity's customers 
that send remittance transfers, the percentage of an entity's transfers 
that are remittance transfers, or an entity's total revenue generated 
from providing remittance transfers.
    The Bureau notes that it considered these and other approaches when 
it finalized the 100-transfer safe harbor threshold in 2012. The Bureau 
stated it did not believe it was appropriate, based on the 
administrative record at the time, to define a safe harbor based on a 
relative size measure, such as percentage of revenue, or other 
suggested criteria, and that commenters did not provide, and the Bureau 
did not have data suggesting, across the remittance transfer industry, 
why any of the suggestions made by commenters would be an appropriate 
basis for the safe harbor threshold. The Bureau also stated that it 
believed that due to the wide variety of business models for offering 
remittance transfers and lack of currently available data, it would be 
difficult to craft a single standalone measure of relative size for 
identifying persons who provide remittance transfers on only a limited 
basis.\43\ The Bureau does not have any further data to inform such 
approaches and thus its position on adopting any such

[[Page 67140]]

alternative thresholds remains unchanged.
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    \43\ 77 FR 50243, 50250 (Aug. 20, 2012).
---------------------------------------------------------------------------

    Entities are familiar with tracking their remittance transfers for 
purposes of the current safe harbor, Call Report requirements, and 
other purposes; the Bureau does not believe that tracking remittance 
transfer volume in order to confirm that entities qualify for the safe 
harbor will be any more difficult if the safe harbor threshold were 500 
than it is with the current threshold of 100. While tracking total 
revenue (rather than profits) from remittance transfers may also be 
somewhat straightforward, the Bureau is particularly concerned that 
some alternative approaches, such as tracking a proportion (e.g., 
percentage of customers that send remittance transfers), could be 
difficult for an entity to track on an ongoing or real-time basis and 
could fluctuate both up and down over the course of the year. The 
Bureau also believes that a safe harbor provides the most certainty if 
it is based on a bright-line measure that permits entities to easily 
identify whether or not they qualify, especially if it is a measure 
with which industry is already familiar.
    Nonetheless, the Bureau solicits comment on whether it should adopt 
any alternate or additional approach for the safe harbor from the 
``normal course of business'' definition. Specifically, regarding the 
suggestion to base the safe harbor threshold on the percentage of an 
entity's customers that send remittance transfers, the Bureau seeks 
comment on whether this would be a viable approach and if so, what the 
appropriate percentage of customers would be and why. In addition, the 
Bureau seeks comment on the time frame over which any such alternate 
approach should be tracked and the timing for any transitional 
provisions that might be necessary using such an approach. The Bureau 
also seeks comment on the potential burdens to entities, or challenges 
that could arise, in basing the safe harbor on an approach other than 
the annual number of remittance transfers.
    In the 2019 RFI, the Bureau also requested information and evidence 
to determine whether an exception for small financial institutions (for 
example, based on asset size) might be appropriate.\44\ EFTA section 
904(c) contains a ``small financial institution'' exception, which 
provides that the Bureau ``shall by regulation modify'' EFTA's 
statutory requirements for such institutions if the Bureau determines 
that ``such modifications are necessary to alleviate any undue 
compliance burden on small financial institutions and such 
modifications are consistent with the purpose and objective of 
[EFTA].'' The Bureau considered the information received in response to 
the 2019 RFI and assessed whether the data it has would be sufficient 
to develop a proposed small financial institution exception that meets 
the criteria in section 904(c). The Bureau also considered whether 
other options might be more preferable to address the issue of coverage 
under the Remittance Rule. While some industry commenters requested a 
small financial institution exemption and provided some information in 
support of that request, the Bureau has concluded that proposing to 
adjust the safe harbor threshold would be a more effective approach to 
addressing the concerns of small financial institutions. In addition, a 
consumer advocacy group asserted that market data and the results of 
the Assessment do not support creating a small financial institution 
exemption. On balance, the Bureau believes that its proposal to raise 
the safe harbor threshold would be a more effective way to address the 
issue of coverage under the Remittance Rule and thus is not proposing 
to create a small financial institution exemption.
---------------------------------------------------------------------------

    \44\ 84 FR 17971 (Apr. 29, 2019).
---------------------------------------------------------------------------

1005.32 Estimates
    As discussed in part II above, a significant consumer protection 
provided by the Remittance Rule is the requirement that remittance 
transfer providers disclose certain information to consumers that send 
remittance transfers. Specifically, a provider generally must provide a 
pre-payment disclosure (as set forth in Sec.  1005.31(b)(1)) to a 
sender when the sender requests the remittance transfer, but prior to 
payment for the transfer. The provider also generally must provide a 
receipt (as required by Sec.  1005.31(b)(2)) to the sender when payment 
is made for the remittance transfer. As an alternative to providing the 
separate pre-payment disclosure and the receipt, a provider may provide 
a combined disclosure (as described in Sec.  1005.31(b)(3)) to the 
sender when the sender requests a remittance transfer, but prior to 
payment. Section 1005.36(a)(1) and (2) sets forth special rules for 
when the disclosures must be given for a one-time transfer scheduled 
five or more business days before the date of transfer or for the first 
in a series of preauthorized remittance transfers.
    The disclosures required by Sec. Sec.  1005.31(b)(1) through (3) 
and 1005.36(a)(1) and (2) include a disclosure of the exchange rate if 
the transfer will be received in a currency other than the one in which 
the transfer was funded, as described in Sec.  1005.31(b)(1)(iv). The 
disclosures required by Sec. Sec.  1005.31(b)(1) through (3) and 
1005.36(a)(1) and (2) also must include the following disclosures as 
set forth in Sec.  1005.31(b)(1)(v) through (vii), respectively: (1) If 
``covered third-party fees'' as defined in Sec.  1005.30(h) are 
imposed, the total amount that will be transferred to the recipient 
inclusive of the covered third-party fees; (2) the amount of any 
covered third-party fees; and (3) the amount that will be received by 
the designated recipient (after deducting any covered third-party 
fees). The above disclosures set forth in Sec.  1005.31(b)(1)(v) 
through (vii) must be provided in the currency in which the designated 
recipient will receive the funds.
    Relatedly, an important requirement established by EFTA section 919 
is that remittance transfer providers generally must disclose (both 
prior to and at the time the consumer pays for the transfer) the exact 
exchange rate and the amount to be received by the designated recipient 
of a remittance transfer.\45\ Accordingly, the Rule generally requires 
that providers disclose to senders the exact amount of currency that 
the designated recipient will receive. Section 1005.32, however, sets 
forth several exceptions to this general requirement, including the 
temporary exception in existing Sec.  1005.32(a). As such, the Bureau 
is proposing two new permanent exceptions to address the expiration of 
the temporary exception, set forth in proposed Sec.  1005.32(b)(4) and 
(5) and related commentary.
---------------------------------------------------------------------------

    \45\ 15 U.S.C. 1693o-1(a)(1) and (2).
---------------------------------------------------------------------------

32(a) Temporary Exception for Insured Institutions
    As noted above, EFTA section 919 sets forth a temporary exception 
that permits certain financial institutions to disclose estimates 
instead of exact amounts to consumers. Remittance transfer providers 
qualify for the temporary exception in EFTA section 919 if: (i) They 
are insured depository institutions or insured credit unions 
(collectively, ``insured institutions'') that make a transfer from an 
account that the sender holds with them; and (ii) they are unable to 
know, for reasons beyond their control, the amount of currency that 
will be made available to the designated recipient. If these conditions 
are met, EFTA's temporary exception provides that these institutions 
need not disclose the amount of currency that will be received by the 
designated recipient but rather may disclose ``a reasonably accurate

[[Page 67141]]

estimate of the foreign currency to be received.'' \46\
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 1693o-1(a)(4).
---------------------------------------------------------------------------

    EFTA set the temporary exception to expire five years from the 
enactment of the Dodd-Frank Act. EFTA also provided a one-time ability 
for the Bureau to extend the exception for up to five more years, until 
July 21, 2020, if the Bureau determined that the expiration of the 
exception would negatively affect the ability of insured institutions 
to send remittance transfers to foreign countries. In 2014, the Bureau 
by rule extended the exception for five years to July 21, 2020.\47\ As 
EFTA section 919 expressly limits the length of the temporary exception 
to the term specified therein, the temporary exception will expire on 
July 21, 2020.
---------------------------------------------------------------------------

    \47\ 79 FR 55970 (Sept. 18, 2014).
---------------------------------------------------------------------------

    In implementing the temporary exception in EFTA section 919, Sec.  
1005.32(a)(1) provides that a remittance transfer provider may give 
estimates in compliance with Sec.  1005.32(c) for the exchange rate (if 
applicable), covered third-party fees, and certain other disclosures if 
the provider meets three conditions. The three conditions are: (1) The 
provider must be an insured institution; (2) the provider must not be 
able to determine the exact amounts to be disclosed for reasons beyond 
its control; and (3) the transfer generally must be sent from the 
sender's account with the insured institution.\48\
---------------------------------------------------------------------------

    \48\ For the purposes of the temporary exception, a sender's 
account does not include a prepaid account, unless the prepaid 
account is a payroll card account or a government benefit account.
---------------------------------------------------------------------------

    Section 1005.32(a)(3) provides that insured depository 
institutions, insured credit unions, and uninsured U.S. branches and 
agencies of foreign depository institutions are considered ``insured 
institutions'' for purposes of the temporary exception. MSBs are not 
``insured institutions'' for purposes of the temporary exception. The 
Bureau is not proposing to amend Sec.  1005.32(a) but provides a 
discussion of this provision and related comments received in response 
to the 2019 RFI as background to explain its proposed two new 
exceptions in Sec.  1005.32(b)(4) and (5), discussed below.
Challenges of Insured Institutions in Disclosing Exact Amounts
    As discussed in part II above, banks and credit unions have 
predominantly utilized an ``open network'' payment system made up of 
the correspondent banking network to send remittance transfers on 
behalf of consumers, and most banks and credit unions only maintain a 
relatively small number of correspondent banking relationships. As 
such, in many cases involving remittance transfers sent via the 
correspondent banking network, the sending institution must find a 
chain of one or more intermediary financial institutions to transmit 
funds from the sending institution to the designated recipient's 
institution.
    There are two basic ways of how such a chain works where the 
originating (sending) institution has no correspondent banking 
relationship with the designated recipient's institution: the 
``serial'' method and the ``cover'' method (also known as the ``split 
and cover'' method).\49\ Sending a remittance transfer using the serial 
method means that the payment is instructed and settled one step at a 
time between each of the financial institutions in the transmittal 
route. Each connected pair of financial institutions in the transmittal 
route have a correspondent banking relationship with each other, which 
enables fund settlement.\50\ By current market practice, each 
intermediary financial institution typically deducts a fee from the 
payment amount, which results in the recipient of the payment not 
receiving the full amount of the original payment order.\51\ Sending a 
remittance transfer using the cover method means that the payment 
information is conveyed from the sending institution to the designated 
recipient's institution while settlement is handled separately through 
correspondent banks.\52\ Further, current market practice is such that 
correspondent banks typically do not deduct transaction fees from 
payments sent using the cover method.\53\
---------------------------------------------------------------------------

    \49\ See 2016 BIS Report at 33-34.
    \50\ Id. at 34.
    \51\ Id. at 37.
    \52\ Every cross-border money transfer, including remittance 
transfers, sent via the correspondent banking network has two 
components: The payment information and the settlement instruction. 
Whereas these two components travel together when using the serial 
method, the cover method separates the payment information from the 
settlement instructions.
    \53\ 2016 BIS Report at 37.
---------------------------------------------------------------------------

    As discussed above, the temporary exception permits insured 
institutions to disclose estimates (rather than exact amounts) of the 
exchange rate and covered third-party fees (and other amounts that have 
to be estimated because the exchange rate and covered third-party fees 
are estimated). With respect to the exchange rate, insured institutions 
and their trade associations have reported to the Bureau that because 
exchange rates fluctuate, sending institutions comply with the 
requirement to disclose exact exchange rates by ``fixing'' the exchange 
rate at the time a sender requests a remittance transfer. They do this 
by converting the funds to the applicable foreign currency up front 
themselves, or by using their correspondent bank or third-party service 
provider (instead of having an intermediary financial institution or 
the designated recipient's institution perform the foreign currency 
conversion). As discussed in greater detail below in the section-by-
section analysis of proposed Sec.  1005.32(b)(4), insured institutions 
may face a number of hurdles with respect to converting funds to 
certain currencies upfront. In such cases, they may rely on the 
temporary exception with respect to the disclosure of the exchange 
rate.\54\ With respect to covered third-party fees, insured 
institutions and their trade associations have told the Bureau that 
when banks and credit unions send remittance transfers using the serial 
method (where sending institutions do not have a correspondent 
relationship with all the financial institutions in the remittance 
transfer's transmittal route), they cannot control or even know 
transaction fees imposed by another financial institution in the 
payment chain without having a correspondent relationship with that 
financial institution. As such, they rely on the temporary exception 
with respect to the disclosure of covered third-party fees.\55\
---------------------------------------------------------------------------

    \54\ Section 1005.32(b) also contains other exceptions that 
permit the estimation of the exchange rate in certain circumstances.
    \55\ See below in the section-by-section analysis of proposed 
Sec.  1005.32(b)(5) for a discussion of why sending institutions are 
not always able to send cover payments to designated recipients' 
institutions.
---------------------------------------------------------------------------

    Recent market developments and potential solutions. In the 
Assessment Report, the Bureau observed that the remittance market has 
undergone substantial change since the Rule became effective. The 
Assessment Report described several developments regarding the growth 
and incorporation of innovative technologies by providers of cross-
border money transfers and other companies that support such 
providers.\56\
---------------------------------------------------------------------------

    \56\ Assessment Report at 97-106.
---------------------------------------------------------------------------

    The Bureau has continued to monitor the remittance transfer market 
since the publication of the Assessment Report and observes that most 
of these developments continue to progress. Examples include: (1) The 
continued growth and expanding functionality of the Society for 
Worldwide Interbank Financial Telecommunication (SWIFT)'s ``global 
payment innovation'' (gpi) tracking product, which can increase the 
amount of up-front information available to sending

[[Page 67142]]

institutions, and the expansion of the major payment card networks' 
capacity to support cross-border payments; \57\ (2) the continued 
growth of ``fintech'' nonbank remittance transfer providers and their 
further expansion into partnerships and other relationships with banks 
and credit unions, which allow such entities to tap into the closed 
network payment systems that nonbank remittance transfer providers have 
developed; \58\ and (3) the continued growth and expanding partnerships 
of virtual currency companies, such as Ripple, which offer both a 
payments messaging platform to support cross-border money transfers as 
well as a proprietary virtual currency, XRP, which can be used to 
effect settlement of those transfers.\59\
---------------------------------------------------------------------------

    \57\ SWIFT provides financial messaging services that support a 
large share of all cross-border interbank payments sent via 
correspondent banks. See, e.g., Press Release, SWIFT, SWIFT enables 
payments to be executed in seconds (Sept. 23, 2019), https://www.swift.com/news-events/press-releases/swift-enables-payments-to-be-executed-in-seconds; John Adams, Small cross-border deals play a 
big role for Visa, Mastercard, PaymentsSource (May 21, 2019), 
https://www.paymentssource.com/news/small-cross-border-deals-play-a-big-role-for-visa-mastercard.
    \58\ See, e.g., Zoe Murphy, TransferWise launches TransferWise 
for Banks in the U.S. with Novo, Tearsheet (Sept. 26, 2019), https://tearsheet.co/new-banks/transferwise-launches-transferwise-for-banks-in-the-u-s-with-novo/.
    \59\ See, e.g., Press Release, Ripple, Ripple Announces 
Strategic Partnership with Money Transfer Giant, MoneyGram (June 17, 
2019), https://www.ripple.com/insights/ripple-announces-strategic-partnership-with-money-transfer-giant-moneygram/; Sharon Kimathi, 
PNC becomes first US bank on RippleNet, FinTech Futures (Aug. 29, 
2019), https://www.fintechfutures.com/2019/08/pnc-becomes-first-us-bank-on-ripplenet/.
---------------------------------------------------------------------------

    These developments suggest that in the future there may be means by 
which banks and credit unions could reduce their remaining reliance on 
estimates. These developments all share a fundamental similarity: They 
all apply elements of a closed network payment system to cross-border 
money transfers sent by banks and credit unions. As discussed in part 
II above, in a closed network payment system, a single entity generally 
exerts a high degree of end-to-end control over a transaction. This 
control generally facilitates standardization and uniformity over 
terms, conditions, and processes to which participants in a closed 
network payment system must adhere. That standardization and 
uniformity, in turn, can provide a great deal of certainty to all 
participants in such a system as to the terms and conditions that will 
apply to individual transactions within that system.
    To the degree banks and credit unions increase their reliance on 
closed network payment systems for sending remittance transfers and 
other cross-border money transfers, the Bureau notes that this could 
result in greater standardization and ease by which sending 
institutions can quote exact covered third-party fees and exchange 
rates. The Bureau also believes that expanded adoption of SWIFT's gpi 
product or Ripple's suite of products could similarly allow banks and 
credit unions to know the exact final amount that recipients of 
remittance transfers will receive before they send the transfer.
    However, based on comments that banks, credit unions, and their 
trade associations submitted in response to the 2019 RFI and the 
Bureau's own market monitoring, the Bureau believes it is unlikely in 
the short-to-medium term that the developments described above will be 
able to fully eliminate reliance on the correspondent banking network 
as the predominant method for banks and credit unions to send 
remittance transfers. There are thousands of financial institutions 
worldwide that could receive remittance transfers. If, as noted above, 
the different approaches described above share the similarity of 
replicating some elements of a closed network payment system, they 
likely would need to enroll all or most of those financial institutions 
into their platforms to offer banks and credit unions up-front 
certainty when sending transfers for which they currently rely on the 
temporary exception. It may be costly, excessively time-consuming, or 
otherwise difficult to enroll all or even most of these institutions, 
especially the smaller ones. Accordingly, the Bureau believes that it 
is unlikely in the short-to-medium term for the developments discussed 
above to replace the correspondent banking system as the predominant 
means that banks and credit unions use to send remittance transfers.
Comments Received in Response to the 2019 RFI
    As noted in part III above, the Bureau in the 2019 RFI sought 
information on the upcoming expiration of the temporary exception and 
potential options to mitigate its impact. In response to the 2019 RFI, 
the overwhelming majority of comments came from banks, credit unions, 
their trade associations, and their service providers. The Bureau 
received one comment from a ``fintech'' nonbank remittance transfer 
provider and one comment from a consumer advocacy group.
    Comments from credit unions, banks, their trade associations, and 
their service providers. Many of these industry commenters indicated 
that insured institutions should still be permitted to estimate the 
exchange rate and covered third-party fees (and the disclosures that 
depend on those amounts) after the temporary exception expires. As 
discussed in more detail below in the section-by-section analyses of 
proposed Sec.  1005.32(b)(4) and (5), several industry commenters 
asserted that: (1) The vast majority of international payments sent by 
banks and credit unions, including commercial cross-border transfers 
and remittance transfers, are wire transfers sent via correspondent 
banks in an open network payment system; and (2) as a result, depending 
on the identity and location of the designated recipient's institution, 
insured institutions have difficulty knowing the exact exchange rate 
and covered third-party fees for all remittance transfers at the time 
the disclosures required by the Remittance Rule must be given. See the 
section-by-section analysis of proposed Sec.  1005.32(b)(4) for a 
discussion of the comments received on the exchange rate, and the 
section-by-section analysis of proposed Sec.  1005.32(b)(5) for a 
discussion of the comments received on covered third-party fees.
    Several industry commenters asserted that insured institutions 
might stop sending remittance transfers in situations where the insured 
institutions cannot provide exact disclosures of the exchange rate or 
covered third-party fees. Several other industry commenters 
acknowledged that it is possible for them to send certain remittance 
transfers for consumers via international ACH, or use nonbank service 
providers, closed network payment systems, or other methods that could 
allow them to control or eliminate covered third-party fees and thus 
provide exact amounts of those fees in the disclosures required by the 
Remittance Rule. They also asserted, however, that none of these 
methods provide a comprehensive alternative to the correspondent 
banking system.
    Several industry commenters asserted that after the temporary 
exception expires, if the Bureau does not allow insured institutions to 
continue providing estimates, it will hurt smaller insured institutions 
and their customers. These industry commenters indicated that if the 
larger correspondent banks react to the expiration of the temporary 
exception by limiting or increasing the cost of their offerings, there 
will likely be a domino effect in the industry that will negatively 
influence the cost of, or access to, these services for consumers. 
Several industry commenters indicated that if community banks and 
credit

