Consumer Financial Protection Circular 2024-02: Deceptive Marketing Practices About the Speed or Cost of Sending a Remittance Transfer, 27357-27361 [2024-08007]

Download as PDF 27357 Rules and Regulations Federal Register Vol. 89, No. 75 Wednesday, April 17, 2024 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. CONSUMER FINANCIAL PROTECTION BUREAU 12 CFR Part X Consumer Financial Protection Circular 2024–02: Deceptive Marketing Practices About the Speed or Cost of Sending a Remittance Transfer Consumer Financial Protection Bureau. ACTION: Consumer financial protection circular. AGENCY: The Consumer Financial Protection Bureau (Bureau or CFPB) has issued Consumer Financial Protection Circular 2024–02, titled, ‘‘Deceptive Marketing Practices About the Speed or Cost of Sending a Remittance Transfer.’’ In this circular, the Bureau responds to the question, ‘‘When do remittance transfer providers violate the prohibition on deceptive acts or practices in the Consumer Financial Protection Act (CFPA) in their marketing about the speed and cost of sending a remittance transfer?’’ DATES: The Bureau released this circular on its website on March 27, 2024. ADDRESSES: Enforcers, and the broader public, can provide feedback and comments to Circulars@cfpb.gov. FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory Implementation & Guidance Program Analyst, Office of Regulations, at 202– 435–7700 or at: https://reginquiries. consumerfinance.gov/. If you require this document in an alternative electronic format, please contact CFPB_ Accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: lotter on DSK11XQN23PROD with RULES1 SUMMARY: Question Presented When do remittance transfer providers violate the prohibition on deceptive acts or practices in the Consumer Financial Protection Act (CFPA) in their marketing about the speed and cost of sending a remittance transfer? VerDate Sep<11>2014 16:02 Apr 16, 2024 Jkt 262001 Response Remittance transfer providers may be liable under the CFPA for deceptive marketing about the speed or cost of sending a remittance transfer. Providers may be liable under the CFPA for deceptive marketing practices regardless of whether the provider is in compliance with the disclosure requirements of the Remittance Rule. For example, among other things, it may be deceptive to: • Market remittance transfers as being delivered within a certain time frame, when transfers actually take longer to be made available to recipients; • Market remittance transfers as ‘‘no fee’’ when in fact the provider charges fees; • Market promotional fees or promotional exchange rates for remittance transfers without sufficiently clarifying when an offer is temporary or limited; • Market remittance transfers as ‘‘free’’ if they are not in fact free. Background Remittance Transfer Speed and Costs Pursuant to the CFPB’s Remittance Rule,1 the term ‘‘remittance transfer’’ includes most electronic transfers of funds sent by consumers in the United States to recipients in other countries. Consumers in the United States send hundreds of billions of dollars in remittance transfers to recipients in foreign countries each year.2 Remittance transfers are often consumer-toconsumer transfers of money by immigrants sending financial support to family and friends in other countries. They also include other types of transfers, such as transfers by consumers in the United States to Americans living temporarily abroad, such as students. Consumers may send remittance transfers regularly as an ongoing source of financial assistance or in other circumstances, such as an occasional or emergency form of support. Remittance transfers also include cross-border consumer-tobusiness payments for goods or services. Consumers may choose among a range of bank, credit union, and non-bank 1 Reg. E, 12 CFR part 1005 et seq. Remittance Rule Assessment Report, at 7 (Revised Apr. 24, 2019), https://files.consumer finance.gov/f/documents/bcfp_remittance-ruleassessment_report_corrected_2019-03.pdf. 2 CFPB, PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 money transmitters when sending a remittance transfer. Non-bank money transmitters have traditionally dominated the market for remittance transfers