[[Page 67143]]

unions start reducing or eliminating remittance transfer services, 
customers, especially those in rural communities, would have limited 
options for remittance transfers and could be left without safe, 
convenient, and cost-effective means to transmit funds.
    Several industry commenters indicated that insured institutions 
that continue to offer remittance transfers may see costs increase when 
sending transfers to certain destinations if insured institutions have 
to change the ways they provide remittance transfers in order to 
disclose exact amounts. With respect to the exchange rate, two bank 
commenters indicated that if banks have to move to providing an exact 
exchange rate for all wire transfers, banks will have no choice but to 
build in an extra buffer in the exact exchange rate disclosed, so that 
they do not lose money on the transactions. One trade association 
indicated that (1) for credit unions that rely primarily on 
correspondent institutions to provide exchange rate and fee 
information, the expiration of the temporary exception could have 
indirect effects if correspondent banks adopt costlier processes for 
ensuring accurate disclosure of amounts received; and (2) if the 
compliance costs of correspondents are passed on to credit unions, this 
could further challenge credit unions' ability to offer remittance 
transfers at reasonable and competitive rates.
    Several industry commenters asserted that they believed that there 
is no evidence of consumer harm from disclosing estimates rather than 
exact amounts. Several trade associations indicated that banks maintain 
databases of fee information to allow them to provide highly reliable 
estimates when they are unable to know with certainty the exact covered 
third-party fees that will be assessed.
    Based on the concerns discussed above, a number of industry 
commenters requested that the Bureau exempt all wire transfers from the 
requirement to disclose the exact exchange rate and covered third-party 
fees to accommodate the characteristics of remittance transfers sent 
through correspondent banks in an open network payment system. They 
asserted that the Bureau could use its general exception and adjustment 
authority under EFTA section 904(c) to exempt wire transfers from the 
requirement to provide exact exchange rates or covered third-party fees 
(and the disclosures that depend on those amounts) when insured 
institutions are not able to determine exact amounts. In the 
alternative, several trade associations suggested that the Bureau 
should use its authority under EFTA section 919(c) to exempt wire 
transfers where exact amounts cannot reasonably be determined in 
advance.\60\ These trade associations asserted that (1) the use of 
correspondent banks to send remittance transfers in an open network 
payment system is a method of making the transfers and that this 
network system does not allow insured institutions to know the amount 
of currency that will be received by the designated recipient for all 
transfers; and (2) the correspondent banking network is decentralized 
and that decentralization places inherent limits on the ability of 
insured institutions to obtain accurate exchange rate and covered 
third-party fee information. Relatedly, several industry commenters 
suggested that the Bureau amend the criteria and process for using the 
``countries'' exception in Sec.  1005.32(b)(1) (which implements EFTA 
section 919(c)) to make it easier to include countries on the Bureau-
maintained ``countries list'' so that insured institutions can provide 
estimates of the exchange rate or covered third-party fees for 
remittance transfers to those countries. (See the end of this part V 
for the Bureau's request for comment on this issue.)
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    \60\ EFTA section 919(c) (implemented in Sec.  1005.32(b)(1)) 
permits the Bureau to except remittance transfer providers from 
having to provide exact amounts for transfers to certain nations if 
the Bureau determines that a recipient country does not legally 
allow, or the method by which transactions are made in the recipient 
country does not allow, a remittance transfer provider to know the 
amount of currency that will be received by the designated 
recipient. See below for a discussion of this exception.
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    Other industry commenters discussed other approaches to address 
concerns specifically related to providing exact exchange rates, and 
these approaches are discussed below in the section-by-section analysis 
of proposed Sec.  1005.32(b)(4). Industry suggestions to address 
concerns specifically relating to providing exact covered third-party 
fees are discussed below in the section-by-section analysis of proposed 
Sec.  1005.32(b)(5).
    Several industry trade associations indicated that, if the Bureau 
does not extend or make permanent the temporary exception, the Bureau 
should adopt a one-year transition period to provide a safe harbor for 
banks' good faith implementation and compliance efforts. These trade 
associations indicated that this one-year transition period is needed 
because of the complexities of determining how any changes in a final 
rule will affect services to consumers and other banks, the need to 
communicate those impacts to customers, and the need to create new 
procedures and training to enable compliance.
    Comment from a nonbank remittance transfer provider. The one 
``fintech'' nonbank remittance transfer provider that commented on the 
2019 RFI indicated that the temporary exception was never intended to 
be permanent, whether directly or indirectly through an extension of 
other exceptions. This commenter asserted its belief that extending the 
exception directly or indirectly will stunt the movement toward 
transparency and continue the bifurcated regulatory approach under 
which insured institutions may be able to provide estimates but MSBs 
cannot.
    Comment from a consumer advocacy group. The consumer advocacy group 
that commented on the 2019 RFI indicated that (1) the Remittance Rule 
is designed to improve accountability and transparency, and through 
those benefits to consumers, also benefit competition and innovation; 
(2) the temporary exception was put into place to accommodate existing 
practices while the market adapted to new standards under the Rule; and 
(3) evidence from pricing and market innovation indicate that the 
market has substantially adapted and is poised to move away from a need 
for the exception. The commenter also encouraged institutions that 
might consider terminating their remittance transfer services to 
instead partner with larger institutions or nonbank money transmitters 
including MSBs to act as a service provider to that withdrawing 
institution's customers. The commenter asserted that these partnerships 
would be especially useful in situations where the institution 
terminating the remittance transfer services serves a segment of 
consumers with few alternatives available when sending remittance 
transfers.
Recent Outreach on Impacts of the Expiring Temporary Exception
    As noted in part III above, the Bureau has engaged in ongoing 
market monitoring and other outreach to industry and other stakeholders 
regarding the Remittance Rule. As in their comments on the 2019 RFI, 
the general consensus from industry in these meetings and discussions 
was that, if the Bureau does not take steps to allow estimates of the 
exchange rate or covered third-party fees to mitigate the expiration of 
the temporary exception, insured institutions may stop sending 
remittance transfers in situations where, despite reasonable efforts, 
they cannot provide exact disclosures. One trade association emphasized 
the difficulties that some

[[Page 67144]]

insured institutions face in providing exact disclosures for certain 
remittance transfers sent through correspondent banks in an open 
network payment system. This trade association reiterated the 
suggestions in its comment letter for potential regulatory solutions, 
such as the Bureau using its general exception and adjustment authority 
under EFTA section 904(c), or its authority under EFTA section 919(c), 
to exempt wire transfers from the requirement to provide exact 
disclosures when insured institutions are not able to determine 
accurate amounts.
    Several large insured institutions provided information on the 
circumstances in which they use the temporary exception and discussed 
their concerns about the potential impact its expiration would have on 
whether they could continue to provide certain remittance transfers. 
These institutions indicated that they do not rely on the temporary 
exception to estimate the exchange rate but do rely on it in certain 
circumstances to estimate covered third-party fees. They also described 
the actions they have taken or plan to take to mitigate the potential 
impacts of the expiring temporary exception, and potential measures 
that the Bureau could take to limit further its impact. One large 
insured institution also identified the countries where it uses the 
temporary exception most often to estimate covered third-party fees, 
and for each of these countries provided information about the number 
of remittance transfers for which it uses the temporary exception.
    The Bureau also received a letter from several members of Congress 
expressing concern that if insured institutions are no longer able to 
provide estimates of exchange rates and covered third-party fees after 
the temporary exception expires, many institutions would likely 
discontinue providing remittance transfer services to their customers 
because they would be unable to comply with the Remittance Rule. These 
members of Congress requested that the Bureau use its authority under 
EFTA section 904(a) and (c), or its authority under EFTA section 
919(c), or its authority under section 1032 of the Dodd-Frank Act, to 
allow insured institutions to continue providing estimates of exchange 
rates and covered third-party fees in cases where exact disclosures are 
not possible. These members of Congress stated that a solution should 
be permanent, not temporary, so insured institutions are able to make 
long-term decisions regarding the provision of remittance transfer 
services.
The Bureau's Proposal
    To mitigate the impact of the temporary exception's expiration, the 
Bureau is proposing two new permanent exceptions, as discussed in 
greater detail below in the section-by-section analyses of proposed 
Sec.  1005.32(b)(4) and (5). The Bureau is retaining the temporary 
exception in Sec.  1005.32(a)(1), with the current sunset date of July 
21, 2020. As discussed in the 2019 RFI, EFTA section 919 expressly 
limits the length of the temporary exception to July 21, 2020. The 
Bureau, therefore, is not proposing to extend the exception or make it 
permanent. As such, the exception will expire on July 21, 2020 unless 
Congress changes the law. For similar reasons, the Bureau is not 
proposing to replicate the temporary exception, as some trade 
association commenters suggested the Bureau should do.\61\
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    \61\ Specifically, these trade association commenters asked the 
Bureau to exempt wire transfers generally from the requirement to 
disclose exact exchange rates or covered third-party fees to 
accommodate the characteristics of open network transactions when 
insured institutions are not able to determine exact amounts at the 
time the disclosures are provided. They also suggested that, under 
EFTA 919(c), the Bureau should specify that wire transfers are a 
``method by which transactions are made in the recipient country'' 
that does not allow exact disclosures if such amounts cannot be 
reasonably determined at the time the disclosures are provided.
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32(b) Permanent Exceptions
32(b)(4) Permanent Exception for Estimation of the Exchange Rate by an 
Insured Institution
    The Bureau is proposing to add a new permanent exception to the 
Remittance Rule that would permit insured institutions to estimate the 
exchange rate (and other disclosures that depend on the exchange rate) 
that must be disclosed in the disclosures required by Sec. Sec.  
1005.31(b)(1) through (3) and 1005.36(a)(1) and (2) in certain 
circumstances. This proposed exception is designed to help mitigate the 
impact of the expiration of the temporary exception on consumers' 
access to certain remittance transfers.
Comments Received on Estimating the Exchange Rate in Response to the 
2019 RFI
    Several industry commenters asserted that insured institutions have 
difficulty knowing the exact exchange rate at the time they must 
provide the disclosures required by the Remittance Rule. For example, 
several industry trade associations indicated that (1) insured 
institutions can provide the exact exchange rate in the disclosures if 
the insured institution, its service provider, or its correspondent 
bank conducts the foreign currency exchange prior to the transfer; they 
noted, however, that it may be difficult for this to occur for all 
remittance transfers sent by insured institutions; (2) in many cases, 
local customs or practices may make foreign currency exchange outside 
the United States difficult or impossible even if these restrictions 
are not pursuant to the laws of the receiving country; (3) for some 
currencies, the market is too small and illiquid, which makes 
maintenance of a currency-trading desk in the United States difficult 
or impossible; (4) for other currencies, it may not be economically 
viable for a correspondent bank to conduct the foreign currency 
exchange for other reasons, including that some currencies may just 
simply be difficult or expensive to purchase; and (5) banks generally 
profit on their foreign currency exchange services, and some foreign 
banks may refuse to process incoming wire transfers not denominated in 
U.S. dollars so as not to lose the revenue they receive from exchanging 
the currency themselves. One bank also indicated that it is expensive 
to ``lock in'' an exchange rate for highly volatile currencies because 
of the fluctuations in those exchange rates.
    As discussed in more detail above in the section-by-section 
analysis of Sec.  1005.32(a), several industry commenters indicated 
that if the Bureau does not adopt an exception that allows insured 
institutions to continue to estimate the exchange rate in certain 
circumstances, insured institutions may stop sending remittance 
transfers in situations where the insured institutions cannot disclose 
the exact exchange rate. Several other industry commenters indicated 
that insured institutions that continue to offer remittance transfers 
may see costs increase when sending transfers to certain countries if 
insured institutions have to change the ways they provide transfers in 
order to disclose exact exchange rates.
    Several trade associations suggested that the Bureau should permit 
exchange rate estimates for any remittance transfer that involves 
exchanging a foreign currency if the remittance transfer provider or 
its foreign currency provider is unable to conduct foreign currency 
exchange ``in the ordinary course of its business.'' The trade 
associations indicated that this suggested exception would cover the 
following situations: (1) Local customs and practices, rather than 
specific laws, prevent banks from disclosing the exact exchange rate; 
(2) currencies with very small or illiquid markets, which makes the 
maintenance of a currency-trading desk in the U.S. difficult or 
impossible;

[[Page 67145]]

and (3) currencies that are difficult or expensive to buy so it is not 
economically viable for a correspondent bank to conduct the exchange.
    In addition, one credit union raised a specific issue related to 
Department of Defense (DoD) regulations that require the credit union 
to benchmark the exchange rate it offers as a credit union on a 
military installation in a foreign country to the Military Banking 
Facility (MBF) rate. For one-time transfers scheduled one to four days 
in advance, the credit union indicates that it uses the temporary 
exception to estimate the exchange rate because it does not know the 
benchmark rate that will apply on the date of transfer and does not 
qualify for the existing permanent exception in Sec.  1005.32(b)(2), 
which permits estimates for transfers scheduled five or more business 
days before the date of transfer when certain conditions are met.\62\
---------------------------------------------------------------------------

    \62\ The Bureau believes that the DoD regulations are not in 
conflict with the requirements in the Remittance Rule for one-time 
transfers scheduled one to four days in advance.
---------------------------------------------------------------------------

The Bureau's Proposal
    The Bureau is proposing to add a new permanent exception to the 
Remittance Rule that would permit insured institutions to estimate the 
exchange rate (and other disclosures that depend on the exchange rate) 
in certain circumstances. Based on the comments received on the 2019 
RFI and other outreach and research, the Bureau is concerned that if it 
does not adopt any additional exceptions that allow estimates of the 
exchange rate after the temporary exception expires, some insured 
institutions may choose to stop sending remittance transfers to 
recipients in certain countries. These insured institutions may choose 
to stop providing certain remittance transfers because they deem the 
costs of determining exact amounts for the exchange rate to be 
prohibitively expensive. The Bureau is concerned that if these 
institutions discontinue providing such transfers, consumer access to 
remittance transfer services for certain countries may be reduced or 
eliminated. As discussed in more detail above in the section-by-section 
analysis of Sec.  1005.32(a), it appears increasingly unlikely that any 
new technologies or partnerships will be able to fully eliminate 
insured institutions' reliance on estimates in the short-to-medium 
term.
    Also, the Bureau is concerned that, when the temporary exception 
expires, if the Rule does not allow estimates of the exchange rate in 
certain circumstances, insured institutions that continue to offer 
remittance transfer services may see costs increase when sending 
transfers to certain countries if insured institutions have to change 
the ways they provide remittance transfers in order to disclose exact 
exchange rates. This would predictably lead to increased prices for 
consumers. In addition, the Bureau is concerned that prices for 
consumers may also increase for transfers to certain countries (due to 
reduced competition) if the number of remittance transfer providers 
offering remittance transfers to such countries is reduced due to some 
providers eliminating or curtailing transfer services because they 
could not determine and disclose exact exchange rates for those 
countries.
    Proposed Sec.  1005.32(b)(4)(i) generally provides that for 
disclosures described in Sec. Sec.  1005.31(b)(1) through (3) and 
1005.36(a)(1) and (2), estimates may be provided for a remittance 
transfer to a particular country in accordance with Sec.  1005.32(c) 
for the amounts required to be disclosed under Sec.  1005.31(b)(1)(iv) 
through (vii) if the designated recipient of the remittance transfer 
will receive funds in the country's local currency and all of the 
following conditions are met: (1) The remittance transfer provider is 
an insured institution as defined in Sec.  1005.32(a)(3); (2) the 
insured institution cannot determine the exact exchange rate for that 
particular remittance transfer at the time it must provide the 
applicable disclosures; (3) the insured institution made 1,000 or fewer 
remittance transfers in the prior calendar year to the particular 
country for which the designated recipients of those transfers received 
funds in the country's local currency; and (4) the remittance transfer 
generally is sent from the sender's account with the insured 
institution.\63\ The Bureau also is proposing conforming changes to the 
following provisions to reference the proposed exception in Sec.  
1005.32(b)(4) where the temporary exception in Sec.  1005.32(a) 
currently is referenced and pertains to the estimation of the exchange 
rate: (1) Sec.  1005.32(c); (2) Sec.  1005.33(a)(1)(iii)(A); (3) Sec.  
1005.36(b)(3); (4) comment 32-1; (5) comment 32(b)(1)-4.ii; (6) comment 
32(d)-1; and (7) comment 36(b)-3.
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    \63\ For the purposes of the proposed exception in proposed 
Sec.  1005.32(b)(4), a sender's account would not include a prepaid 
account, unless the prepaid account is a payroll card account or a 
government benefit account.
---------------------------------------------------------------------------

    Proposed Sec.  1005.32(b)(4)(i) would generally apply to the 
following disclosures set forth in Sec.  1005.31(b)(1)(iv) through 
(vii) respectively: (1) The exchange rate (as applicable); (2) if 
``covered third-party fees'' as defined in Sec.  1005.30(h) are 
imposed, the total amount that will be transferred to the recipient 
inclusive of the covered third-party fees; (3) the amount of any 
covered third-party fees; and (4) the amount that will be received by 
the designated recipient (after deducting any covered third-party 
fees). Proposed Sec.  1005.32(b)(4)(ii) makes clear, however, that the 
total amount that will be transferred to the recipient inclusive of 
covered third-party fees, the amount of covered third-party fees, and 
the amount that will be received by the designated recipient (after 
deducting covered third-party fees) may be estimated under proposed 
Sec.  1005.32(b)(4)(i) only if the exchange rate is permitted to be 
estimated under proposed Sec.  1005.32(b)(4)(i) and the estimated 
exchange rate affects the amount of such disclosures. For example, if a 
remittance transfer will be received by the designated recipient in the 
same currency as the one in which the transfer is funded, the insured 
institution would not disclose an exchange rate for the transfer, and 
the total amount that will be transferred to the recipient inclusive of 
covered third-party fees, the amount of covered third-party fees, and 
the amount that will be received by the designated recipient (after 
deducting covered third-party fees) will not be affected by an exchange 
rate. In that case, an insured institution may not use proposed Sec.  
1005.32(b)(4) to estimate those disclosures. The insured institution, 
however, may be able to use another permanent exception set forth in 
Sec.  1005.32(b), including the exception in proposed Sec.  
1005.32(b)(5), to estimate those disclosures if the conditions of those 
exceptions are met.
    Proposed Sec.  1005.32(b)(4) also would apply only if the 
designated recipient of the remittance transfer will receive funds in 
the country's local currency. Current comment 31(b)(1)(iv)-1 provides 
guidance on how a remittance transfer provider can determine in which 
currency the designated recipient will receive the funds. The comment 
provides that for purposes of determining whether an exchange rate is 
applied to the transfer, if a remittance transfer provider does not 
have specific knowledge regarding the currency in which the funds will 
be received, the provider may rely on a sender's representation as to 
the currency in which funds will be received. For example, if a sender 
requests that a remittance transfer be deposited into an account in 
U.S. dollars, the provider need not disclose an exchange rate, even if 
the account is denominated in Mexican pesos and the funds are

[[Page 67146]]

converted prior to deposit into the account. Thus, under this comment, 
a remittance transfer provider may rely on a sender's representation as 
to the currency in which funds will be received for purposes of 
determining whether an exchange rate is applied to the transfer, unless 
the remittance transfer provider has actual knowledge regarding the 
currency in which the funds will be received for the transfer. If a 
sender does not know the currency in which funds will be received, the 
provider may assume that the currency in which funds will be received 
is the currency in which the remittance transfer is funded.
    Each of the four conditions set forth in proposed Sec.  
1005.32(b)(4)(i)(A) through (D) is discussed in more detail below. The 
Bureau solicits comment generally on this proposed exception, and on 
each condition as discussed in more detail below.
    The remittance transfer provider is an insured institution. 
Proposed Sec.  1005.32(b)(4)(i)(A) provides that the remittance 
transfer provider must be an insured institution as defined in Sec.  
1005.32(a)(3).\64\ As with the temporary exception, the exception in 
proposed Sec.  1005.32(b)(4) is primarily designed to address 
providers' concerns about knowing the exact exchange rate at the time 
disclosures are provided for wire transfers sent via correspondent 
banks in an open network payment system. The Bureau believes that the 
great majority of these transfers are provided by insured institutions 
and that, in turn, these open network transfers are the most common 
type of remittance transfer provided by insured institutions.
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    \64\ The term ``insured institution'' is defined in Sec.  
1005.32(a)(3) to mean insured depository institutions (which 
includes uninsured U.S. branches and agencies of foreign depository 
institutions) as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813), and insured credit unions as defined 
in section 101 of the Federal Credit Union Act (12 U.S.C. 1752).
---------------------------------------------------------------------------

    Nonetheless, the Bureau understands that some remittance transfer 
providers that are not insured institutions could use the correspondent 
banking system to send remittance transfers.\65\ The Bureau solicits 
comment on whether the Bureau should extend the exception in proposed 
Sec.  1005.32(b)(4) to apply to remittance transfer providers that are 
not insured institutions, including MSBs and broker-dealers, and the 
reasons why the proposed exception should apply to these persons.
---------------------------------------------------------------------------

    \65\ As noted in the 2019 RFI, a no-action letter issued by 
staff at the Securities and Exchange Commission (SEC) provided that 
staff will not take any enforcement action under Regulation E 
against broker-dealers that provide disclosures consistent with the 
requirements of the temporary exception. See https://www.sec.gov/divisions/marketreg/mr-noaction/2012/financial-information-forum-121412-rege.pdf.
---------------------------------------------------------------------------

    The insured institution cannot determine the exact exchange rate 
for the transfer at the time it must provide the applicable 
disclosures. As a condition of using the exception in proposed Sec.  
1005.32(b)(4), proposed Sec.  1005.32(b)(4)(i)(B) would require that, 
at the time the insured institution must provide the disclosure 
required by Sec.  1005.31(b)(1) through (3) or Sec.  1005.36(a)(1) or 
(2), as applicable, the insured institution cannot determine the exact 
exchange rate required to be disclosed under Sec.  1005.31(b)(1)(iv) 
for that remittance transfer. Proposed comment 32(b)(4)-1 provides 
guidance on whether an insured institution cannot determine the exact 
exchange rate applicable to a remittance transfer at the time the 
disclosures must be given. Specifically, proposed comment 32(b)(4)-1 
explains that for purposes of proposed Sec.  1005.32(b)(4)(i)(B), an 
insured institution cannot determine the exact exchange rate required 
to be disclosed under Sec.  100531(b)(1)(iv) for a remittance transfer 
to a particular country where the designated recipient of the transfer 
will receive funds in the country's local currency if the exchange rate 
for the transfer is set by a person other than (1) the insured 
institution; (2) an institution that has a correspondent relationship 
with the insured institution; (3) a service provider for the insured 
institution; or (4) a person that acts as an agent of the insured 
institution. The Bureau believes that proposed comment 32(b)(4)-1 sets 
forth the circumstances in which an insured institution cannot 
determine the exchange rate for a particular transfer sent through 
correspondent banks in an open network payment system and seeks comment 
on this provision.
    Proposed comment 32(b)(4)-1.i provides an example of when an 
insured institution cannot determine an exact exchange rate under 
proposed Sec.  1005.32(b)(4)(i)(B) for a remittance transfer. Proposed 
comment 32(b)(4)-1.ii provides two examples of when an insured 
institution can determine an exact exchange rate under proposed Sec.  
1005.32(b)(4)(i)(B) for a remittance transfer, and thus the insured 
institution may not use the proposed exception in proposed Sec.  
1005.32(b)(4) to estimate the disclosures required under Sec.  
1005.31(b)(1)(iv) through (vii) for the remittance transfer. The Bureau 
solicits comment on the condition set forth in proposed Sec.  
1005.32(b)(4)(i)(B) generally, and on the guidance and examples set 
forth in proposed comment 32(b)(4)-1 for whether an insured institution 
can or cannot determine the exact exchange rate for a remittance 
transfer for purposes of proposed Sec.  1005.32(b)(4)(i)(B).
    The insured institution made 1,000 or fewer remittance transfers in 
the prior calendar year to the particular country for which the 
designated recipients of those transfers received funds in the 
country's local currency. Proposed Sec.  1005.32(b)(4)(i)(C) provides 
that with respect to the country to which the remittance transfer is 
being sent, the insured institution must have made 1,000 or fewer 
remittance transfers in the prior calendar year to the particular 
country for which the designated recipients of those transfers received 
funds in the country's local currency.
    Proposed comment 32(b)(4)-2.i provides that for purposes of 
determining whether an insured institution made 1,000 or fewer 
remittance transfers in the prior calendar year to a particular country 
pursuant to proposed Sec.  1005.32(b)(4)(i)(C), the number of 
remittance transfers provided includes transfers in the prior calendar 
year to that country when the designated recipients of those transfers 
received funds in the country's local currency regardless of whether 
the exchange rate was estimated for those transfers. The proposed 
comment provides an example to illustrate. Also, proposed comment 
32(b)(4)-2.ii provides that for purposes of the 1,000 transfer 
threshold, the number of remittance transfers does not include 
remittance transfers to a country in the prior calendar year when the 
designated recipients of those transfers did not receive the funds in 
the country's local currency. The proposed comment provides an example 
to illustrate.
    The Bureau is concerned that if an insured institution is sending 
1,000 or fewer remittance transfers to a particular country in the 
country's local currency, it may be unduly costly for the institution 
to establish and maintain currency-trading desk capabilities and risk 
management policies and practices related to foreign exchange trading 
of that currency, or to use service providers, correspondent 
institutions, or persons that act as the insured institution's agent to 
obtain exact exchange rates for that currency. Based on the comments 
received on the 2019 RFI and additional outreach and research, the 
Bureau believes that cost is a primary factor in whether an insured 
institution will perform the currency exchange and thus whether it 
would know the exact exchange rate to provide in its disclosures. In 
these cases where the volume is less than the proposed

[[Page 67147]]

1,000-transfer threshold in the previous calendar year to a particular 
country in the country's local currency, the Bureau is concerned that 
if the insured institution cannot estimate the exchange rate for a 
particular transfer to that country, the institution will no longer 
continue to make transfers to that country in the country's local 
currency because of the costs associated with performing the currency 
exchange. The Bureau is particularly concerned about smaller financial 
institutions that may lack the scale for it to be practicable to cover 
the costs of establishing and maintaining currency-trading desks and 
managing the risk of exchange rate trading of currency for certain 
countries, or to use service providers, correspondent institutions, or 
persons that act as the insured institution's agent to obtain exact 
exchange rates for those currencies.
    The Bureau has received feedback from banks, credit unions, and 
their trade associations that there are other circumstances in which an 
insured institution does not perform the foreign currency conversion 
upfront, and they do not appear to be directly or primarily related to 
the cost to the insured institution of performing the currency exchange 
or the scale of an insured institution's foreign exchange business. For 
example, some trade association commenters on the 2019 RFI asserted 
that local customs or practices may make foreign currency exchange 
outside the United States ``difficult or impossible'' even if these 
restrictions are not pursuant to the laws of the receiving country, or 
that some foreign banks may refuse to process incoming wire transfers 
not denominated in U.S. dollars so as not to lose the revenue they 
receive from performing the currency exchange themselves. Based on 
outreach and its understanding of the market, however, the Bureau 
believes that insured institutions with foreign currency exchange 
businesses that have reached a sufficient or large-enough scale may be 
better-equipped at navigating these situations. As such, the proposed 
threshold, if adopted, should largely obviate the concerns related to 
these circumstances.\66\
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    \66\ For example, the ``difficulty'' or ``impossibility'' some 
trade association commenters raised with respect to certain local 
customs or practices may refer to difficulty or impossibility due to 
disproportionate cost.
---------------------------------------------------------------------------

    The Bureau solicits comment generally on this proposed condition 
and, in particular, on the proposed 1,000-transfer threshold. The 
Bureau solicits comment on whether the proposed 1,000-transfer 
threshold is an appropriate number of transfers to avoid institutions 
incurring undue costs in establishing and maintaining currency-trading 
desks and managing the risks related to foreign exchange trading of 
currency for certain countries, or to use service providers, 
correspondent institutions, or persons that act as the insured 
institution's agent to obtain exact exchange rates for those 
currencies. The Bureau also solicits comment on whether some other 
number of transfers would be more appropriate in light of these cost 
considerations. The Bureau further solicits comment on whether there 
are other defined conditions which would warrant an exemption.
    The Bureau notes that the proposed threshold amount focuses on the 
number of transfers to a particular country (in the country's local 
currency) that the insured institution made to that country in the 
previous calendar year. Unlike covered third-party fees, where the 
amount of the fees charged vary by institution, the Bureau understands 
that the exchange rate generally is determined at the country level. 
Nonetheless, the Bureau recognizes that in some cases, several 
countries may use the same currency, such as the Euro currency, and 
that in other cases one country may use more than one currency, such as 
Bhutan which officially allows both the ngultrum and the Indian rupee 
currencies to be used in the country.\67\ The Bureau also notes that in 
some cases, a designated recipient may receive a transfer in a currency 
other than the country's local currency, such as where the transfer is 
sent to a designated recipient's institution in South Korea and the 
designated recipient receives the funds in Japanese yen. The Bureau 
solicits comment on whether this proposed exception should focus on the 
number of transfers in a particular currency (as opposed to a 
particular country in the country's local currency). For example, under 
this alternative approach, if more than one country uses the same 
currency, the insured institution would need to count the number of all 
the remittance transfers sent in that currency in the prior calendar 
year for purposes of the threshold amount, regardless of the country to 
which that transfer was sent. The Bureau solicits comment on whether it 
would be more difficult for insured institutions to count the number of 
remittance transfers sent in a particular currency in the prior 
calendar year, as opposed to counting the number of remittance 
transfers sent to a particular country in the country's local currency 
in the prior calendar year.
---------------------------------------------------------------------------

    \67\ See Int'l Monetary Fund, Monetary & Capital Markets Dep't, 
Annual Report on Exchange Arrangements and Exchange Restrictions 
2018, at 17 (Apr. 16, 2019), https://www.imf.org/en/Publications/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions/Issues/2019/04/24/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions-2018-46162.
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    The remittance transfer is sent from the sender's account with the 
insured institution. Consistent with the temporary exception in Sec.  
1005.32(a), proposed Sec.  1005.32(a)(4)(i)(D) provides that the 
remittance transfer must be sent from the sender's account with the 
insured institution; provided, however, for the purposes of proposed 
Sec.  1005.32(b)(4)(i)(D), a sender's account does not include a 
prepaid account, unless the prepaid account is a payroll card account 
or a government benefit account. Currently, prepaid accounts generally 
are subject to the Remittance Rule, but the temporary exception in 
Sec.  1005.32(a) does not apply to transfers from these accounts, 
unless the prepaid account is a payroll card account or a government 
benefit account, and the other conditions of the temporary exception 
are met. Proposed Sec.  1005.32(a)(4)(i)(D) is intended to continue the 
current application of the Remittance Rule to prepaid accounts.
    Permanent exception. Proposed Sec.  1005.32(b)(4) would be a 
permanent exception with no sunset date. Based on the comments received 
on the 2019 RFI and further outreach and research, the Bureau believes 
that for at least the short-to-medium term it is likely that many 
insured institutions will depend primarily on the correspondent banking 
network to send remittance transfers where it may be unduly costly to 
provide exact exchange rates. As discussed in more detail above in the 
section-by-section analysis of Sec.  1005.32(a), the Bureau believes 
that certain developments in the market eventually could make it 
practicable for insured institutions to disclose exact exchange rates 
for transfers, although the Bureau cannot forecast when technological 
and market development will permit this to occur. As such, the Bureau 
solicits comment on whether the Bureau should include a sunset 
provision with respect to the exception in proposed Sec.  1005.32(b)(4) 
and, if so, what that sunset date should be.
    Legal authority. To effectuate the purposes of EFTA and to 
facilitate compliance, the Bureau is proposing to use its EFTA section 
904(a) and (c) authority to propose a new exception under Sec.  
1005.32(b)(4). Under its EFTA section 904(c) authority the Bureau ``may 
provide for such adjustments and exceptions for any class of electronic

[[Page 67148]]

fund transfers or remittance transfers, as in the judgment of the 
Bureau are necessary or proper to effectuate the purposes of this 
subchapter, to prevent circumvention or evasion thereof, or to 
facilitate compliance therewith.'' \68\ The Bureau believes that this 
proposed exception would facilitate compliance with EFTA, preserve 
consumer access, and effectuate its purposes. Specifically, the Bureau 
interprets ``facilitate compliance'' to include enabling or fostering 
continued operation in conformity with the law. The Bureau believes 
that the proposed exception would facilitate compliance where it may be 
infeasible or impracticable (due to undue cost) for insured 
institutions to determine the exchange rate because of an insufficient 
number of transfers to a particular country. Compliance difficulties or 
challenges that insured institutions face in providing exact 
disclosures could cause those institutions to reduce or cease offering 
transfers to certain countries, which in turn could mean that consumers 
have less access to remittance transfer services or have to pay more 
for them. By preserving such access, the proposed exception could also 
help maintain competition in the marketplace, therefore effectuating 
one of EFTA's purposes. If the temporary exception expires without the 
Bureau taking any mitigation measure, the Bureau believes certain 
insured institutions may stop sending transfers to certain countries, 
therefore potentially reducing competition for those transfers. This 
potential loss of competition could be detrimental to senders because 
the price of transfers could increase or because it could become less 
convenient to send them.\69\
---------------------------------------------------------------------------

    \68\ 15 U.S.C. 1693b(c).
    \69\ As the Bureau stated in the 2019 RFI, the Bureau recognizes 
the value to consumers of being able to send remittance transfers 
directly from a checking account to the account of a recipient in a 
foreign country through their bank or credit union. 84 FR 17971, 
17974 (Apr. 29, 2019).
---------------------------------------------------------------------------

    Other approaches suggested by commenters on the 2019 RFI. The 
Bureau is not proposing to permit estimates for any remittance transfer 
that involves exchanging a foreign currency if the remittance transfer 
provider or its foreign currency provider is unable to conduct foreign 
exchange ``in the ordinary course of its business.'' The Bureau 
believes that the exception in proposed Sec.  1005.32(b)(4) is a better 
approach in that it would create a bright-line threshold with respect 
to estimating exchange rates. The Bureau believes that the clarity of 
this standard is more likely than the suggested alternative to reduce 
uncertainty and promote compliance. The Bureau also believes that its 
proposed 1,000 threshold may address most of the concerns related to 
circumstances in which it is difficult for institutions to provide 
exact exchange rates for certain remittance transfers.
32(b)(5) Permanent Exception for Estimation of Covered Third-Party Fees 
by an Insured Institution
    The Bureau is proposing to add a new permanent exception to the 
Remittance Rule that would permit insured institutions to estimate 
covered third-party fees (and other disclosures that depend on the 
covered third-party fees) that must be included in certain 
circumstances in the disclosures required by Sec. Sec.  1005.31(b)(1) 
through (3) and 1005.36(a)(1) and (2). This proposed exception is 
designed to help mitigate the impact of the expiration of the temporary 
exception on consumers' access to certain remittance transfers.
    The term ``covered third-party fees'' is defined in Sec.  
1005.30(h)(1) to mean any fees (other than ``non-covered third-party 
fees'' described in Sec.  1005.30(h)(2)) that a person other than the 
remittance transfer provider imposes on the transfer. Fees imposed on a 
wire transfer by an intermediary institution are covered third-party 
fees. In addition, fees imposed by a designated recipient's institution 
on a wire transfer are covered third-party fees if the designated 
recipient's institution acts as an agent for the remittance transfer 
provider.
    In contrast, the term ``non-covered third-party fees'' is defined 
as any fees imposed by the designated recipient's institution for 
receiving a remittance transfer into an account except if the 
institution acts as an agent of the remittance transfer provider. Fees 
a designated recipient's institution imposes on a wire transfer are 
non-covered third-party fees if the designated recipient's institution 
does not act as an agent of the remittance transfer provider. The term 
``agent'' is defined in Sec.  1005.30(a) to mean an agent, authorized 
delegate, or person affiliated with a remittance transfer provider, as 
defined under State or other applicable law, when such agent, 
authorized delegate, or affiliate acts for that remittance transfer 
provider.
Comments Received on Estimating Covered Third-Party Fees in Response to 
the 2019 RFI
    Many industry commenters noted that most transfers sent by insured 
institutions are wire transfers sent through correspondent banks in an 
open network payment system. Several industry trade associations 
indicated that currently there are two ways in which an insured 
institution may know the amount of covered third-party fees for a 
remittance transfer sent through correspondent banks in an open network 
payment system. One way is for the insured institution to form 
correspondent banking relationships with other financial institutions, 
because such relationships allow the insured institution to know or 
control the transaction fees that could apply to a remittance transfer. 
The other way is for the insured institution to send payments to 
institutions using the cover method as discussed above in the section-
by-section analysis of Sec.  1005.32(a) and the ``OUR'' charge 
code.\70\ According to these trade associations, assuming the OUR code 
is honored,\71\ the insured institution can disclose the exact transfer 
amount because in honoring the OUR code the designated recipient's 
institution and intermediary institutions will not deduct any 
transaction fees from the transfer amount. However, these trade 
associations have asserted that an insured institution is limited in 
the financial institutions to whom it may send such a payment, because 
to send a cover payment the insured institution must have a SWIFT 
relationship management application (RMA) \72\ with the designated 
recipient's institution.\73\
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    \70\ The OUR code instructs financial institutions that receive 
payment instructions sent via SWIFT that the sending institution 
will bear all of the payment transaction fees and the recipient of 
the payment will not pay any such fees.
    \71\ The Bureau also notes that, as discussed above in the 
section-by-section analysis of Sec.  1005.32(a), it understands that 
by current market practice, financial institutions do not deduct 
transaction fees from cover payments.
    \72\ When an insured institution sends payment messages through 
SWIFT, it needs an RMA with the designated recipient's institution 
to send certain types of messages to that institution.
    \73\ Similarly, in connection with the Bureau's 2014 rulemaking 
to extend the temporary exception, one large bank told the Bureau 
that it could only send cover payments to institutions with which it 
has a preexisting agreement or relationship. See 79 FR 23234, 23245 
(Jan. 31, 2014).
---------------------------------------------------------------------------

    Several industry commenters indicated, however, that it is not 
possible to use correspondent relationships or the cover method for all 
remittance transfers sent through correspondent banks in an open 
network payment system. One bank indicated that due to its size and its 
volume of remittance transfers, it is not feasible for the bank to 
develop correspondent banking relationships in many foreign 
countries.\74\ Several trade

[[Page 67149]]

associations indicated that (1) with respect to the cover method, 
insured institutions are limited in the RMAs they can establish due to 
anticipated volume, anti-money laundering and other risk management 
requirements; (2) OUR instructions are market practices, not legally 
binding requirements; (3) some banks do not honor OUR instructions for 
a number of reasons, including local custom and the additional cost and 
complexity to downstream banks of collecting fees from the insured 
institution; and (4) the nature of an open network payment system does 
not allow banks to know with certainty at the time the disclosures are 
given whether other institutions will honor an OUR code, absent sending 
payments to one's correspondent bank or sending cover payments.
---------------------------------------------------------------------------

    \74\ Several trade associations submitted a comment letter to 
the Bureau in response to the 2017 Assessment Report RFI in which 
the trade associations indicated that insured institutions are 
unable to determine exact amounts for certain destinations because 
the low volume of transactions and resulting lack of correspondent 
relationships in such geographies makes the usual means by which 
insured institutions gather information to enable exact disclosures 
cost prohibitive or not operationally feasible. These trade 
associations made similar comments in a letter to the Bureau in 
response to the 2018 Adopted Regulations RFI.
---------------------------------------------------------------------------

    As discussed in more detail above in the section-by-section 
analysis of Sec.  1005.32(a), several industry commenters indicated 
that if the Bureau does not adopt any additional exceptions that allow 
insured institutions to continue to estimate covered third-party fees 
in certain circumstances, insured institutions may stop sending 
remittance transfers in situations where the insured institutions 
cannot provide exact disclosures of covered third-party fees. Several 
other industry commenters indicated that insured institutions that 
continue to offer remittance transfers may see costs increase when 
sending transfers to certain designated recipients' institutions if 
insured institutions have to change the ways they provide remittance 
transfers in order to disclose exact covered third-party fees.
    One trade association suggested that the Bureau should expand the 
definition of ``non-covered third-party fees'' to cover any fees 
imposed by a third-party that the insured institution cannot determine 
after reasonable inquiry, thereby no longer requiring the disclosure of 
those fees. (As discussed above, non-covered third-party fees are not 
required to be disclosed under the Remittance Rule.) The trade 
association also suggested that the Bureau should amend the definition 
of ``error'' in Sec.  1005.33, or provide relevant interpretive 
guidance, to ensure that the definition of ``error'' does not include 
instances in which covered third-party fees are charged that were not 
previously identified during a reasonable review by the remittance 
transfer provider.
The Bureau's Proposal
    The Bureau is proposing to add a new permanent exception to the 
Remittance Rule that would permit insured institutions to estimate the 
amount of covered third-party fees (and other disclosures that depend 
on the amount of those fees) in certain circumstances. Based on the 
comments received on the 2019 RFI and other outreach and research, the 
Bureau is concerned that if it does not adopt any additional exceptions 
that allow estimates of covered third-party fees after the temporary 
exception expires, some insured institutions may choose to stop sending 
remittance transfers to recipients with accounts at certain designated 
recipients' institutions. These insured institutions may choose to stop 
providing certain remittance transfers because they deem the costs of 
determining exact covered third-party fees to be prohibitively 
expensive. The Bureau is concerned that if these institutions 
discontinue providing such transfers, consumer access to remittance 
transfer services for certain designated recipients' institutions may 
be reduced or eliminated. As discussed in more detail above in the 
section-by-section analysis of Sec.  1005.32(a), it appears 
increasingly unlikely that any new technologies or partnerships will be 
able to fully eliminate insured institutions' reliance on estimates in 
the short-to-medium term.
    Also, the Bureau is concerned that in a scenario where the Bureau 
provides no additional exceptions that allow estimates of covered 
third-party fees when the temporary exception expires, insured 
institutions that continue to offer remittance transfer services may 
see costs increase when sending transfers to certain designated 
recipients' institutions if insured institutions have to change the 
ways they provide remittance transfers in order to disclose exact 
covered third-party fees. This would predictably lead to increased 
prices for consumers. In addition, the Bureau is concerned that prices 
for consumers may also increase for transfers to certain designated 
recipients' institutions (due to reduced competition) if the number of 
remittance transfer providers offering remittance transfers to such 
designated recipients' institutions is reduced due to some providers 
eliminating or curtailing transfer services because they could not 
determine and disclose exact covered third-party fees for those 
designated recipients' institutions.
    Proposed Sec.  1005.32(b)(5)(i) generally provides that for 
disclosures described in Sec. Sec.  1005.31(b)(1) through (3) and 
1005.36(a)(1) and (2), estimates may be provided for a remittance 
transfer to a particular designated recipient's institution in 
accordance with Sec.  1005.32(c) for the amounts required to be 
disclosed under Sec.  1005.31(b)(1)(vi) through (vii), if all of the 
following conditions are met: (1) The remittance transfer provider is 
an insured institution, as defined in Sec.  1005.32(a)(3); (2) the 
insured institution cannot determine the exact covered third-party fees 
for a remittance transfer to a particular designated recipient's 
institution at the time it must provide the applicable disclosures; (3) 
the insured institution made 500 or fewer remittance transfers in the 
prior calendar year to that designated recipient's institution; and (4) 
the remittance transfer generally is sent from the sender's account 
with the insured institution.\75\ The Bureau is also proposing 
conforming changes to the following provisions to reference the 
proposed exception in Sec.  1005.32(b)(5) where the temporary exception 
in Sec.  1005.32(a) currently is referenced and pertains to the 
estimation of covered third-party fees: (1) Sec.  1005.32(c); (2) Sec.  
1005.33(a)(1)(iii)(A); (3) Sec.  1005.36(b)(3); (4) comment 32-1; (5) 
comment 32(c)(3)-1; and (6) comment 36(b)-3.
---------------------------------------------------------------------------

    \75\ For the purposes of proposed Sec.  1005.32(b)(5), a 
sender's account would not include a prepaid account, unless the 
prepaid account is a payroll card account or a government benefit 
account.
---------------------------------------------------------------------------

    Proposed Sec.  1005.32(b)(5)(i) would generally apply to the 
following disclosures set forth in Sec.  1005.31(b)(1)(vi) through 
(vii) respectively: (1) The amount of any covered third-party fees; and 
(2) the amount that will be received by the designated recipient (after 
deducting any covered third-party fees). Proposed Sec.  
1005.32(b)(5)(ii) makes clear, however, that the amount that will be 
received by the designated recipient (after deducting covered third-
party fees) may be estimated under proposed Sec.  1005.32(b)(5)(i) only 
if covered third-party fees are permitted to be estimated under 
proposed Sec.  1005.32(b)(5)(i) and the estimated covered third-party 
fees affect the amount of such disclosure. For example, if the covered 
third-party fees for a remittance transfer may not be estimated under 
proposed Sec.  1005.32(b)(5), the amount that will be received by the 
designated recipient (after deducting any covered third-party