from the United States. In recent years, new money transmitters have emerged offering digital remittance transfer services. Many established money transmitters have also added digital services, in addition to in-person options for consumers to go to a store or agent to send remittance transfers.3 When sending remittance transfers, consumers may consider a number of key factors when deciding among different providers, including the speed of the transfer and its cost as well as convenience, security, reliability, and trust.4 The speed of a remittance transfer varies depending on the type of transfer and provider. The World Bank Remittance Prices Worldwide database illustrates that a range of transfer speeds can exist within a given remittance corridor, with some providers, for example, offering delivery in less than an hour, and others offering delivery in three to five days.5 Costs can also vary significantly within a remittance corridor. Remittance transfer costs include fees charged by the remittance transfer provider including, if applicable, their agents and third parties. Costs also include any exchange rate costs applied by the provider to the currency conversion and governmental taxes. The exchange rate offered to consumers 3 See Daivi Rodima-Taylor, The Uneven Path Toward Cheaper Digital Remittances, Migration Information Source (June 22, 2023), https:// www.migrationpolicy.org/article/cheaper-digitalremittances; Daniel Webber, Remittances’ Shift to Digital: Driving Change in an Industry Split Between Yesterday and Tomorrow, Forbes (Mar. 21, 2023), https://www.forbes.com/sites/danielwebber/ 2023/03/21/remittances-shift-to-digital-drivingchange-in-an-industry-split-between-yesterday-andtomorrow/?sh=77f07495341. 4 See 2012 Final Rule, 77 FR 6194, 6199 (Feb. 7, 2012). See also Annette LoVoi, Sending Money: The Path Forward, Appleseed, at 12 (May 2016), https:// www.ctappleseed.org/wp-content/uploads/2016/04/ Immigrant-Finances-Final-Appleseed-Report-onRemittance-Use-Sending-Money-Home-5.26.16.pdf; ICF Macro, Summary of Findings: Design and Testing of Remittance Disclosures, Report to the Board of Governors of the Federal Reserve System, at 2–4 (Apr. 20, 2011), https://www.federalreserve. gov/econresdata/bcreg20110512_ICF_Report_ Remittance_Disclosures_(FINAL).pdf. 5 See The World Bank, Remittance Prices Worldwide: Making Markets More Transparent, https://remittanceprices.worldbank.org/ The database also reflects that a range of costs exist for sending a remittance transfer in a given corridor. E:\FR\FM\17APR1.SGM 17APR1 27358 Federal Register / Vol. 89, No. 75 / Wednesday, April 17, 2024 / Rules and Regulations often reflects a spread—meaning, a percentage difference between the retail exchange rate offered to the consumer and some wholesale exchange rate.6 Remittance transfer providers utilize different pricing strategies when determining the fees and exchange rate they charge to consumers for remittance transfers. Transparency Concerns Around Remittance Transfer Speed and Costs lotter on DSK11XQN23PROD with RULES1 Prior to the passage of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act (Dodd-Frank Act), Federal consumer protection laws generally did not apply to remittances, and remittance transfer providers were not consistently required to disclose applicable fees, exchange rates, transfer speeds, and the amount to be received in a transaction. Consumers thus did not always know how much money would be received on the other end and were not able to easily comparison shop among providers. With the Dodd-Frank Act’s amendments to the Electronic Fund Transfer Act and the promulgation of the Remittance Rule, remittance transfer providers are now generally required to disclose certain information to consumers before the consumer pays for a transfer and also when payment is made.7 Before the consumer pays for a transfer, the information a remittance transfer provider must disclose includes (but is not limited to): as applicable, the amount that will be transferred to the designated recipient in the currency in which the remittance transfer is funded; any fees imposed and any taxes collected on the remittance transfer; the total amount of the transaction, which is the sum of the amount that will be transferred and any fees imposed and any taxes collected, in the funding currency; the exchange rate used by the provider for the remittance transfer; any covered third-party fees; and the amount that will be received by the designated recipient in the currency in which the funds will be received. The receipt that consumers generally receive when payment is made must contain the same information. In addition, the receipt must disclose the date in the foreign country on which funds will be available to the designated recipient. 