[[Page 67150]]

fees) may not be estimated under proposed Sec.  1005.32(b)(5). The 
insured institution, however, may be able to use another permanent 
exception set forth in Sec.  1005.32(b), including the proposed 
exception in Sec.  1005.32(b)(4), to estimate that disclosure if the 
conditions of those exceptions are met.
    Each of the four conditions set forth in proposed Sec.  
1005.32(b)(5)(i)(A) through (D) is discussed in more detail below. The 
Bureau solicits comment generally on this proposed exception, and on 
each condition as discussed in more detail below.
    The remittance transfer provider is an insured institution. 
Proposed Sec.  1005.32(b)(5)(i)(A) provides that the remittance 
transfer provider must be an insured institution as defined in Sec.  
1005.32(a)(3).\76\ The Bureau solicits comment on whether the Bureau 
should extend this exception to apply to remittance transfer providers 
that are not insured institutions, including MSBs and broker-dealers, 
and the reasons why the proposed exception should apply to these 
persons.\77\
---------------------------------------------------------------------------

    \76\ The term ``insured institution'' is defined in Sec.  
1005.32(a)(3) to mean insured depository institutions (which 
includes uninsured U.S. branches and agencies of foreign depository 
institutions) as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813), and insured credit unions as defined 
in section 101 of the Federal Credit Union Act (12 U.S.C. 1752).
    \77\ See the section-by-section analysis of proposed Sec.  
1005.32(b)(4) above for a discussion of a similar request for 
comment related to proposed Sec.  1005.32(b)(4)(i)(A).
---------------------------------------------------------------------------

    The insured institution cannot determine the exact covered third-
party fees for a remittance transfer to a particular designated 
recipient's institution at the time it must provide the applicable 
disclosures. As a condition of using the exception in proposed Sec.  
1005.32(b)(5), proposed Sec.  1005.32(b)(5)(i)(B) would require that, 
at the time the insured institution must provide, as applicable, the 
disclosure required by Sec.  1005.31(b)(1) through (3) or Sec.  
1005.36(a)(1) or (2), the insured institution cannot determine the 
exact covered third-party fees required to be disclosed under Sec.  
1005.31(b)(1)(vi) for that remittance transfer. Proposed comment 
32(b)(5)-1 provides guidance on when an insured institution cannot 
determine the exact covered third-party fees as applicable to a 
remittance transfer at the time the disclosures must be given. 
Specifically, proposed comment 32(b)(5)-1 provides that for purposes of 
Sec.  1005.32(b)(5)(i)(B), an insured institution cannot determine, at 
the time it must provide the applicable disclosures, the exact covered 
third-party fees required to be disclosed under Sec.  1005.31(b)(1)(vi) 
for a remittance transfer to a designated recipient's institution when 
all of the following conditions are met: (1) The insured institution 
does not have a correspondent relationship with the designated 
recipient's institution; (2) the designated recipient's institution 
does not act as an agent of the insured institution; (3) the insured 
institution does not have an agreement with the designated recipient's 
institution with respect to the imposition of covered third-party fees 
on the remittance transfer (e.g., an agreement whereby the designated 
recipient's institution agrees to charge back any covered third-party 
fees to the insured institution rather than impose the fees on the 
remittance transfer); and (4) the insured institution does not know at 
the time the disclosures are given that the only intermediary financial 
institutions that will impose covered third-party fees on the transfer 
are those institutions that have a correspondent relationship with or 
act as an agent for the insured institution, or have otherwise agreed 
upon the covered third-party fees with the insured institution. The 
Bureau believes that proposed comment 32(b)(5)-1 sets forth the 
circumstances in which an insured institution cannot determine the 
exact covered third-party fees for remittance transfers sent through 
correspondent banks in an open network payment system and seeks comment 
on this provision.
    In contrast, proposed comment 32(b)(5)-2 provides that for purposes 
of proposed Sec.  1005.32(b)(5)(i)(B), an insured institution can 
determine, at the time it must provide the applicable disclosures, 
exact covered third-party fees for a remittance transfer, and thus the 
insured institution may not use the exception in proposed Sec.  
1005.32(b)(5) to estimate the disclosures required under Sec.  
1005.31(b)(1)(vi) or (vii) for the transfer, if any of the following 
conditions are met: (1) An insured institution has a correspondent 
relationship with the designated recipient's institution; (2) the 
designated recipient's institution acts as an agent of the insured 
institution; (3) an insured institution has an agreement with the 
designated recipient's institution with respect to the imposition of 
covered third-party fees on the remittance transfer; or (4) an insured 
institution knows at the time the disclosures are given that the only 
intermediary financial institutions that will impose covered third-
party fees on the transfer are those institutions that have a 
correspondent relationship with or act as an agent for the insured 
institution, or have otherwise agreed upon the covered third-party fees 
with the insured institution. The Bureau believes that proposed comment 
32(b)(5)-2 sets forth the circumstances in which an insured institution 
can determine the exact covered third-party fees for remittance 
transfers sent through a correspondent banks in an open network payment 
system and seeks comment on this provision.
    The Bureau solicits comment on the condition set forth in proposed 
Sec.  1005.32(b)(5)(i)(B) generally, and on the guidance set forth in 
proposed comments 32(b)(5)-1 and -2 for whether an insured institution 
can or cannot determine the exact covered third-party fees for a 
remittance transfer for purposes of proposed Sec.  1005.32(b)(5)(i)(B).
    The insured institution made 500 or fewer remittance transfers in 
the prior calendar year to that designated recipient's institution. 
Proposed Sec.  1005.32(b)(5)(i)(C) provides that, with respect to the 
designated recipient's institution to which the remittance transfer is 
being sent, the insured institution must have made 500 or fewer 
remittance transfers in the prior calendar year to that designated 
recipient's institution. The Bureau notes that the proposed threshold 
amount focuses on the number of transfers to the particular designated 
recipient's institution that the insured institution made in the 
previous calendar year. The Bureau understands that covered third-party 
fees generally are determined by each institution rather than at the 
country level.
    Proposed comment 32(b)(5)-3.i provides that for purposes of 
determining whether an insured institution made 500 or fewer remittance 
transfers in the prior calendar year to a particular designated 
recipient's institution pursuant to proposed Sec.  1005.32(b)(5)(i)(C), 
the number of remittance transfers provided includes remittance 
transfers in the prior calendar year to that designated recipient's 
institution regardless of whether the covered third-party fees were 
estimated for those transfers. The proposed comment provides an example 
to illustrate.
    Proposed comment 32(b)(5)-3.ii also provides that for purposes of 
the proposed 500 threshold, the number of remittance transfers includes 
remittance transfers provided to the designated recipient's institution 
in the prior calendar year regardless of whether the designated 
recipients received the funds in the country's local currency or in 
another currency. The proposed comment provides an example to 
illustrate.

[[Page 67151]]

    The Bureau is concerned that if an insured institution is sending 
500 or fewer transfers annually to a given designated recipient's 
institution, it may be unduly costly for the insured institution to 
establish the necessary relationships to know the covered third-party 
fees that will apply to a remittance transfer at the time the 
disclosures must be given. For example, based on comments received on 
the 2019 RFI and other outreach and research, the Bureau understands 
insured institutions sending remittance transfers through correspondent 
banks in an open network payment system would know the exact amount of 
covered third-party fees that will apply to a remittance transfer at 
the time disclosures are given if the insured institution has a 
correspondent relationship with the designated recipient's institution. 
The Bureau understands that another way in which the insured 
institution may know at the time the disclosures must be given the 
exact amount of covered third-party fees for a particular remittance 
transfer is through using the cover method under the SWIFT network, as 
discussed above. To use the cover method, the insured institution would 
need an RMA with the designated recipient's institution.
    The Bureau understands that there are costs to maintaining the 
relationships that are needed to enable insured institutions to provide 
exact disclosures of covered third-party fees for remittance 
transfers.\78\ Based on comments on the 2019 RFI and other outreach and 
research, the Bureau believes that anticipated transfer volume from an 
insured institution to a particular designated recipient's institution 
is an important factor in the insured institution's decision about 
whether to form and maintain such relationships.
---------------------------------------------------------------------------

    \78\ See Financial Stability Board, FSB Correspondent Banking 
Data Report, at 4, 44 (2017); 2016 BIS Report at 11.
---------------------------------------------------------------------------

    The Bureau also recognizes that transfer volume is not the only 
factor in determining whether an insured institution enters into a 
correspondent banking relationship or an RMA with another financial 
institution. Industry commenters on the 2019 RFI identified factors 
that relate to the insured institution's risk assessment requirements 
and asked the Bureau to take these into consideration when 
contemplating regulatory solutions. It appears that these risk 
assessment requirements weigh various risk factors, such as cybercrime 
risk, to the insured institution. Because insured institutions could 
take significantly different approaches to managing such risks, based 
on their risk appetite, the Bureau believes that it would be difficult 
to adopt specific exceptions to address all of these risk factors and 
the varying risk appetites across institutions. Thus, with respect to 
permitting estimates of covered third-party fees, the Bureau is 
proposing a bright-line threshold of insured institutions making 500 or 
fewer transfers to a particular designated recipient's institution in 
the prior calendar year. The Bureau believes the proposed threshold, if 
adopted, would obviate a number of the concerns related to these risk 
factors.
    The Bureau solicits comment generally on this proposed condition, 
and in particular, on the proposed 500 transfer threshold amount. The 
Bureau solicits comment on whether the proposed 500 transfer threshold 
is appropriate in determining whether it is cost effective for insured 
institutions to incur the costs of establishing and maintaining the 
necessary relationships so that they can determine the exact covered 
third-party fees for remittance transfers to that designated 
recipient's institution. The Bureau also solicits comment on whether 
the transfer threshold should be higher or lower than 500 transfers to 
achieve this objective. The Bureau further solicits comment on whether 
there are other defined conditions which would warrant an exemption.
    The remittance transfer is sent from the sender's account with the 
insured institution. Proposed Sec.  1005.32(a)(5)(i)(D) provides that 
the remittance transfer must be sent from the sender's account with the 
insured institution; provided however, for the purposes of proposed 
Sec.  1005.32(b)(5), a sender's account would not include a prepaid 
account, unless the prepaid account is a payroll card account or a 
government benefit account.\79\
---------------------------------------------------------------------------

    \79\ See the section-by-section analysis of proposed Sec.  
1005.32(b)(4)(i)(D) above for a discussion of a similar provision 
related to proposed Sec.  1005.32(b)(4).
---------------------------------------------------------------------------

    Permanent exception. Proposed Sec.  1005.32(b)(5) would be a 
permanent exception with no sunset date. The Bureau solicits comment on 
whether the Bureau should include a sunset provision with respect to 
the proposed exception in Sec.  1005.32(b)(5) and, if so, what that 
sunset date should be.\80\
---------------------------------------------------------------------------

    \80\ See the section-by-section analysis of proposed Sec.  
1005.32(b)(4) above for a discussion of a similar request for 
comment related to proposed Sec.  1005.32(b)(4).
---------------------------------------------------------------------------

    Legal authority. To effectuate the purposes of EFTA and to 
facilitate compliance, the Bureau is proposing to use its EFTA section 
904(a) and (c) authority to add a new exception under Sec.  
1005.32(b)(5). Under its EFTA section 904(c) authority, the Bureau 
``may provide for such adjustments and exceptions for any class of 
electronic fund transfers or remittance transfers, as in the judgment 
of the Bureau are necessary or proper to effectuate the purposes of 
this subchapter, to prevent circumvention or evasion thereof, or to 
facilitate compliance therewith.'' \81\ The Bureau believes that the 
proposed exception would facilitate compliance with EFTA, preserve 
consumer access, and effectuate its purposes. Specifically, the Bureau 
interprets ``facilitate compliance'' to include enabling or fostering 
continued operation in conformity with the law. The Bureau believes 
that the proposed exception would facilitate compliance where it may be 
infeasible or impracticable (due to disproportionate cost) for insured 
institutions to determine covered third-party fees because of 
insufficient volume to a particular designated recipient's institution. 
Compliance difficulties or challenges that insured institutions face in 
providing exact covered third-party fees could cause those institutions 
to reduce or cease offering transfers to certain designated recipients' 
institutions, which in turn could mean that consumers have less access 
to remittance transfer services. By preserving such access, the 
proposed exception also could help maintain competition in the 
marketplace, therefore effectuating one of EFTA's purposes. If the 
temporary exception expires without the Bureau taking any mitigation 
measure, the Bureau believes certain insured institutions may stop 
sending transfers to particular designated recipients' institutions, 
therefore reducing competition for those transfers. This potential loss 
of market participants could be detrimental to senders because it could 
increase the price of remittance transfers or such transfer services 
could become less convenient.\82\
---------------------------------------------------------------------------

    \81\ 15 U.S.C. 1693b(c).
    \82\ As the Bureau stated in the 2019 RFI, the Bureau recognizes 
the value to consumers of being able to send remittance transfers 
directly from a checking account to the account of a recipient in a 
foreign country though their bank or credit union. 84 FR 17971, 
17974 (Apr. 29, 2019).
---------------------------------------------------------------------------

    Other approaches suggested by commenters on the 2019 RFI. The 
Bureau is not proposing to expand the definition of ``non-covered 
third-party fees'' to include any fees imposed by a third-party that 
the insured institution cannot determine after reasonable inquiry, 
thereby no longer requiring the disclosure of those fees. (Non-covered 
third-party fees are not required to be

[[Page 67152]]

disclosed under the Remittance Rule.) The Bureau is likewise not 
proposing to amend the definition of ``error'' in Sec.  1005.33 to 
exclude instances in which a covered third-party fee is charged that 
was not previously identified during a reasonable review by the 
remittance transfer provider. The Bureau believes proposed Sec.  
1005.32(b)(5) is a better approach in that it would create a bright-
line threshold with respect to estimating covered third-party fees. The 
proposed approach would allow insured institutions to provide estimates 
of covered third-party fees where it may not be cost effective for 
those institutions to continue providing such transfers if they could 
not provide estimates. Also, the Bureau believes that the proposed 
approach would benefit consumers more than the suggested alternative 
related to ``non-covered third-party fees'' because the sender of the 
transfer would receive an estimate of the covered third-party fees if 
the conditions of proposed Sec.  1005.32(b)(5) are met, rather than not 
receiving any information about the fees if these fees were deemed to 
be ``non-covered third-party fees.''
Additional Issue for Comment: The Permanent Exception in Sec.  
1005.32(b)(1) and the Bureau's Safe Harbor Countries List
    As discussed above, EFTA generally requires a remittance transfer 
provider to disclose the exact exchange rate to be applied to a 
remittance transfer.\83\ Also as described above, an exception to this 
requirement (in section 919(c) of EFTA) allows the Bureau to write 
regulations specific to transfers to certain countries if it has 
determined that the recipient country does not legally allow, or the 
method by which transactions are made in the recipient country do not 
allow, a remittance transfer provider to know the amount of currency 
the designated recipient will receive. If these conditions are met, the 
provider may use a reasonably accurate estimate of the foreign currency 
to be received, based on the exchange rate the provider conveyed to the 
sender at the time the sender initiated the transaction.\84\
---------------------------------------------------------------------------

    \83\ EFTA section 919(a)(2)(A)(iii), codified at 15 U.S.C. 
1693o-1(a)(2)(A)(iii).
    \84\ EFTA section 919(c)(2), codified at 15 U.S.C. 1693o-
1(c)(2).
---------------------------------------------------------------------------

    The Bureau implemented section 919(c) of EFTA in Sec.  
1005.32(b)(1), creating a ``permanent exception for transfers to 
certain countries.'' The exception is available in two situations. 
First, Sec.  1005.32(b)(1)(i) permits providers to use estimates if 
they cannot determine exact amounts because (A) the laws of the 
recipient country do not permit such a determination, or (B) the method 
by which transactions are made in the recipient country does not permit 
such determination. Comment 32(b)(1)-2.i explains that, for example, 
under the first category, the laws do not permit exact disclosures when 
the exchange rate is determined after the provider sends the transfer 
or at the time of receipt. Comment 32(b)(1)-3 offers an example of a 
situation that qualifies for the methods exception. The example 
provided is a situation where transactions are sent via international 
ACH on terms negotiated between the U.S. government and the recipient 
country's government, under which the exchange rate is a rate set by 
the recipient country's central bank or other governmental authority 
after the provider sends the remittance transfer. Comments 32(b)(1)-4.i 
through iii provide additional examples of situations that do and do 
not qualify for the methods exception.
    Second, Sec.  1005.32(b)(1)(ii) offers a safe harbor allowing 
remittance transfer providers to disclose estimates instead of exact 
amounts for remittance transfers to certain countries as determined by 
the Bureau. Notably, however, the Rule does not allow a remittance 
transfer provider to use the safe harbor if the provider has 
information that a country's laws or the method by which transactions 
are conducted in that country permits a determination of the exact 
disclosure amount.
    In 2012, the Bureau issued a list of five countries--Aruba, Brazil, 
China, Ethiopia, and Libya--that qualify for this safe harbor.\85\ The 
list contains countries whose laws the Bureau has decided prevent 
providers from determining, at the time the required disclosures must 
be provided, the exact exchange rate on the date of availability for a 
transfer involving a currency exchange.\86\ The Bureau also explained 
that the safe harbor countries list was subject to change, and provided 
instructions for contacting the Bureau to request that countries be 
added or removed from the list.\87\ Since 2012, the Bureau has not 
added any additional countries to this list.
---------------------------------------------------------------------------

    \85\ Bureau of Consumer Fin. Prot., Remittance Rule Safe Harbor 
Countries List (Sept. 26, 2012), http://files.consumerfinance.gov/f/201209_CFPB_Remittance-Rule-Safe-Harbor-Countries-List.pdf. The 
Bureau subsequently published that list in the Federal Register. 78 
FR 66251 (Nov. 5, 2013).
    \86\ Id. at 3.
    \87\ Id. at 3-4.
---------------------------------------------------------------------------

    The Bureau has received feedback over the years from some 
remittance transfer providers and their trade associations regarding 
the Bureau's countries list. In the 2019 RFI, the Bureau again sought 
comment on what other countries, if any, should be added to the list 
because their laws do not permit the determination of exact amounts at 
the time the pre-payment disclosure must be provided.\88\ In response, 
several industry commenters, including trade associations, banks, and a 
credit union, made various requests, primarily suggesting that 
particular countries or regions be added to the list. A few of these 
commenters requested that the Bureau make other changes to the 
permanent exception in Sec.  1005.32(b)(1) to address, for example, 
difficulties in obtaining accurate fee and exchange rate information 
that they assert occur when sending open network transfers. A group of 
trade association commenters also suggested that the Bureau loosen and 
revise its requirements for the inclusion of additional countries on 
the countries list as a way to mitigate the expiration of the temporary 
exception.
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    \88\ The Bureau also asked that commenters describe how the 
relevant laws prevent such a determination, and whether the 
countries were ones for which remittance transfer services were not 
currently being provided, or whether providers were relying on 
estimates. 84 FR 17971, 17977 (Apr. 29, 2019).
---------------------------------------------------------------------------

    The Bureau again seeks comment on the permanent exception in Sec.  
1005.32(b)(1) and the Bureau's process for adding countries to the 
list. The Bureau requests that any commenters seeking to have 
particular countries added to the list describe how the relevant laws 
or method prevent such a determination. The Bureau is particularly 
interested in whether these countries are ones for which remittance 
transfer services are not currently being provided, or whether 
providers are currently relying on estimates for providing disclosures 
required by the Rule.
    The Bureau has, to date, only put countries on the list where the 
laws of the country prevent determining the exact exchange rate, 
although EFTA and the Rule permit the Bureau to add counties to the 
list if there is an issue with the method as well. As noted above, some 
have suggested that the Bureau amend Sec.  1005.32(b)(1)(i) to provide 
that wire transfers are a ``method by which transactions are made in 
the recipient country'' that does not allow exact disclosures if such 
amounts cannot be reasonably determined at the time the disclosures are 
provided. However, for reasons discussed above in the section-by-
section analysis of Sec.  1005.32(a), the Bureau is not proposing to do 
so.

[[Page 67153]]

Nonetheless, the Bureau is interested in suggestions regarding possible 
changes to the substantive criteria by which it adds countries to the 
countries list, whether based on the laws or method. For example, the 
law of a country precluding determining exact amounts could mean both 
the express terms of the law or the law as applied.
    The Bureau is also interested in suggestions regarding possible 
changes to the processes and standards by which it adds countries to 
the countries list, including standards related to the nature or 
quantum of evidence needed for the Bureau to determine that the law or 
method of transfer to a country precludes providing exact disclosures. 
Currently, the Bureau's instructions to persons wishing to have 
countries considered for the countries list is to send feedback 
regarding whether the Bureau should make changes to the list, and any 
supporting materials (in English), to a specified email or mailing 
address. The Bureau has only included countries on the countries list 
where it has been able to verify that the law or regulation warrants 
inclusion. The Bureau has not, historically, added countries to the 
list when it has not been able to verify that they merit inclusion. The 
Bureau seeks comment on whether, in order to facilitate its review of 
countries list requests, it should articulate a more detailed list of 
information and documents (such as copies of relevant laws and 
regulations, as well as affidavits) that an applicant might submit to 
make such a request of the Bureau.
    Given the new permanent exceptions proposed herein to address the 
expiration of the temporary exception, the Bureau seeks comment on 
whether insured institutions expect that proposed Sec.  1005.32(b)(4) 
and (5) will address their concerns regarding providing estimates or 
whether they would additionally need to rely on Sec.  1005.32(b)(1). 
The Bureau relatedly requests comment on the volume of transfers that 
remittance transfer providers send to the countries that are currently 
on the countries list as well as to those that they are requesting be 
added.
    Finally, the Bureau seeks comment on whether any remittance 
transfer providers use estimates pursuant to Sec.  1005.32(b)(1)(i) 
with respect to any countries that are not on the countries list. As 
the Bureau has stated in the past, that provision permits a remittance 
transfer provider to make its own determination that the laws of other 
recipient countries not on the list, or the method of sending transfers 
to such countries, do not permit a determination of exact amounts.\89\ 
If providers are not relying on Sec.  1005.32(b)(1)(i) to provide 
estimates, the Bureau requests comment on why they are not doing so.
---------------------------------------------------------------------------

    \89\ 78 FR 66251, 66252 (Nov. 5, 2013).
---------------------------------------------------------------------------

    The Bureau notes that its focus in this rulemaking is to address 
the expiration of the temporary exception and the safe harbor 
threshold. Accordingly, the Bureau cautions that, in light of its time 
frame for doing so, it will give priority to addressing those issues 
over the issues relating to the countries list.

VI. Effective Date

    The Bureau is proposing that any final rule take effect on July 21, 
2020. The Bureau anticipates that at least 30 days prior to July 21, 
2020, it will publish any final rule in the Federal Register, as 
required under section 553(d) of the Administrative Procedure Act.\90\ 
As discussed above, the temporary exception in Sec.  1005.32(a) expires 
on July 21, 2020. The Bureau is proposing that its modifications to the 
Rule, which are intended to mitigate the effects of the expiration of 
the temporary exception, become effective on the day the temporary 
exception expires.
---------------------------------------------------------------------------

    \90\ 5 U.S.C. 553(d). Under the Congressional Review Act (5 
U.S.C. 801 through 808), if the Office of Management and Budget 
determines that a rule constitutes a ``major rule'' as defined in 5 
U.S.C. 804(2), the rule may not take effect until the later of 60 
days after it is received by Congress or published in the Federal 
Register. 5 U.S.C. 801(a)(3)(A).
---------------------------------------------------------------------------

    The Bureau's proposed change to the safe harbor threshold in Sec.  
1005.30(f)(2) will also, among other things, mitigate the effect of the 
temporary exception's expiration on insured institutions that provide 
between 100 and 500 remittance transfers per year. Given the Bureau's 
expected timing for publication of a final rule addressing the safe 
harbor threshold and provisions to mitigate the expiration of the 
temporary exception, and the interplay between the safe harbor 
threshold and the temporary exception, the Bureau is likewise proposing 
that the change to the safe harbor threshold become effective on July 
21, 2020. The Bureau seeks comment on this aspect of the proposal. The 
Bureau also seeks comment on whether a mid-year change in the safe 
harbor threshold would pose any complications for providers or cause 
confusion, and if so, whether the Bureau should make the change to the 
safe harbor threshold effective on some later date, such as January 1, 
2021.
    The Bureau also solicits comment on any compliance issues that 
might arise for insured institutions when transitioning from use of the 
temporary exception to use of the two new proposed exceptions set forth 
in proposed Sec.  1005.32(b)(4) and (5).
    After considering comments on this proposal, the Bureau intends to 
publish a final rule with respect to the safe harbor threshold and 
provisions to mitigate the expiration of the temporary exception.

VII. Dodd-Frank Act Section 1022(b) Analysis

A. Overview

    In developing the proposed rule, the Bureau has considered the 
potential benefits, costs, and impacts.\91\ The Bureau also consulted 
with appropriate Federal agencies regarding the consistency of the 
proposed rule with prudential, market, or systemic objectives 
administered by such agencies as required by section 1022(b)(2)(B) of 
the Dodd-Frank Act.\92\ The Bureau requests comment on the preliminary 
analysis presented below as well as submissions of additional data that 
could inform the Bureau's analysis of the benefits, costs, and impacts.
---------------------------------------------------------------------------

    \91\ Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act 
(12 U.S.C. 5512(b)(2)(A)) requires the Bureau to consider the 
potential benefits and costs of the regulation to consumers and 
covered persons, including the potential reduction of access by 
consumers to consumer financial products or services; the impact of 
the proposed rule on insured depository institutions and insured 
credit unions with $10 billion or less in total assets as described 
in section 1026 of the Dodd-Frank Act (12 U.S.C. 5516); and the 
impact on consumers in rural areas.
    \92\ Section 1022(b)(2)(B) of the Dodd-Frank Act (12 U.S.C. 
5512(b)(2)(B)) requires that the Bureau consult with the appropriate 
prudential regulators or other Federal agencies prior to proposing a 
rule and during the comment process regarding consistency of the 
proposed rule with prudential, market, or systemic objectives 
administered by such agencies.
---------------------------------------------------------------------------

    The proposed rule would amend several elements of the Remittance 
Rule. (1) It would raise the safe harbor threshold for providing 
remittance transfers in the normal course of business from 100 
transfers to 500 transfers. Under this proposed change, a person that 
provided 500 or fewer remittance transfers in the previous calendar 
year and provides 500 or fewer remittance transfers in the current 
calendar year would be deemed not to be providing remittance transfers 
in the normal course of its business and thus is not subject to the 
Rule. (2) It would provide a permanent exception that would allow 
insured institutions to estimate the exchange rate (and other 
disclosures that depend on the exchange rate) under certain conditions 
when sending to a country, principally that the designated recipient of 
the remittance transfer will receive funds in the country's local 
currency and (a) the insured institution made 1,000 or fewer

[[Page 67154]]

transfers in the prior calendar year to that country where the 
designated recipients received funds in the country's local currency 
and (b) the insured institution cannot determine the exact exchange 
rate for that particular transfer at the time it must provide the 
applicable disclosures. (3) It would provide a permanent exception that 
would permit insured institutions to estimate covered third-party fees 
(and disclosures that depend on the amount of those fees) under certain 
conditions when sending to a designated recipient's institution, 
principally that the insured institution (a) made 500 or fewer 
remittance transfers to that designated recipient's institution in the 
prior calendar year and (b) the insured institution cannot determine 
the exact covered third-party fees for that particular transfer at the 
time it must provide the applicable disclosures.
    The Bureau would generally consider the benefits, costs, and 
impacts of the proposed rule against the baseline in which the Bureau 
takes no action. Under that approach, the baseline would be premised on 
an assumption that the Rule's existing temporary exception allowing 
certain insured institutions to disclose estimates instead of exact 
amounts to consumers would expire and the normal course of business 
safe harbor threshold would remain at 100 transfers. However, if the 
Bureau adopts the proposal as set forth herein, certain entities 
currently benefitting from the temporary exception would be exempt from 
the Rule entirely because of the expansion of the normal course of 
business safe harbor threshold. These entities would obtain no 
additional reduction in burden from the permanent exceptions for 
exchange rates and covered third-party fees because they would be 
excepted entirely from the Rule. Given this, the Bureau believes it is 
appropriate to consider the reduction in burden from the proposed 
permanent exceptions against a baseline in which the Bureau has amended 
the normal course of business safe harbor threshold as proposed. In 
other words, the Bureau considers the potential benefits, costs, and 
impacts of the proposed permanent exceptions only on insured 
institutions that provide more than 500 transfers in the prior and 
current calendar years. The impact analysis therefore discusses two 
baselines in sequence, as follows: (1) For purposes of considering the 
proposed normal course of business safe harbor threshold of 500 
transfers, the Bureau uses a no-action baseline that assumes the 
temporary exception will expire and no permanent exceptions will be 
adopted; and (2) for purposes of considering the proposed permanent 
exceptions for exchange rates and covered third-party fees, the Bureau 
uses a baseline in which the temporary exception has expired and the 
agency has amended the normal course of business safe harbor threshold 
as proposed, so entities that provide 500 or fewer transfers in the 
previous and current calendar years are excluded.
    With respect to the provisions of the proposed rule, the Bureau's 
analysis considers the benefits and costs to remittance transfer 
providers (covered persons) and as well as to senders (consumers). The 
Bureau has discretion in any rulemaking to choose an appropriate scope 
of analysis with respect to benefits, costs, and impacts, as well as an 
appropriate baseline or baselines.

B. Data Limitations and Quantification of Benefits, Costs, and Impacts

    The discussion in this impact analysis relies on data the Bureau 
obtained from industry, other regulatory agencies, and publicly 
available sources. The Bureau has done extensive outreach on many of 
the issues the proposal raises, including conducting the Assessment and 
issuing the Assessment Report as required under section 1022(d) of the 
Dodd-Frank Act, issuing the 2019 RFI, holding discussions with a number 
of remittance transfer providers that are banks and credit unions of 
different sizes, and consulting with other stakeholders. However, as 
discussed further below, the data with which to quantify the potential 
costs, benefits, and impacts of the proposed rule are generally 
limited.
    Quantifying the benefits of the proposed rule for consumers 
presents certain challenges. As discussed further below, the proposed 
rule would tend to preserve access to wire transfers, the great 
majority of which are provided by insured institutions, and would tend 
to hold steady the pricing of wire transfers for certain, but not 
necessarily all, consumers who send wire transfers. The proposed rule 
would allow some insured institutions to continue using estimates in 
disclosures while other insured institutions would have to provide 
exact amounts in disclosures. Determining the number of consumers 
experiencing these different effects would require representative 
market-wide data on the prevalence of consumers who receive exact 
amounts versus estimated amounts in disclosures as well as the costs to 
providers of conveying this information to consumers in compliance with 
the Rule and the Bureau's proposed amendments thereto. The Bureau would 
then need to predict the responses of providers to these costs and the 
prevalence of consumers who would receive exact information versus 
estimated information in disclosures under the proposed rule. The 
Bureau does not have the data needed to quantify these effects, nor 
could it readily quantify the benefits to consumers of these effects. 
The Bureau asks interested parties to provide data, research results, 
and other factual information that would allow the Bureau to further 
quantify the effects of the proposed rule.
    In light of these data limitations, the analysis below provides 
both a quantitative and qualitative discussion of the potential 
benefits, costs, and impacts of the proposed rule. Where possible given 
the data available, the Bureau has made quantitative estimates based on 
economic principles. Where the data is limited or not available, the 
Bureau relies on general economic principles and the Bureau's 
experience and expertise in consumer financial markets to provide a 
qualitative discussion of the benefits, costs, and impacts of the 
proposed rule.

C. Potential Benefits and Costs to Covered Persons and Consumers

    As discussed above in explaining the baseline, the cost to certain 
insured institutions of the expiration of the temporary exception would 
be mitigated, although to differing extents, by the proposed increase 
in the normal course of business safe harbor threshold and the proposed 
permanent exceptions that would permit insured institutions to provide 
estimates of exchange rates and covered third-party fees in certain 
circumstances. In particular, insured institutions that currently 
provide between 101 and 500 transfers \93\ in the prior and current 
calendar years would no longer be covered by the Rule and would 
therefore no longer need to provide any disclosures at all. If the 
Bureau were to adopt all of the proposed provisions, the permanent 
exceptions permitting estimation of exchange rates and covered third-
party fees would not have any additional effect on the insured 
institutions (and their customers) that the Rule would no longer cover. 
The Bureau therefore believes that it is appropriate to consider the 
benefits and costs to consumers and covered persons of the proposed 
rule through considering: (1) The proposed permanent exceptions that 
would increase the normal course of business safe harbor threshold; and

[[Page 67155]]

(2) the effects of the proposals to allow certain insured institutions 
to provide estimates in certain disclosures under certain circumstances 
on banks and credit unions that currently provide more than 500 
transfers annually.
---------------------------------------------------------------------------

    \93\ As noted above in the section-by-section analysis of Sec.  
1005.30(f), ``between 101 and 500'' means 101 or more and 500 or 
fewer.
---------------------------------------------------------------------------

    As explained above, the Bureau is not aware of any nonbank 
remittance transfer providers that would qualify for exclusion from the 
Rule under the proposed 500-transfer normal course of business safe 
harbor threshold. In particular, the Bureau believes that all MSBs that 
provide remittance transfers provide more than 500 transfers annually. 
Further, the two proposed permanent exceptions would apply only to 
insured institutions and would not apply to nonbank remittance transfer 
providers like MSBs.
    In light of the above, the proposed rule overall could affect MSBs 
only indirectly, through shifts in the volume of remittance transfers 
sent by MSBs relative to the volume sent by insured institutions. The 
Bureau believes, however, that these shifts would be limited because 
MSBs provide a somewhat different service than banks and credit unions 
to meet different consumer demands. For example, as discussed in part 
II above, in the Assessment Report, the Bureau found that the dollar 
value of the average remittance transfer provided by MSBs is typically 
much smaller (approximately $381 on average) than the dollar value of 
transfers (more than approximately $6,500 on average) provided by banks 
or credit unions.\94\ Thus, in general, if certain insured institutions 
increase the cost of sending remittance transfers or cease sending 
remittance transfers to certain countries and/or designated recipients' 
institutions when the temporary exception expires, the Bureau believes 
that consumers who had been using these insured institutions to send 
wire transfers would generally shift to other insured institutions and 
not to MSBs. The Bureau therefore expects only a modest impact relative 
to the market today on MSBs from the expiration of the temporary 
exception, with or without the proposals herein. Thus, the Bureau 
expects only a modest impact on MSBs from the proposals relative to the 
assumed baseline.\95\
---------------------------------------------------------------------------

    \94\ Assessment Report at 68, 73.
    \95\ Entities besides insured institutions and traditional MSBs 
can be remittance transfer providers, including broker-dealers. The 
Bureau lacks data on the number of remittance transfers sent by 
these entities. The Bureau understands that broker-dealers may use 
wire services provided by banks for remittance transfers and that a 
broker-dealer's reliance on the temporary exception may mirror that 
of the banks with whom they are associated. As discussed above in 
the section-by-section analysis of proposed Sec.  1005.32(b)(4), 
there is an SEC no-action letter that concluded SEC staff will not 
recommend enforcement actions to the SEC under Regulation E if a 
broker-dealer provides disclosures as though the broker-dealer were 
an insured institution for purposes of the temporary exception. The 
Bureau declines to speculate on the potential impact of the proposed 
rule on these entities but welcomes comment on this point.
---------------------------------------------------------------------------

1. Raising the Normal Course of Business Safe Harbor Threshold to 500 
Transfers Annually
    The proposed rule would raise the normal course of business safe 
harbor threshold for Rule coverage from 100 transfers to 500 transfers. 
Under the proposed rule, a person that provided 500 or fewer remittance 
transfers in the previous calendar year and provides 500 or fewer 
remittance transfers in the current calendar year would be deemed not 
to be providing remittance transfers in the normal course of its 
business and thus would not be subject to the Rule. Based on their 
respective Call Reports,\96\ 414 banks and 247 credit unions provided 
between 101 and 500 transfers in either 2017 or 2018, but not more than 
500 in either year.\97\ These banks and credit unions are currently 
covered by the Remittance Rule but would not be covered if the 500-
transfer threshold was adopted as proposed. These institutions 
represent 55 percent of banks providing more than 100 transfers and 62 
percent of credit unions providing more than 100 transfers. Thus, under 
the proposed rule, 661 previously covered institutions would no longer 
need to provide exact disclosures or meet any of the other requirements 
of the Rule. Comparing these numbers to calculations from 2017 and 
earlier in the Assessment Report, the number of banks and credit unions 
providing between 101 and 500 transfers has not changed much from year 
to year, so are likely to be representative of the impact going 
forward.
---------------------------------------------------------------------------

    \96\ As noted above in the section-by-section analysis of Sec.  
1005.30(f), banks and credit unions are required to submit quarterly 
``Call Reports'' by the FFIEC and the NCUA, respectively. For a more 
detailed description of these reporting requirements, see Assessment 
Report at 24.
    \97\ The 2018 transfers of a bank or credit union is included in 
this calculation if it provided between 101 and 500 transfers in 
either year, even if, for example, it transferred 100 or fewer 
transfers in 2018. Similarly, it is excluded if it provided more 
than 500 transfers in either year.
---------------------------------------------------------------------------

Benefits and Costs to Insured Institutions
    As discussed above, 414 banks and 247 credit unions subject to the 
Rule under the no-action baseline would no longer incur the compliance 
costs of the Rule if the 500-transfer safe harbor threshold were 
adopted as proposed. The Bureau does not have a precise estimate of the 
costs these institutions would stop incurring if the Bureau adopts the 
500-transfer normal course of business safe harbor threshold. However, 
the Assessment Report discusses the kinds of compliance costs faced by 
providers covered by the Rule.\98\ These costs include staff training 
costs, information acquisition costs for disclosures, and error 
investigation and resolution costs.
---------------------------------------------------------------------------

    \98\ Id. at 117-20.
---------------------------------------------------------------------------

    In addition, if any banks and credit unions were restricting the 
number of remittance transfers that they provide to 100 or fewer in 
order to qualify for the existing normal course of business safe harbor 
threshold, it is possible they may decide to start providing more 
remittance transfers if the threshold were increased to 500 transfers 
as proposed. However, the Assessment Report indicates that banks and 
credit unions did not limit the number of transfers to stay under the 
existing normal course of business safe harbor threshold, nor did banks 
or credit unions appear to cease providing remittance transfers because 
of the Rule.\99\ These facts suggest it is unlikely that many 
institutions would start providing more remittance transfers if the 
normal course of business safe harbor threshold were increased from 100 
to 500 transfers as proposed.
---------------------------------------------------------------------------

    \99\ Id. at 133-38.
---------------------------------------------------------------------------

    Finally, it is possible that some insured institutions would see 
effects from an increased normal course of business safe harbor 
threshold because of the preferences of their customers. One 
possibility is that the customers of insured institutions that would be 
excluded from coverage if the Bureau were to increase the normal course 
of business safe harbor threshold to 500 transfers, might decide to 
start transferring with insured institutions that would remain subject 
to the Rule. These customers might prefer receiving the pre-payment 
disclosure and receipts or having the error resolution rights required 
under the Rule, even if they have to pay more to send remittance 
transfers. Conversely, if the price of sending remittance transfers is 
lower with the newly non-covered institutions, some customers may 
switch to those institutions. Given the inconvenience of changing 
remittance transfer providers, and the analysis of the impact of the 
100-transfer normal course of business safe harbor threshold in the 
Assessment Report,\100\ the Bureau expects that the net change in 
transfers and market participation would likely be small for insured 
institutions that

[[Page 67156]]

would be no longer covered by the Rule if the normal course of business 
safe harbor threshold was set at 500 transfers as proposed.
---------------------------------------------------------------------------

    \100\ Id. at 133-37.
---------------------------------------------------------------------------

Benefits and Costs to Consumers
    In 2018, insured institutions that would not have been covered if 
the normal course of business safe harbor threshold was set at 500 
transfers provided approximately 141,900 transfers.\101\ These 
transfers represent 1.2 percent of 2018 transfers by insured 
institutions providing more than 100 transfers in either 2017 or 
2018.\102\ The Assessment Report found that these numbers have been 
fairly stable from year to year before 2018, so are likely to be 
representative of the impact going forward.\103\
---------------------------------------------------------------------------

    \101\ From the bank and credit union Call Reports. The total 
represents approximately 92,600 bank transfers and 49,300 credit 
union transfers.
    \102\ From the bank and credit union Call Reports. The dollar 
volume of the transfers provided by banks providing between 101 and 
500 transfers in either 2017 or 2018, but not more than 500 in 
either year, was $2 billion. Credit unions do not report their 
dollar volume.
    \103\ Id. at 76-77, 83-84.
---------------------------------------------------------------------------

    The proposed rule has potential benefits and costs to the 
remittance customers of banks and credit unions providing between 101 
and 500 remittance transfers annually. The benefits include potentially 
lower prices for consumers if the remittance transfer provider passes 
on any reduction in regulatory compliance costs. As discussed in the 
Assessment Report, at least some bank and credit union providers 
reported to the Bureau that in response to the Rule, they increased the 
price they charged consumers to send remittance transfers.\104\ 
Excepting such entities from the Rule's coverage could result in 
decreased prices by these banks and credit unions for sending 
remittance transfers.
---------------------------------------------------------------------------

    \104\ Id. at 94.
---------------------------------------------------------------------------

    The costs to customers of banks and credit unions providing between 
101 and 500 remittance transfers annually are the potential loss of the 
Rule's pre-payment disclosures, which may facilitate comparison 
shopping, and other Rule protections, including cancellation and error 
resolution rights. The Bureau does not have the information necessary 
to quantify these costs. The Bureau has received relatively few 
complaints from consumers arising from transfers provided by banks and 
credit unions not covered by Rule.\105\ The Assessment Report found 
that consumers asserted errors for as many as 1.9 percent of transfers 
and cancelled between 0.29 and 4.5 percent of transfers depending on 
the provider.\106\ Some banks and credit unions providing between 101 
and 500 remittance transfers annually may continue to provide certain 
of these protections to their customers, although perhaps in a more 
limited manner than required by the Rule.
---------------------------------------------------------------------------

    \105\ About 0.4 percent of complaints the Bureau has received 
are about ``international money transfers'' including remittance 
transfers. Id. at 113-16. As noted above, the number of complaints 
may be low because providers are complying with the law. Another 
possibility is that some consumers who send remittance transfers may 
have limited English proficiency, and therefore, be less likely to 
know that they can submit complaints to the Bureau or may be less 
likely to seek help from a government agency than other consumers.
    \106\ Id. at 126, 131.
---------------------------------------------------------------------------

    As noted above, it is possible that, to the extent any banks and 
credit unions intentionally provide 100 or fewer transfers (so as to 
qualify for the existing normal course of business safe harbor), it is 
possible they may decide to start providing more if the proposed rule 
was adopted. The Assessment Report did not find that banks or credit 
unions were limiting the number of transfers they provided to stay 
under the existing 100-transfer normal course of business safe harbor 
threshold or that banks or credit unions had stopped providing 
remittance transfers because of the Rule.\107\ Thus, the Bureau does 
not believe that there would be much if any increase in access to 
remittance transfer services resulting from the proposed increase in 
the normal course of business safe harbor threshold.
---------------------------------------------------------------------------

    \107\ Id. at 133-38.
---------------------------------------------------------------------------

Alternatives
    The Bureau is considering an alternative 200-transfer threshold for 
the normal course of business safe harbor threshold. There were 156 
banks and 138 credit unions in 2018 that provided between 101 and 200 
transfers in either 2017 or 2018, but not more than 200 in either year, 
based on their respective Call Reports. As reported above, the 
corresponding numbers under the proposed rule are 414 banks and 247 
credit unions. Thus, the proposed rule more than doubles the number of 
banks that would not be subject to the Rule relative to the 
alternative. The corresponding relative increase under the proposed 
rule for credit unions is 79 percent. Under the alternative, the banks 
and credit unions that would not be subject to the Rule represent 21 
percent of banks providing more than 100 transfers in either 2017 or 
2018 and 35 percent of credit unions providing more than 100 transfers 
in either 2017 or 2018. As reported above, the corresponding numbers 
under the proposed rule are 55 percent for banks and 62 percent for 
credit unions. The other impacts as described above for a 500-transfer 
normal course of business safe harbor threshold would follow for a 200-
transfer threshold.
    The total number of transfers in 2018 for banks and credit unions 
that provided between 101 and 200 transfers in either 2017 or 2018, but 
not more than 200 in either year, were 19,900 bank transfers and 18,200 
credit union transfers. As reported above, the corresponding numbers 
under the proposed rule are approximately 92,600 bank transfers and 
49,300 credit union transfers. Thus, the proposed rule would more than 
quadruple the number of bank transfers and would more than double the 
number of credit unions transfers that would not be subject to the Rule 
relative to the alternative. Under the alternative, the bank and credit 
union transfers in 2018 that would not be subject to the proposed rule 
represent 0.18 percent of transfers by banks providing more than 100 
transfers in either 2017 or 2018, and 2.31 percent of transfers by 
credit unions providing more than 100 transfers in either 2017 or 2018. 
Overall this is 0.32 percent of transfers in 2018 by insured 
institutions providing greater than 100 transfers in either 2017 or 
2018. The corresponding numbers under the proposed rule are 0.83 
percent for bank transfers and 6.3 percent for credit union transfers. 
As reported above, this is 1.2 percent of all 2018 transfers by insured 
institutions providing more than 100 transfers in either 2017 or 2018. 
Again, the other impacts as described above for a 500-transfer normal 
course of business safe harbor threshold would follow for a 200-
transfer threshold.
    The Bureau has also considered, and is soliciting comment on, 
whether it should adopt any alternate or additional measures for the 
``normal course of business'' safe harbor. As stated above, the Bureau 
particularly seeks comment on whether to base the term ``normal course 
of business'' on the percentage of an entity's customers that send 
remittance transfers, and if so, what the appropriate percentage of 
customers should be and why. In addition, the Bureau seeks comment on 
the time frame over which any such alternate metric should be tracked 
and the timing for any transitional provisions that might be necessary 
using such a metric. The Bureau also seeks comment on the potential 
burden to entities, or challenges that could arise, in basing the safe 
harbor on an approach other than the annual number of remittance 
transfers.

[[Page 67157]]

    A limitation on the ability of the Bureau to consider the impacts 
of this alternative is the lack of institutional-level data or 
representative averages for groups of institutions on, among other 
things, the percentage of customers that send remittance transfers, the 
average number of remittance transfers sent by customers who send 
remittance transfers, and the distribution of transfers across 
customers (e.g., whether sending remittance transfers is concentrated 
among a small share of customers or dispersed). The numbers of 
consumers and covered persons affected by different per-consumer 
thresholds would depend on this information. The qualitative effects on 
consumers and covered persons that would be not be covered by the Rule 
at different normal course of business safe harbor thresholds would be 
as described above. The Bureau requests data and other information that 
would be useful for quantifying the number of affected consumers and 
persons sending remittance transfers and the benefits and costs on the 
affected consumers and persons.
2. Proposed Permanent Exceptions
    This section considers the benefits, costs, and impacts of the two 
permanent exceptions proposed by the Bureau that would allow remittance 
transfer providers that are insured institutions to estimate exchange 
rates and covered third-party fees in certain circumstances. This 
analysis proceeds in two steps. First, it examines the information 
available to the Bureau to determine the likely impact of the 
expiration of the existing temporary exception. The analysis then 
considers the likely benefits, costs, and impacts of the proposed 
permanent exceptions. For reasons explained above, the analysis 
generally considers only the impacts of the expiration and proposed 
permanent exceptions on banks and credit unions that provide more than 
500 transfers annually.
    According to their Call Reports, of 343 banks providing more than 
500 transfers in 2017 or 2018, 48 (14 percent) reported using the 
temporary exception in 2018.\108\ These 48 banks estimate they used the 
temporary exception for approximately 770,000 transfers in 2018, 
representing approximately 7.0 percent of all transfers by banks 
providing more than 500 transfers annually. The Bureau does not have 
comparable information on the use of the temporary exception for credit 
unions. Under the circumstances, the Bureau considers it appropriate to 
assume that credit union usage is similar to that of banks.\109\ 
Specifically, assuming that the same proportion of credit unions 
providing more than 500 transfers annually use the temporary exception 
as banks and use the temporary exception for the same proportion of 
transfers as banks, around 21 credit unions would have used the 
temporary exception for 52,000 transfers. Thus, absent any mitigation 
to address the potential impact of the expiration of the temporary 
exception (other than the expansion of the normal course of business 
safe harbor threshold described above), it is reasonable to estimate 
that 70 insured institutions using the temporary exception for 
approximately 822,000 transfers would need to undertake certain 
adjustments.\110\
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    \108\ It is possible that there are more banks using the 
temporary exception than report it on their Call Reports. For 
example, smaller bank providers that rely on a larger service 
provider may not accurately report their usage.
    \109\ The Bureau requests data and other information on the use 
of the temporary exception by credit unions, and in particular by 
credit unions providing more than 500 transfers annually.
    \110\ According to their Call Reports, 34 banks providing 
between 101 and 500 remittance transfers annually relied on the 
temporary exception for 6,500 transfers. Assuming proportional use 
for credit unions providing between 101 and 500 remittance transfers 
annually approximately 20 credit unions relied on the temporary 
exception for 3,500 transfers. For a baseline in which the normal 
course of business safe harbor threshold was not increased, the 
impacts on consumers and covered persons considered would also apply 
to these transfers and covered persons.
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    Bank Call Reports do not differentiate between the use of the 
temporary exception for exchange rates and covered third-party fees. 
From discussions with some large banks and a trade association 
representing a number of the largest banks, the Bureau understands that 
the temporary exception generally is not used by very large banks to 
estimate exchange rates because providing the exact exchange rate is 
not difficult for such banks. Accordingly, the analysis assumes that a 
substantial majority of the remittance transfers and institutions using 
the temporary exception are using it exclusively for covered third-
party fees. The Bureau requests additional data and other information 
on the share of remittance transfers that rely on the temporary 
exception to estimate exchange rates alone, covered third-party fees 
alone, and both exchange rates and covered third-party fees.
Proposed Permanent Exception for Estimation of the Exchange Rate by an 
Insured Institution
    The proposed rule would provide a permanent exception that would 
allow insured institutions to estimate the exchange rate (and other 
disclosures that depend on the exchange rate) under certain conditions 
when sending to a country. Principally, these conditions are that the 
designated recipient of the remittance transfer will receive funds in 
the country's local currency and (a) the insured institution made 1,000 
or fewer transfers in the prior calendar year to that country where the 
designated recipients received funds in the country's local currency 
and (b) the insured institution cannot determine the exact exchange 
rate for that particular transfer at the time it must provide the 
applicable disclosures.
    The information available to the Bureau indicates that the 
predominant use of the temporary exception is for estimating covered 
third-party fees. However, as discussed below, the Bureau understands 
that certain insured institutions may incur additional costs in order 
to disclose exact exchange rates. Further, these costs, as well as the 
willingness to incur them, may differ across insured institutions. 
Thus, under the baseline in which the temporary exception expires and 
the Bureau raises the normal course of business safe harbor threshold 
to 500 transfers as proposed, it is possible that the requirement to 
disclose exact exchange rates may cause some insured institutions to 
cease providing transfers to certain countries. The proposed permanent 
exception for estimating exchange rates would tend to mitigate cost 
increases and reductions in the provision of remittance transfers at 
any particular insured institution.
Benefits and Costs to Insured Institutions
    Under the baseline, insured institutions that are covered by the 
Rule and have been using the temporary exception to estimate exchange 
rates would either need to provide exact exchange rate disclosures or 
stop sending those transfers. To provide exact exchange rate 
disclosures, these insured institutions would incur certain costs. An 
insured institution may need to establish and maintain currency-trading 
desk capabilities and risk management policies and practices related to 
the foreign currency and country or to use service providers, 
correspondent institutions, or persons that act as the insured 
institution's agent. These additional costs may also differ across 
insured institutions, due to differences in existing arrangements with 
service providers or correspondent banks, the ability to negotiate 
changes in those arrangements, the expertise of existing staff, and the 
likely volume of transfers. Insured institutions may also

[[Page 67158]]

differ in the level of commitment to sending remittance transfers to 
particular countries, based on the needs of their customers, and thus 
their willingness to incur additional costs. Overall, the requirement 
to disclose exact exchange rates under the baseline may cause some 
insured institutions to cease providing transfers to certain countries. 
These effects would likely differ across insured institutions.
    The Bureau believes that the proposed permanent exception for 
estimating the exchange rate would tend to mitigate these costs and 
impacts. The Bureau lacks information about the percentage of transfers 
by recipient country that rely on the temporary exception for exchange 
rates and the portion of those transfers that could rely on the 
permanent exception being proposed. However, the Bureau understands 
that insured institutions are predominantly using the temporary 
exception to estimate covered third-party fees, rather than exchange 
rates. Thus, the Bureau believes that the additional costs under the 
baseline may be relatively modest overall, and the proposed permanent 
exception could mitigate most of the increase that would otherwise 
occur. Further, it is the Bureau's understanding from discussion with 
some large banks and a trade association representing a number of the 
largest banks that providing exact exchange rates is not difficult for 
very large banks. Thus, to the extent that very large banks would have 
an advantage under the baseline in sending transfers to particular 
countries, the proposed permanent exception would mitigate this 
advantage by allowing smaller institutions to continue to estimate 
exchange rates in disclosures for certain remittance transfers.
    Some insured institutions that currently provide exact exchange 
rates might have been able to accommodate customers from other insured 
institutions that currently use the temporary exception and that would 
choose not to begin providing exact exchange rates under the baseline. 
Under the proposed permanent exception for estimation of exchange 
rates, these insured institutions will not obtain the benefit of these 
new customers.
Benefits and Costs to Consumers
    Under the baseline in which the temporary exception expires and the 
Bureau raises the normal course of business safe harbor threshold to 
500 transfers as proposed, the preferred insured institution for some 
consumers might not be able to provide an exact exchange rate 
disclosure for transfers to certain countries. Some consumers, 
therefore, would need to seek out an alternate remittance transfer 
provider to send transfers to those countries. As noted above, it is 
the Bureau's understanding from discussion with some large banks and a 
trade association representing a number of the largest banks that 
providing the exact exchange rate is not difficult for very large 
banks. Thus, to the extent that a consumer's preferred insured 
institution cannot provide the exact exchange rate, there would likely 
be a less preferred insured institution that could provide the exact 
exchange rate and send the transfer.\111\
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    \111\ These consumers may also consider using an MSB to send 
transfers if it is too difficult or expensive to find an insured 
institution that can send the transfer. MSBs are generally able to 
provide exact exchange rate information for the reasons discussed in 
part II above. However, MSBs provide a somewhat different service 
than banks and credit unions to meet different consumer demands. The 
Bureau therefore considers that there would be relatively few 
consumers, under the baseline, who use an MSB because they find it 
too difficult or expensive to use an insured institution.
---------------------------------------------------------------------------

    Under the proposed permanent exception for estimating the exchange 
rate, more consumers would be able to continue to use their preferred 
insured institution to send transfers. These consumers may also 
potentially be able to do so at lower prices if, for example, an 
insured institution decided to pass on the higher costs incurred to 
obtain exact exchange rate information.
    The cost to these consumers is that they will not receive exact 
disclosures. Disclosures that include exact exchange rate information 
make it easier for a consumer to know whether a designated recipient is 
going to receive an intended sum of money, or the amount in U.S. 
dollars that the consumer must send to deliver a specific amount of 
foreign currency to a designated recipient. Requiring the disclosure of 
exact exchange rates may also make it easier for consumers to compare 
prices across providers. The proposed permanent exception for 
estimating exchange rates may therefore impose a cost on certain 
consumers in the form of these foregone benefits.
    Overall, the evidence available to the Bureau suggests that the 
costs to consumers of allowing providers to use estimates for exchange 
rates are not likely to be significant. Certain consumers may be less 
likely to engage in comparison shopping or the comparison shopping may 
be less effective. However, as discussed above, the Bureau believes the 
proposed permanent exception for estimating exchange rates would be 
used for only a small portion of all remittance transfers sent by 
insured institutions. Further, as discussed in the Assessment Report 
and noted above, the Bureau reviewed evidence from its complaints 
database and did not find evidence of significant consumer complaints 
regarding the use of estimates for exchange rates or for covered third-
party fees.\112\
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    \112\ Assessment Report at 113-16.
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Proposed Permanent Exception for Estimation of Covered Third-Party Fees 
by an Insured Institution
    As noted above, under the baseline in which the temporary exception 
expires and the Bureau raises the normal course of business safe harbor 
threshold to 500 transfers as proposed, the Bureau estimates that 
approximately 70 insured institutions would need to stop providing 
estimated disclosures for 822,000 transfers. Based on its analysis of 
available information, the Bureau expects that many of these insured 
institutions could form additional relationships or set up new systems 
to provide exact fee disclosures for a large portion of the transfers 
currently using the temporary exception for estimating covered third-
party fees. The Bureau held discussions with banks and a trade 
association representing a number of the largest banks, reviewed 
comments from the 2019 RFI, and analyzed Call Reports from banks that 
have reduced their reliance on the temporary exception. Based on the 
information received from these sources, banks appear to be willing to 
set up the relationships or establish other systems (such as 
international ACH) necessary to reduce their reliance on estimates to 
around half of the number of transfers for which they used the 
temporary exception in 2018.\113\ The Bureau has no information that 
would suggest a different conclusion for credit unions. Forming these 
relationships would allow these insured institutions to provide exact 
disclosures and continue to send these transfers and their customers 
would gain the benefit of receiving exact disclosures. However, forming 
these relationships comes at some cost to insured institution 
providers, and some of these costs could be passed on to consumers. 
Note that these costs are not costs of the proposed rule; they are 
costs incurred under the baseline in which the temporary exception 
expires and the Bureau increases the normal course of business safe 
harbor threshold as proposed.
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    \113\ The Bureau cautions that this prediction is not 
necessarily accurate and is based on limited information.
---------------------------------------------------------------------------

    There are a limited number of outcomes for the remaining half of

[[Page 67159]]

transfers for which insured institutions used the temporary exception 
in 2018 and which could not be sent with estimated disclosures under 
the baseline. Consumers requesting these transfers would need to find 
an alternative remittance transfer provider. The Bureau understands 
that the alternative remittance transfer provider would most likely be 
an insured institution that sends enough remittance transfers to the 
designated recipient's institution that the sending insured institution 
either has relationships or would form additional relationships or set 
up new systems to provide exact covered third-party fee disclosures. 
The alternative provider might also be an MSB. As discussed above, 
however, MSBs provide a somewhat different service than banks and 
credit unions to meet different consumer demands. This would tend to 
reduce any substitution from insured institutions to MSBs. In either 
case, these consumers would lose the convenience and other benefits of 
transferring with their preferred bank or credit union. Finally, it is 
hypothetically possible that no insured institution or MSB (or 
combination of MSBs), at any price, could transfer a consumer's 
preferred amount to certain designated recipients' institutions. This 
would occur if no insured institution is able to provide exact 
disclosures and no MSB (or combination of MSBs) is able to transfer 
high enough amounts to certain designated recipients' institutions.
    The Bureau does not have the information necessary to quantify how 
many transfers would fall into each category. For purposes of the 
analysis below, the Bureau assumes that under the baseline, customers 
of an insured institution that would no longer send remittance 
transfers to a designated recipient's institution would generally 
search for and find a different insured institution that would send the 
transfer. The Bureau considers it unlikely that no insured institution 
or MSB (or combination of MSBs), at any price, could send the desired 
amount of funds to a designated recipient's institution.
    Under the proposed permanent exception for estimating covered 
third-party fees, transfers covered by the Rule fall into two main 
categories: (1) Transfers that are below the threshold for covered 
third-party fees, and therefore disclose estimates, but under the 
baseline would have been provided with exact disclosures at a higher 
price or by a remittance transfer provider other than the consumer's 
first choice; or (2) transfers that are above the threshold for covered 
third-party fees, and so will be provided with exact disclosures for 
fees under both the proposed rule and baseline. Relative to the 
baseline, in which all bank or credit union transfers that take place 
would have exact disclosures, only (1) represents a change considered 
for the costs or benefits of the proposed permanent exception for 
estimating covered third-party fees.
Benefits and Costs to Insured Institutions
    As stated above, under the baseline in which the temporary 
exception expires and the Bureau raises the normal course of business 
safe harbor threshold to 500 transfers as proposed, the Bureau 
estimates that approximately 70 insured institutions would need to stop 
providing estimated disclosures for 822,000 transfers. While the Bureau 
does not have market-wide information, information provided by certain 
large banks suggests that there are few designated recipient banks to 
which these large banks individually send more than 500 transfers and 
with which these large banks would not be able or willing to set up a 
relationship sufficient to provide exact disclosures. Based on this 
information, the Bureau expects that under both the baseline and the 
proposed permanent exception for estimating covered third-party fees, 
these 70 institutions will form roughly the same number of 
relationships and will provide exact disclosures for about half of 
these transfers. Forming these relationships comes at some cost to 
insured institution providers, and some of these costs could be passed 
on to consumers.
    As explained above, under the baseline, the other half of the 
remittance transfers with estimated disclosures would no longer be 
provided by the insured institutions that currently send them but would 
be sent by different insured institutions. Based on the information 
available from certain large banks, under the proposed permanent 
exception for estimating covered third-party fees, the Bureau expects 
that the insured institutions that currently send these transfers would 
continue to send them. These transfers (category (1) above) provide 
estimated disclosures, so these insured institutions would not need to 
form additional relationships. These insured institutions would benefit 
from not turning away potential customers and by being able to continue 
providing a valuable service to their customers. These benefits might 
be significant, although they are difficult quantify.
Benefits and Costs to Consumers
    Under category (1) above, certain remittance transfers would have 
been provided with exact disclosures under the baseline but at higher 
price or by a remittance transfer provider other than the consumer's 
first choice. As discussed above, the Bureau expects that the proposed 
permanent exception for estimating covered third-party fees when an 
insured institution makes 500 or fewer transfers to the designated 
recipient's institution in the prior calendar year would mitigate all 
or almost all of the costs to consumers from the loss of access to 
transfers to certain designated recipient's institutions under the 
baseline. These remittance transfers represent the most important 
benefit of the proposed permanent exception for consumers. While the 
Bureau does not have the information to quantify the number of 
transfers in this category or the exact value to consumers, the benefit 
to consumers of continued access is potentially large.
    Under category (1) above, consumers will receive disclosures 
containing estimates. As discussed above in considering the impact of 
the proposed permanent exception for exchange rates, the use of 
estimates for covered third-party fees may make it more difficult for 
consumers to engage in comparison shopping and impose a cost on 
consumers by making disclosures less accurate.
Alternative
    For purposes of considering the effects of the proposed permanent 
exceptions that allow institutions to estimate exchange rates and 
covered third-party fees, the Bureau used a baseline in which the 
temporary exception expired and the Bureau amended the normal course of 
business safe harbor threshold as proposed. If instead the Bureau 
maintains the existing normal course of business safe harbor threshold 
at 100 transfers, then this provision of the current Rule would be part 
of the baseline, along with the expiration of the temporary exception.
    Under this baseline, the proposed permanent exceptions that would 
allow institutions to estimate exchange rates and covered third-party 
fees would have effects on insured institutions that provide between 
101 and 500 remittance transfers per year and the consumers on whose 
behalf these institutions send remittance transfers. These effects 
would be in addition to the effects on insured institutions that 
provide more than 500 remittance transfers per year and the consumers 
on

[[Page 67160]]

whose behalf these insured institutions send remittance transfers.
    As discussed above, 414 banks and 247 credit unions provided 
between 101 and 500 transfers in either 2017 or 2018, but not more than 
500 in either year. In 2018, they respectively sent about 92,600 and 
49,300 transfers. These banks and credit unions would remain covered by 
the Rule under the alternative since the normal course of business safe 
harbor threshold remains at 100 transfers. However, all of these 
insured institutions would necessarily meet the respective 500-transfer 
and 1,000-transfer threshold requirements in the proposed permanent 
exceptions. Thus, all of these insured institutions could continue to 
disclose estimates for exchange rates and covered third-party fees to 
the extent that they already do so. The ability to disclose estimates 
under the proposed permanent exceptions would mitigate costs relative 
to the baseline used here.
    These insured institutions currently provide error resolution 
rights and meet the other conditions of the Rule. These insured 
institutions would continue to do so under both the baseline used here 
and under the alternative proposed rule, that provided only the 
permanent exceptions for estimating exchange rates and covered third-
party fees.

D. Potential Specific Impacts of the Proposed Rule

1. Depository Institutions and Credit Unions With $10 Billion or Less 
in Total Assets, as Described in Section 1026
    As stated above, based on their Call Reports, 414 banks and 247 
credit unions provided between 101 and 500 transfers in either 2017 or 
2018, but not more than 500 in either year. Of these, 386 banks and all 
247 credit unions had $10 billion or less in total in assets in 2018. 
Some of these insured institutions currently provide exact disclosures 
(based on Call Report data) and all of them would have to provide exact 
disclosures under the baseline expiration of the temporary exception. 
None of these insured institutions would be covered by the Rule under 
the proposed increase in the normal course of business safe harbor 
threshold. It follows that the large majority of the banks and all of 
the credit unions affected by the proposed change in the normal course 
of business safe harbor threshold have $10 billion or less in assets. 
Thus, the impacts of the proposed increase in the normal course of 
business safe harbor threshold, described above, are also generally the 
specific impacts for depository institutions and credit unions with $10 
billion or less in total assets.
    In addition, 190 banks and 142 credit unions with $10 billion or 
less in assets in 2018 provided more than 500 transfers in 2017 or 
2018. As above, some of these banks and credit unions currently provide 
exact disclosures, and all of them would have to provide exact 
disclosures under the baseline expiration of the temporary exception. 
These banks and credit unions would not be directly affected by the 
proposed change in the normal course of business safe harbor threshold. 
They might be affected, compared to the baseline expiration of the 
temporary exception, by the proposed permanent exceptions for 
estimating the exchange rate and covered third-party fees. According to 
the bank Call Report data, only 18 of these banks reported using the 
temporary exception, and they did so for approximately 66,600 
transfers. As discussed above, the Bureau understands that remittance 
transfer providers that are smaller depository institutions and credit 
unions obtain information about exchange rates and covered third-party 
fees from a limited number of service providers that are either very 
large insured institutions or large nonbank service providers. Given 
this reliance, the impacts of the proposed permanent exceptions, 
described above, are also generally the specific impacts for depository 
institutions and credit unions with $10 billion or less in total 
assets.
2. Impact of the Proposed Provisions on Consumers in Rural Areas
    Consumers in rural areas may experience different impacts from the 
proposed rule than other consumers. The Bureau has discretion to define 
rural areas as appropriate for this impact analysis. For the impact 
analysis in this section, the Bureau used its 2018 rural counties 
list.\114\ The Bureau compared the address each bank and credit union 
reported on its Call Report with this rural county list to determine if 
that bank or credit union was located in a rural county. This 
comparison is limited to the location listed in the Call Report, which 
is generally the headquarters of the bank or credit union. There are 
likely rural branches of insured institutions with headquarters located 
in non-rural areas, so this comparison captures only a portion of the 
impact of the proposed rule on consumers in rural areas.
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    \114\ See https://www.consumerfinance.gov/policy-compliance/guidance/rural-and-underserved-counties-list/.
---------------------------------------------------------------------------

    According to the Call Reports, 83 banks provided between 101 and 
500 remittance transfers in either 2017 or 2018, but not more than 500 
in either year, and were headquartered in rural counties. These banks 
provided 17,000 transfers in 2018. Further, 15 credit unions provided 
between 101 and 500 remittance transfers in either 2017 or 2018, but 
not more than 500 in either year, and were located in rural counties. 
These credit unions provided 2,200 transfers. Finally, three banks 
provided more than 500 transfers in either 2017 or 2018, were located 
in rural areas, and reported relying on the temporary exception. These 
banks reported that they relied on the temporary exception for 2,000 
transfers total. Assuming reliance on the temporary exception is 
similar for credit unions, the four credit unions that provided more 
than 500 transfers in either 2017 or 2018 and were located in rural 
areas would have used the temporary exception for approximately 900 
transfers.
    Consumers in rural areas may have access to fewer remittance 
transfers providers and therefore may benefit more than other consumers 
from a rule change that keeps more insured institutions in the market 
or helps reduce costs to the extent that cost reductions are passed on 
to consumers. However, these consumers will also disproportionately 
lose consumer protections relative to other consumers, under the 
baseline in which the temporary exception expires, to the extent that 
the banks and credit unions that provide remittance transfers to these 
consumers are disproportionately excluded from the Rule or use the 
permanent exceptions under the proposed rule. As stated above, the 414 
banks and 247 credit unions that provided between 101 and 500 transfers 
in either 2017 or 2018, but not more than 500 in either year, represent 
55 percent of the banks and 62 percent of the credit unions that 
provided more than 100 transfers in both years. In rural areas, the 
corresponding 83 banks and 15 credit unions represented 75 percent of 
the banks and 79 percent of the credit unions that provided more than 
100 transfers in both years in rural areas. Thus, the proposed increase 
in the normal course of business safe harbor threshold would have 
somewhat larger effects in rural areas in both preserving access to 
remittance transfer providers and possibly reducing the protections 
provided by the Rule, as described previously.

[[Page 67161]]

VIII. Regulatory Flexibility Act Analysis

    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.\115\ 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.\116\ 
Potentially affected small entities include insured institutions that 
have $550 million or less in assets and that provide remittance 
transfers in the normal course of their business.\117\
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    \115\ 5 U.S.C. 601 et seq. The Bureau is not aware of any small 
governmental units or not-for-profit organizations to which the 
proposal would apply.
    \116\ 5 U.S.C. 601(3) (the Bureau may establish an alternative 
definition after consultation with the Small Business Administration 
and an opportunity for public comment).
    \117\ Small Bus. Admin., Table of Small Business Size Standards 
Matched to North American Industry Classification System Codes, 
https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
---------------------------------------------------------------------------

    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and-comment 
rulemaking requirements, unless the agency certifies that the rule will 
not have a significant economic impact on a substantial number of small 
entities.\118\ The Bureau also is subject to certain additional 
procedures under the RFA involving the convening of a panel to consult 
with small business representatives prior to proposing a rule for which 
an IRFA is required.\119\
---------------------------------------------------------------------------

    \118\ 5 U.S.C. 603 through 605.
    \119\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    An IRFA is not required for this proposal because the proposal, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. The Bureau does not expect the final rule to 
impose costs on small entities relative to the baseline. Under the 
baseline, the temporary exception expires, and therefore no remittance 
transfer providers--including small entities--would be able to provide 
estimates using that exception. Under the proposed rule, certain small 
entities that would otherwise be covered by the Remittance Rule would 
not be covered by the Rule and certain other small entities would be 
able to provide estimates in certain circumstances. Thus, the Bureau 
believes that the proposed rule would only reduce burden on small 
entities relative to the baseline.\120\
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    \120\ In general, given the expiration of the temporary 
exception and assuming the adoption of the proposed rule, some small 
entities that currently provide estimates would be able to continue 
to provide estimates for some or all of their remittance transfers 
and some would need to begin providing exact disclosures. Using the 
bank Call Reports, however, the Bureau finds that no small banks 
would need to begin providing exact disclosures. Specifically, the 
Bureau finds that there were 75 banks in 2018 with assets under $550 
million covered by the Rule (because they provided greater than 100 
transfers in 2017 or 2018). Of these banks, only 12 would be covered 
by the Rule if the normal course of business safe harbor threshold 
was adopted as proposed. Further, none of these banks currently 
report relying on the temporary exception. Thus, no small banks 
would need to begin providing exact disclosures even if the proposed 
exceptions on use of estimates were not adopted. Using the credit 
union Call Reports, the Bureau finds that there were 120 credit 
unions covered by the Rule in 2018 (because they provided more than 
100 transfers in 2017 or 2018). Of these credit unions, only 29 
would be covered by the Rule if the normal course of business safe 
harbor threshold was adopted as proposed. The credit union Call 
Reports do not report utilization of the temporary exception. 
However, since none of the 12 small banks that would remain covered 
by the proposed rule use the temporary exception, the Bureau 
considers it reasonable to suppose that that few or none of the 29 
small credit unions that would remain covered by the proposed rule 
use the temporary exception.
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    Accordingly, the undersigned certifies that this proposal, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. The Bureau requests comment on its analysis 
of the impact of the proposed rule on small entities and requests any 
relevant data.

IX. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\121\ Federal 
agencies are generally required to seek approval from the Office of 
Management and Budget (OMB) for information collection requirements 
prior to implementation. Under the PRA, the Bureau may not conduct or 
sponsor, and, notwithstanding any other provision of law, a person is 
not required to respond to, an information collection unless the 
information collection displays a valid control number assigned by OMB.
---------------------------------------------------------------------------

    \121\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    As explained below, the Bureau has determined that this proposed 
rule does not contain any new or substantively revised information 
collection requirements other than those previously approved by OMB 
under that OMB control number. The proposed rule would amend 12 CFR 
part 1005 (Regulation E), which implements EFTA. The Bureau's OMB 
control number for Regulation E is 3170-0014.
    Under Regulation E, the Bureau generally accounts for the paperwork 
burden for the following respondents pursuant to its administrative 
enforcement authority: Federally insured depository institutions with 
more than $10 billion in total assets, their depository institution 
affiliates, and certain non-depository institutions. The Bureau and the 
FTC generally both have enforcement authority over non-depository 
institutions subject to Regulation E. Accordingly, the Bureau has 
allocated to itself half of the proposed rule's estimated reduction in 
burden on non-depository financial institutions subject to Regulation 
E. Other Federal agencies, including the FTC, are responsible for 
estimating and reporting to OMB the paperwork burden for the 
institutions for which they have enforcement and/or supervision 
authority. They may use the Bureau's burden estimation methodology, but 
need not do so.
    The Bureau does not believe that this proposed rule would impose 
any new or substantively revised collections of information as defined 
by the PRA. Specifically, based on the above analysis, the Bureau 
believes that the overall impact of the proposal to increase the normal 
course of business safe harbor threshold to 500 and to allow limited 
use of estimates for covered third-party fee and exchange rate 
disclosures is small. The Bureau recognizes, however, that it lacks 
data with which to determine the precise impact of the proposal. 
Comments are specifically requested concerning information that would 
assist the Bureau with making a determination on the impact of allowing 
limited use of estimates in certain disclosures on the Bureau's current 
collection of information pursuant to Regulation E.
    Current Total Annual Burden Hours on Bureau Respondents, Regulation 
E: 3,445,033.
    Current Total Annual Burden Hours on Bureau Respondents, Subpart B 
only: 1,471,808.
    Estimated Total Annual Burden Hours on Bureau Respondents Under the 
Proposed Rule, Subpart B only: 1,448,938.
    Estimated Change in Total Annual Burden Hours on Bureau Respondents 
Under the Proposed Rule: -22,870.
    In addition, the Bureau estimates that Bureau respondents will 
incur one-time costs of $6.886 million under the proposed rule, mostly 
to form new relationships with designated recipients' institutions.
    The Bureau has determined that the proposed rule does not contain 
any new or substantively revised information collection requirements as 
defined by the PRA and that the burden estimate for the previously 
approved information collections should be revised as

[[Page 67162]]

explained above. The Bureau welcomes comments on these determinations 
or any other aspect of the proposal for purposes of the PRA. Comments 
should be submitted as outlined in the ADDRESSES section above. All 
comments will become a matter of public record.

List of Subjects in 12 CFR Part 1005

    Automated teller machines, Banking, Banks, Consumer protection, 
Credit unions, Electronic fund transfers, National banks, Remittance 
transfers, Reporting and recordkeeping requirements, Savings 
associations.

Authority and Issuance

    For the reasons set forth above, the Bureau proposes to amend 12 
CFR part 1005 as set forth below:

PART 1005--ELECTRONIC FUND TRANSFERS (REGULATION E)

0
1. The authority citation for part 1005 continues to read as follows:

    Authority:  12 U.S.C. 5512, 5581; 15 U.S.C. 1693b. Subpart B is 
also issued under 12 U.S.C. 5601 and 15 U.S.C. 1693o-1.

Subpart B--Requirements for Remittance Transfers

0
2. Amend Sec.  1005.30 by revising paragraphs (f)(2)(i)(A) and (B) and 
(f)(2)(ii), and adding paragraph (f)(2)(iii) to read as follows:


Sec.  1005.30  Remittance transfer definitions.

* * * * *
    (f) * * *
    (2) * * *
    (i) * * *
    (A) Provided 500 or fewer remittance transfers in the previous 
calendar year; and
    (B) Provides 500 or fewer remittance transfers in the current 
calendar year.
    (ii) Transition period--coming into compliance. If, beginning on 
July 21, 2020, a person that provided 500 or fewer remittance transfers 
in the previous calendar year provides more than 500 remittance 
transfers in the current calendar year, and if that person is then 
providing remittance transfers for a consumer in the normal course of 
its business pursuant to paragraph (f)(1) of this section, the person 
has a reasonable period of time, not to exceed six months, to begin 
complying with this subpart. Compliance with this subpart will not be 
required for any remittance transfers for which payment is made during 
that reasonable period of time.
    (iii) Transition period--qualifying for the safe harbor. If a 
person who previously provided remittance transfers in the normal 
course of its business in excess of the safe harbor threshold set forth 
in this paragraph (f)(2) determines that, as of a particular date, it 
will qualify for the safe harbor, it may cease complying with the 
requirements of this subpart with respect to any remittance transfers 
for which payment is made after that date. The requirements of the Act 
and this part, including those set forth in Sec. Sec.  1005.33 and 
1005.34, as well as the requirements set forth in Sec.  1005.13, 
continue to apply to transfers for which payment is made prior to that 
date.
* * * * *
0
3. In Sec.  1005.32:
0
a. Add paragraphs (b)(4) and (5); and
0
b. Remove ``(a) or (b)(1)'' and add in its place ``(a) or (b)(1), (4), 
or (5)'' in the first sentence of paragraph (c) introductory text.
    The additions read as follows:


Sec.  1005.32  Estimates.

* * * * *
    (b) * * *
    (4) Permanent exception for estimation of the exchange rate by an 
insured institution. (i) Except as provided in paragraph (b)(4)(ii) of 
this section, for disclosures described in Sec. Sec.  1005.31(b)(1) 
through (3) and 1005.36(a)(1) and (2), estimates may be provided for a 
remittance transfer to a particular country in accordance with 
paragraph (c) of this section for the amounts required to be disclosed 
under Sec.  1005.31(b)(1)(iv) through (vii), if the designated 
recipient of the remittance transfer will receive funds in the 
country's local currency and all of the following conditions are met:
    (A) The remittance transfer provider is an insured institution as 
defined in paragraph (a)(3) of this section;
    (B) At the time the insured institution must provide, as 
applicable, the disclosure required by Sec.  1005.31(b)(1) through (3) 
or Sec.  1005.36(a)(1) or (2), the insured institution cannot determine 
the exact exchange rate required to be disclosed under Sec.  
1005.31(b)(1)(iv) for that remittance transfer;
    (C) The insured institution made 1,000 or fewer remittance 
transfers in the prior calendar year to the particular country for 
which the designated recipients of those transfers received funds in 
the country's local currency; and
    (D) The remittance transfer is sent from the sender's account with 
the insured institution; provided however, for the purposes of this 
paragraph (b)(4)(i)(D), a sender's account does not include a prepaid 
account, unless the prepaid account is a payroll card account or a 
government benefit account.
    (ii) The disclosures in Sec.  1005.31(b)(1)(v) through (vii) may be 
estimated under paragraph (b)(4)(i) of this section only if the 
exchange rate is permitted to be estimated under paragraph (b)(4)(i) of 
this section and the estimated exchange rate affects the amount of such 
disclosures.
    (5) Permanent exception for estimation of covered third-party fees 
by an insured institution. (i) Except as provided in paragraph 
(b)(5)(ii) of this section, for disclosures described in Sec. Sec.  
1005.31(b)(1) through (3) and 1005.36(a)(1) and (2), estimates may be 
provided for a remittance transfer to a particular designated 
recipient's institution in accordance with paragraph (c) of this 
section for the amounts required to be disclosed under Sec.  
1005.31(b)(1)(vi) through (vii), if all of the following conditions are 
met:
    (A) The remittance transfer provider is an insured institution as 
defined in paragraph (a)(3) of this section;
    (B) At the time the insured institution must provide, as 
applicable, the disclosure required by Sec.  1005.31(b)(1) through (3) 
or Sec.  1005.36(a)(1) or (2), the insured institution cannot determine 
the exact covered third-party fees required to be disclosed under Sec.  
1005.31(b)(1)(vi) for that remittance transfer;
    (C) The insured institution made 500 or fewer remittance transfers 
in the prior calendar year to that designated recipient's institution; 
and
    (D) The remittance transfer is sent from the sender's account with 
the insured institution; provided however, for the purposes of this 
paragraph (b)(5)(i)(D), a sender's account does not include a prepaid 
account, unless the prepaid account is a payroll card account or a 
government benefit account.
    (ii) The disclosure in Sec.  1005.31(b)(1)(vii) may be estimated 
under paragraph (b)(5)(i) of this section only if covered third-party 
fees are permitted to be estimated under paragraph (b)(5)(i) of this 
section and the estimated covered third-party fees affect the amount of 
such disclosure.
* * * * *


Sec.  1005.33  [Amended]

0
4. Amend Sec.  1005.33(a)(1)(iii)(A) by removing ``(a), (b)(1) or 
(b)(2)'' and adding in its place ``(a) or (b)(1), (2), (4), or (5)''.


Sec.  1005.36  [Amended]

0
5. Amend Sec.  1005.36(b)(3) by removing ``(a) or (b)(1)'' and adding 
in its place ``(a) or (b)(1), (4), or (5)''.
0
6. In supplement I to part 1005:

[[Page 67163]]

0
a. Under Section 1005.30--Remittance Transfer Definitions, revise 30(f) 
Remittance Transfer Provider.
0
b. Under Section 1005.32--Estimates:
0
i. Revise introductory text paragraph 1 and 32(b)(1) Permanent 
Exceptions for Transfers to Certain Countries;
0
ii. Add 32(b)(4) Permanent Exception for Estimation of the Exchange 
Rate by an Insured Institution, and 32(b)(5) Permanent Exception for 
Estimation of Covered Third-Party Fees by an Insured Institution; and
0
iii. Revise 32(c)(3) Covered Third-Party Fees, and 32(d) Bases for 
Estimates for Transfers Scheduled Before the Date of Transfer; and
0
d. Under Section 1005.36--Transfers Scheduled Before the Date of 
Transfer, revise 36(b) Accuracy.
    The revisions and additions read as follows:

Supplement I to Part 1005--Official Interpretations

* * * * *

Section 1005.30--Remittance Transfer Definitions

* * * * *
30(f) Remittance Transfer Provider
    1. Agents. A person is not deemed to be acting as a remittance 
transfer provider when it performs activities as an agent on behalf of 
a remittance transfer provider.
    2. Normal course of business. i. General. Whether 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. For example, if a financial 
institution generally does not make remittance transfers available to 
customers, but sends a couple of such transfers in a given year as an 
accommodation for a customer, the institution does not provide 
remittance transfers in the normal course of business. In contrast, if 
a financial institution makes remittance transfers generally available 
to customers (whether described in the institution's deposit account 
agreement, or in practice) and makes transfers more frequently than on 
an occasional basis, the institution provides remittance transfers in 
the normal course of business.
    ii. Safe harbor. On July 21, 2020, the safe harbor threshold in 
Sec.  1005.30(f)(2)(i) changed from 100 transfers to 500 transfers. 
Under Sec.  1005.30(f)(2)(i), beginning on July 21, 2020, a person that 
provided 500 or fewer remittance transfers in the previous calendar 
year and provides 500 or fewer remittance transfers in the current 
calendar year is deemed not to be providing remittance transfers in the 
normal course of its business. Accordingly, a person that qualifies for 
the safe harbor in Sec.  1005.30(f)(2)(i) is not a ``remittance 
transfer provider'' and is not subject to the requirements of subpart B 
of this part. For purposes of determining whether a person qualifies 
for the safe harbor under Sec.  1005.30(f)(2)(i), the number of 
remittance transfers provided includes any transfers excluded from the 
definition of ``remittance transfer'' due simply to the safe harbor. In 
contrast, the number of remittance transfers provided does not include 
any transfers that are excluded from the definition of ``remittance 
transfer'' for reasons other than the safe harbor, such as small value 
transactions or securities and commodities transfers that are excluded 
from the definition of ``remittance transfer'' by Sec.  1005.30(e)(2).
    iii. Transition period. A person may cease to satisfy the 
requirements of the safe harbor described in Sec.  1005.30(f)(2)(i) if, 
beginning on July 21, 2020, the person provides in excess of 500 
remittance transfers in a calendar year. For example, if a person that 
provided 500 or fewer remittance transfers in the previous calendar 
year provides more than 500 remittance transfers in the current 
calendar year, the safe harbor applies to the first 500 remittance 
transfers that the person provides in the current calendar year. For 
any additional remittance transfers provided in the current calendar 
year and for any remittance transfers provided in the subsequent 
calendar year, whether the person provides remittance transfers for a 
consumer in the normal course of its business, as defined in Sec.  
1005.30(f)(1), and is thus a remittance transfer provider for those 
additional transfers, depends on the facts and circumstances. Section 
1005.30(f)(2)(ii) provides a reasonable period of time, not to exceed 
six months, for such a person to begin complying with subpart B of this 
part, if that person is then providing remittance transfers in the 
normal course of its business. At the end of that reasonable period of 
time, such person would be required to comply with subpart B unless, 
based on the facts and circumstances, the person is not a remittance 
transfer provider.
    iv. Examples. A. Example of safe harbor and transition period for 
100-transfer safe harbor threshold effective prior to July 21, 2020. 
Assume that a person provided 90 remittance transfers in 2012 and 90 
such transfers in 2013. The safe harbor applied to the person's 
transfers in 2013, as well as the person's first 100 remittance 
transfers in 2014. However, if the person provided a 101st transfer on 
September 5, 2014, the facts and circumstances determine whether the 
person provided remittance transfers in the normal course of business 
and was thus a remittance transfer provider for the 101st and any 
subsequent remittance transfers that it provided in 2014. Furthermore, 
the person would not have qualified for the safe harbor described in 
Sec.  1005.30(f)(2)(i) in 2015 because the person did not provide 100 
or fewer remittance transfers in 2014. However, for the 101st 
remittance transfer provided in 2014, as well as additional remittance 
transfers provided thereafter in 2014 and 2015, if that person was then 
providing remittance transfers for a consumer in the normal course of 
business, the person had a reasonable period of time, not to exceed six 
months, to come into compliance with subpart B of this part. Assume 
that in this case, a reasonable period of time is six months. Thus, 
compliance with subpart B was not required for remittance transfers 
made on or before March 5, 2015 (i.e., six months after September 5, 
2014). After March 5, 2015, the person was required to comply with 
subpart B if, based on the facts and circumstances, the person provided 
remittance transfers in the normal course of business and was thus a 
remittance transfer provider.
    B. Example of safe harbor for a person that provided 500 or fewer 
transfers in 2019 and provides 500 or fewer transfers in 2020. On July 
21, 2020, the safe harbor threshold in Sec.  1005.30(f)(2)(i) changed 
from 100 transfers to 500 transfers. Thus, beginning on July 21, 2020, 
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 500 or fewer remittance transfers 
in the previous calendar year and provides 500 or fewer remittance 
transfers in the current calendar year. If a person provided 500 or 
fewer transfers in 2019 and provides 500 or fewer remittance transfers 
in 2020, that person qualifies for the safe harbor threshold in 2020. 
For example, assume that a person provided 200 remittance transfers in 
2019 and 400 remittance transfers in 2020. The safe harbor will apply 
to the person's transfers in 2020 beginning on July 21, 2020, as well 
as the person's first 500 transfers in 2021. See comment 30(f)-2.iv.C 
for an example regarding the transition period if the 500-transfer safe 
harbor is exceeded.
    C. Example of safe harbor and transition period for the 500-
transfer

[[Page 67164]]

safe harbor threshold beginning on July 21, 2020. Assume that a person 
provided 490 remittance transfers in 2020 and 490 such transfers in 
2021. The safe harbor will apply to the person's transfers in 2021, as 
well as the person's first 500 remittance transfers in 2022. However, 
if the person provides a 501st transfer on September 5, 2022, the facts 
and circumstances determine whether the person provides remittance 
transfers in the normal course of business and is thus a remittance 
transfer provider for the 501st and any subsequent remittance transfers 
that it provides in 2022. Furthermore, the person would not qualify for 
the safe harbor described in Sec.  1005.30(f)(2)(i) in 2023 because the 
person did not provide 500 or fewer remittance transfers in 2022. 
However, for the 501st remittance transfer provided in 2022, as well as 
additional remittance transfers provided thereafter in 2022 and 2023, 
if that person is then providing remittance transfers for a consumer in 
the normal course of business, the person will have a reasonable period 
of time, not to exceed six months, to come into compliance with subpart 
B of this part. Assume that in this case, a reasonable period of time 
is six months. Thus, compliance with subpart B is not required for 
remittance transfers made on or before March 5, 2023 (i.e., six months 
after September 5, 2022). After March 5, 2023, the person is required 
to comply with subpart B if, based on the facts and circumstances, the 
person provides remittance transfers in the normal course of business 
and is thus a remittance transfer provider.
    v. Continued compliance for transfers for which payment was made 
before a person qualifies for the safe harbor. Section 
1005.30(f)(2)(iii) addresses situations where a person who previously 
was required to comply with subpart B of this part newly qualifies for 
the safe harbor in Sec.  1005.30(f)(2)(i). That section states that the 
requirements of EFTA and Regulation E, including those set forth in 
Sec. Sec.  1005.33 and 1005.34 (which address procedures for resolving 
errors and procedures for cancellation and refund of remittance 
transfers, respectively), as well as the requirements set forth in 
Sec.  1005.13 (which, in part, governs record retention), continue to 
apply to transfers for which payment is made prior to the date the 
person qualifies for the safe harbor in Sec.  1005.30(f)(2)(i). 
Qualifying for the safe harbor in Sec.  1005.30(f)(2)(i) likewise does 
not excuse compliance with any other applicable law or regulation. For 
example, if a remittance transfer is also an electronic fund transfer, 
any requirements in subpart A of Regulation E that apply to the 
transfer continue to apply, regardless of whether the person must 
comply with subpart B. Relevant requirements in subpart A may include, 
but are not limited to, those relating to initial disclosures, change-
in-terms notices, liability of consumers for unauthorized transfers, 
and procedures for resolving errors.
    3. Multiple remittance transfer providers. If the remittance 
transfer involves more than one remittance transfer provider, only one 
set of disclosures must be given, and the remittance transfer providers 
must agree among themselves which provider must take the actions 
necessary to comply with the requirements that subpart B of this part 
imposes on any or all of them. Even though the providers must designate 
one provider to take the actions necessary to comply with the 
requirements that subpart B imposes on any or all of them, all 
remittance transfer providers involved in the remittance transfer 
remain responsible for compliance with the applicable provisions of the 
EFTA and Regulation E.
* * * * *

Section 1005.32--Estimates

    1. Disclosures where estimates can be used. Sections 1005.32(a) and 
(b)(1), (4), and (5) permit estimates to be used in certain 
circumstances for disclosures described in Sec. Sec.  1005.31(b)(1) 
through (3) and 1005.36(a)(1) and (2). To the extent permitted in Sec.  
1005.32(a) and (b)(1), (4), and (5), estimates may be used in the pre-
payment disclosure described in Sec.  1005.31(b)(1), the receipt 
disclosure described in Sec.  1005.31(b)(2), the combined disclosure 
described in Sec.  1005.31(b)(3), and the pre-payment disclosures and 
receipt disclosures for both first and subsequent preauthorized 
remittance transfers described in Sec.  1005.36(a)(1) and (2). Section 
1005.32(b)(2) permits estimates to be used for certain information if 
the remittance transfer is scheduled by a sender five or more business 
days before the date of the transfer, for disclosures described in 
Sec.  1005.36(a)(1)(i) and (a)(2)(i).
* * * * *
32(b) Permanent Exceptions
32(b)(1) Permanent Exceptions for Transfers to Certain Countries
    1. Laws of the recipient country. The laws of the recipient country 
do not permit a remittance transfer provider to determine exact amounts 
required to be disclosed when a law or regulation of the recipient 
country requires the person making funds directly available to the 
designated recipient to apply an exchange rate that is:
    i. Set by the government of the recipient country after the 
remittance transfer provider sends the remittance transfer or
    ii. Set when the designated recipient receives the funds.
    2. Example illustrating when exact amounts can and cannot be 
determined because of the laws of the recipient country.
    i. The laws of the recipient country do not permit a remittance 
transfer provider to determine the exact exchange rate required to be 
disclosed under Sec.  1005.31(b)(1)(iv) when, for example, the 
government of the recipient country, on a daily basis, sets the 
exchange rate that must, by law, apply to funds received and the funds 
are made available to the designated recipient in the local currency 
the day after the remittance transfer provider sends the remittance 
transfer.
    ii. In contrast, the laws of the recipient country permit a 
remittance transfer provider to determine the exact exchange rate 
required to be disclosed under Sec.  1005.31(b)(1)(iv) when, for 
example, the government of the recipient country ties the value of its 
currency to the U.S. dollar.
    3. Method by which transactions are made in the recipient country. 
The method by which transactions are made in the recipient country does 
not permit a remittance transfer provider to determine exact amounts 
required to be disclosed when transactions are sent via international 
ACH on terms negotiated between the United States government and the 
recipient country's government, under which the exchange rate is a rate 
set by the recipient country's central bank or other governmental 
authority after the provider sends the remittance transfer.
    4. Example illustrating when exact amounts can and cannot be 
determined because of the method by which transactions are made in the 
recipient country.
    i. The method by which transactions are made in the recipient 
country does not permit a remittance transfer provider to determine the 
exact exchange rate required to be disclosed under Sec.  
1005.31(b)(1)(iv) when the provider sends a remittance transfer via 
international ACH on terms negotiated between the United States 
government and the recipient country's government, under which the 
exchange rate is a rate set by the recipient country's central bank on 
the business day after the provider has sent the remittance transfer.

[[Page 67165]]

    ii. In contrast, a remittance transfer provider would not qualify 
for the Sec.  1005.32(b)(1)(i)(B) methods exception if it sends a 
remittance transfer via international ACH on terms negotiated between 
the United States government and a private-sector entity or entities in 
the recipient country, under which the exchange rate is set by the 
institution acting as the entry point to the recipient country's 
payments system on the next business day. However, a remittance 
transfer provider sending a remittance transfer using such a method may 
qualify for the Sec.  1005.32(a) temporary exception or the exception 
set forth in Sec.  1005.32(b)(4).
    iii. A remittance transfer provider would not qualify for the Sec.  
1005.32(b)(1)(i)(B) methods exception if, for example, it sends a 
remittance transfer via international ACH on terms negotiated between 
the United States government and the recipient country's government, 
under which the exchange rate is set by the recipient country's central 
bank or other governmental authority before the sender requests a 
transfer.
    5. Safe harbor list. If a country is included on a safe harbor list 
published by the Bureau under Sec.  1005.32(b)(1)(ii), a remittance 
transfer provider may provide estimates of the amounts to be disclosed 
under Sec.  1005.31(b)(1)(iv) through (vii). If a country does not 
appear on the Bureau's list, a remittance transfer provider may provide 
estimates under Sec.  1005.32(b)(1)(i) if the provider determines that 
the recipient country does not legally permit or method by which 
transactions are conducted in that country does not permit the provider 
to determine exact disclosure amounts.
    6. Reliance on Bureau list of countries. A remittance transfer 
provider may rely on the list of countries published by the Bureau to 
determine whether the laws of a recipient country do not permit the 
remittance transfer provider to determine exact amounts required to be 
disclosed under Sec.  1005.31(b)(1)(iv) through (vii). Thus, if a 
country is on the Bureau's list, the provider may give estimates under 
this section, unless a remittance transfer provider has information 
that a country on the Bureau's list legally permits the provider to 
determine exact disclosure amounts.
    7. Change in laws of recipient country. i. If the laws of a 
recipient country change such that a remittance transfer provider can 
determine exact amounts, the remittance transfer provider must begin 
providing exact amounts for the required disclosures as soon as 
reasonably practicable if the provider has information that the country 
legally permits the provider to determine exact disclosure amounts.
    ii. If the laws of a recipient country change such that a 
remittance transfer provider cannot determine exact disclosure amounts, 
the remittance transfer provider may provide estimates under Sec.  
1005.32(b)(1)(i), even if that country does not appear on the list 
published by the Bureau.
* * * * *
32(b)(4) Permanent Exception for Estimation of the Exchange Rate by an 
Insured Institution
    1. Determining the exact exchange rate. For purposes of Sec.  
1005.32(b)(4)(i)(B), an insured institution cannot determine, at the 
time it must provide the applicable disclosures, the exact exchange 
rate required to be disclosed under Sec.  1005.31(b)(1)(iv) for a 
remittance transfer to a particular country where the designated 
recipient of the transfer will receive funds in the country's local 
currency if a person other than the insured institution sets the 
exchange rate for that transfer, except where that person has a 
correspondent relationship with the insured institution, that person is 
a service provider for the institution, or that person acts as an agent 
of the insured institution.
    i. Example where an insured institution cannot determine the exact 
exchange rate. The following example illustrates when an insured 
institution cannot determine an exact exchange rate under Sec.  
1005.32(b)(4)(i)(B) for a remittance transfer:
    A. An insured institution or its service provider does not set the 
exchange rate required to be disclosed under Sec.  1005.31(b)(1)(iv), 
and the rate is set when the funds are deposited into the recipient's 
account by the designated recipient's institution that does not have a 
correspondent relationship with, and does not act as an agent of, the 
insured institution.
    ii. Examples where an insured institution can determine the exact 
exchange rate. The following examples illustrate when an insured 
institution can determine an exact exchange rate under Sec.  
1005.32(b)(4)(i)(B) for a remittance transfer, and thus the insured 
institution may not use the exception in Sec.  1005.32(b)(4) to 
estimate the disclosures required under Sec.  1005.31(b)(1)(iv) through 
(vii) for the remittance transfer:
    A. An insured institution has a correspondent relationship with an 
intermediary financial institution (or the intermediary financial 
institution acts as an agent of the insured institution) and that 
intermediary financial institution sets the exchange rate required to 
be disclosed under Sec.  1005.31(b)(1)(iv) for a remittance transfer.
    B. An insured institution or its service provider converts the 
funds into the local currency to be received by the designated 
recipient for a remittance transfer using an exchange rate that the 
insured institution or its service provider sets. The insured 
institution can determine the exact exchange rate for purposes of Sec.  
1005.32(b)(4)(i)(B) for the remittance transfer even if the insured 
institution does not have a correspondent relationship with an 
intermediary financial institution in the transmittal route or the 
designated recipient's institution, and an intermediary financial 
institution in the transmittal route or the designed recipient's 
institution does not act as an agent of the insured institution.
    2. Threshold. For purposes of determining whether an insured 
institution made 1,000 or fewer remittance transfers in the prior 
calendar year to a particular country pursuant to Sec.  
1005.32(b)(4)(i)(C):
    i. The number of remittance transfers provided includes transfers 
in the prior calendar year to that country when the designated 
recipients of those transfers received funds in the country's local 
currency regardless of whether the exchange rate was estimated for 
those transfers. For example, an insured institution exceeds the 1,000 
threshold in the prior calendar year if the insured institution 
provided 700 remittance transfers to a country in the prior calendar 
year when the designated recipients of those transfers received funds 
in the country's local currency when the exchange rate was estimated 
for those transfers and also sends 400 remittance transfers to the same 
country in the prior calendar year when the designated recipients of 
those transfers received funds in the country's local currency and the 
exchange rate for those transfers was not estimated.
    ii. The number of remittance transfers does not include remittance 
transfers to a country in the prior calendar year when the designated 
recipients of those transfers did not receive the funds in the 
country's local currency. For example, an insured institution does not 
exceed the 1,000 threshold in the prior calendar year if the insured 
institution provides 700 remittance transfers to a country in the prior 
calendar year when the designated recipients of those transfers 
received funds in the country's local currency and also sends 400 
remittance transfers to the same country in the prior calendar year 
when the designated

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recipients of those transfers did not receive funds in the country's 
local currency.
32(b)(5) Permanent Exception for Estimation of Covered Third-Party Fees 
by an Insured Institution
    1. Insured institution cannot determine the exact covered third-
party fees. For purposes of Sec.  1005.32(b)(5)(i)(B), an insured 
institution cannot determine, at the time it must provide the 
applicable disclosures, the exact covered third-party fees required to 
be disclosed under Sec.  1005.31(b)(1)(vi) for a remittance transfer to 
a designated recipient's institution when all of the following 
conditions are met:
    i. The insured institution does not have a correspondent 
relationship with the designated recipient's institution;
    ii. The designated recipient's institution does not act as an agent 
of the insured institution;
    iii. The insured institution does not have an agreement with the 
designated recipient's institution with respect to the imposition of 
covered third-party fees on the remittance transfer (e.g., an agreement 
whereby the designated recipient's institution agrees to charge back 
any covered third-party fees to the insured institution rather than 
impose the fees on the remittance transfer); and
    iv. The insured institution does not know at the time the 
disclosures are given that the only intermediary financial institutions 
that will impose covered third-party fees on the transfer are those 
institutions that have a correspondent relationship with or act as an 
agent for the insured institution, or have otherwise agreed upon the 
covered third-party fees with the insured institution.
    2. Insured institution can determine the exact covered third-party 
fees. For purposes of Sec.  1005.32(b)(5)(i)(B), an insured institution 
can determine, at the time it must provide the applicable disclosures, 
exact covered third-party fees, and thus the insured institution may 
not use the exception in Sec.  1005.32(b)(5) to estimate the 
disclosures required under Sec.  1005.31(b)(1)(vi) or (vii) for the 
transfer, if any of the following conditions are met:
    i. An insured institution has a correspondent relationship with the 
designated recipient's institution;
    ii. The designated recipient's institution acts as an agent of the 
insured institution;
    iii. An insured institution has an agreement with the designated 
recipient's institution with respect to the imposition of covered 
third-party fees on the remittance transfer; or
    iv. An insured institution knows at the time the disclosures are 
given that the only intermediary financial institutions that will 
impose covered third-party fees on the transfer are those institutions 
that have a correspondent relationship with or act as an agent for the 
insured institution, or have otherwise agreed upon the covered third-
party fees with the insured institution.
    3. Threshold. For purposes of determining whether an insured 
institution made 500 or fewer remittance transfers in the prior 
calendar year to a particular designated recipient's institution 
pursuant to Sec.  1005.32(b)(5)(i)(C):
    i. The number of remittance transfers provided includes remittance 
transfers in the prior calendar year to that designated recipient's 
institution regardless of whether the covered third-party fees were 
estimated for those transfers. For example, an insured institution 
exceeds the 500 threshold in the prior calendar year if an insured 
institution provides 300 remittance transfers to the designated 
recipient's institution in the prior calendar year when the covered 
third-party fees were estimated for those transfers and also sends 400 
remittance transfers to the designated recipient's institution in the 
prior calendar year and the covered third-party fees for those 
transfers were not estimated.
    ii. The number of remittance transfers includes remittance 
transfers provided to the designated recipient's institution in the 
prior calendar year regardless of whether the designated recipients 
received the funds in the country's local currency or in another 
currency. For example, an insured institution exceeds the 500 threshold 
in the prior calendar year if the insured institution provides 300 
remittance transfers to the designated recipient's institution in the 
prior calendar year when the designated recipients of those transfers 
received funds in the country's local currency and also sends 400 
remittance transfers to the same designated recipient's institution in 
the prior calendar year when the designated recipients of those 
transfers did not receive funds in the country's local currency.
* * * * *
32(c) Bases for Estimates
* * * * *
32(c)(3) Covered Third-Party Fees
    1. Potential transmittal routes. A remittance transfer from the 
sender's account at an insured institution to the designated 
recipient's institution may take several routes, depending on the 
correspondent relationships each institution in the transmittal route 
has with other institutions. In providing an estimate of the fees 
required to be disclosed under Sec.  1005.31(b)(1)(vi) pursuant to the 
Sec.  1005.32(a) temporary exception or the exception under Sec.  
1005.32(b)(5), an insured institution may rely upon the representations 
of the designated recipient's institution and the institutions that act 
as intermediaries in any one of the potential transmittal routes that 
it reasonably believes a requested remittance transfer may travel.
32(d) Bases for Estimates for Transfers Scheduled Before the Date of 
Transfer
    1. In general. When providing an estimate pursuant to Sec.  
1005.32(b)(2), Sec.  1005.32(d) requires that a remittance transfer 
provider's estimated exchange rate must be the exchange rate (or 
estimated exchange rate) that the remittance transfer provider would 
have used or did use that day in providing disclosures to a sender 
requesting such a remittance transfer to be made on the same day. If, 
for the same-day remittance transfer, the provider could utilize an 
exception permitting the provision of estimates in Sec.  1005.32(a) or 
(b)(1) or (4), the provider may provide estimates based on a 
methodology permitted under Sec.  1005.32(c). For example, if, on 
February 1, the sender schedules a remittance transfer to occur on 
February 10, the provider should disclose the exchange rate as if the 
sender was requesting the transfer be sent on February 1. However, if 
at the time payment is made for the requested transfer, the remittance 
transfer provider could not send any remittance transfer until the next 
day (for reasons such as the provider's deadline for the batching of 
transfers), the remittance transfer provider can use the rate (or 
estimated exchange rate) that the remittance transfer provider would 
have used or did use in providing disclosures that day with respect to 
a remittance transfer requested that day that could not be sent until 
the following day.
* * * * *

Section 1005.36--Transfers Scheduled Before the Date of Transfer

* * * * *
36(b) Accuracy
    1. Use of estimates. In providing the disclosures described in 
Sec.  1005.36(a)(1)(i) or (a)(2)(i), remittance transfer providers may 
use estimates to the extent permitted by any of the exceptions in Sec.  
1005.32. When estimates

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are permitted, however, they must be disclosed in accordance with Sec.  
1005.31(d).
    2. Subsequent preauthorized remittance transfers. For a subsequent 
transfer in a series of preauthorized remittance transfers, the receipt 
provided pursuant to Sec.  1005.36(a)(1)(i), except for the temporal 
disclosures in that receipt required by Sec.  1005.31(b)(2)(ii) (Date 
Available) and (b)(2)(vii) (Transfer Date), applies to each subsequent 
preauthorized remittance transfer unless and until it is superseded by 
a receipt provided pursuant to Sec.  1005.36(a)(2)(i). For each 
subsequent preauthorized remittance transfer, only the most recent 
receipt provided pursuant to Sec.  1005.36(a)(1)(i) or (a)(2)(i) must 
be accurate as of the date each subsequent transfer is made.
    3. Receipts. A receipt required by Sec.  1005.36(a)(1)(ii) or 
(a)(2)(ii) must accurately reflect the details of the transfer to which 
it pertains and may not contain estimates pursuant to Sec.  
1005.32(b)(2). However, the remittance transfer provider may continue 
to disclose estimates to the extent permitted by Sec.  1005.32(a) or 
(b)(1), (4), or (5). In providing receipts pursuant to Sec.  
1005.36(a)(1)(ii) or (a)(2)(ii), Sec.  1005.36(b)(2) and (3) do not 
allow a remittance transfer provider to change figures previously 
disclosed on a receipt provided pursuant to Sec.  1005.36(a)(1)(i) or 
(a)(2)(i), unless a figure was an estimate or based on an estimate 
disclosed pursuant to Sec.  1005.32. Thus, for example, if a provider 
disclosed its fee as $10 in a receipt provided pursuant to Sec.  
1005.36(a)(1)(i) and that receipt contained an estimate of the exchange 
rate pursuant to Sec.  1005.32(b)(2), the second receipt provided 
pursuant to Sec.  1005.36(a)(1)(ii) must also disclose the fee as $10.
* * * * *

    Dated: November 25, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-25944 Filed 12-5-19; 8:45 am]
 BILLING CODE 4810-AM-P