6 See 2012 Final Rule, 77 FR 6194 at 6196 (discussing the exchange rate as a component of cost). See also CFPB, Report on Remittance Transfers, at 12–13 (July 20, 2011), https:// www.consumerfinance.gov/wp-content/uploads/ 2011/07/Report_20110720_RemittanceTransfers.pdf (discussing the ‘‘well-recognized’’ concept of exchange rate spread in the remittance transfer industry). 7 Reg. E, 12 CFR 1005.31. VerDate Sep<11>2014 16:02 Apr 16, 2024 Jkt 262001 Compliance with the Remittance Rule disclosure requirements does not obviate the obligation to refrain from misleading marketing practices. In particular, remittance transfer providers must ensure their marketing practices do not violate the prohibition of unfair, deceptive, or abusive acts or practices in the CFPA.8 The CFPB has identified problems with transparency and accuracy in marketing practices about the speed of a remittance transfer in its supervision of remittance transfer providers and enforcement of the CFPA’s prohibition against deceptive acts or practices. In the CFPB’s Spring 2022 Supervisory Highlights, the CFPB discussed examiners’ findings that remittance transfer providers made false and misleading representations about the speed of remittance transfers.9 In October 2023, the CFPB issued a consent order against Chime Inc., d/b/a Sendwave, finding that the remittance transfer provider made misleading statements in advertisements about the speed and cost of its services, in violation of the CFPA’s prohibition on deceptive acts or practices.10 This provider claimed in social media marketing that remittance transfers would be delivered ‘‘instantly,’’ in ‘‘30 seconds’’ or ‘‘within seconds,’’ and would incur ‘‘no fees,’’ when in fact transfers often took much longer, and the provider charged a fee.11 In addition, consumers have reported, and the CFPB has observed, problems with price transparency in the marketing practices of remittance transfer providers, resulting in 8 12 U.S.C. 5531. The CFPB has taken public action against multiple remittance transfer providers to enforce various provisions of the CFPA and the Remittance Rule. See Chime, Inc. d/b/a Sendwave, No. 2023–CFPB–0012 (CFPB filed Oct. 17, 2023); Servicio UniTeller, Inc., No. 2022–CFPB– 0012 (CFPB filed Dec. 22, 2022); Choice Money Transfer, Inc. d/b/a Small World Money Transfer, No. 2022–CFPB–0009 (CFPB filed Oct. 4, 2022); CFPB v. MoneyGram International, Inc., No. 22–cv– 3256 (S.D.N.Y. filed Apr. 21, 2022) (pending); Envios de Valores la Nacional Corp., No. 2020– BCFP–0025 (CFPB filed Dec. 21, 2020); Sigue Corporation, et al., No 2020–BCFP–0011 (CFPB filed Aug. 31, 2020); Trans-Fast Remittance LLC, also doing business as New York Bay Remittance, No. 2020–BCFP–0010 (CFPB filed Aug. 31, 2020); Maxitransfers Corp., No. 2019–BCFP–0008 (CFPB filed Aug. 27, 2019). 9 CFPB, Supervisory Highlights, 87 FR 26727, 26734 (May 5, 2022). 10 Chime, Inc. d/b/a Sendwave, No. 2023–CFPB– 0012 (Oct. 17, 2023) (consent order). 11 Id. at 8. The CFPB also found deceptive acts or practices in actions against Trans-Fast Remittances LLC and Maxitransfers Corp. See Trans-Fast Remittance LLC, also doing business as New York Bay Remittance, No. 2020–BCFP–0010 (CFPB filed Aug. 31, 2020) (consent order); Maxitransfers Corp., No. 2019–BCFP–0008 (CFPB filed Aug. 27, 2019) (consent order). PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 consumers encountering unexpected costs.12 The CFPB has received consumer complaints about promotional pricing by remittance transfer providers who do not sufficiently inform consumers that the advertised fee or exchange rate is only a limited scope or temporary offer. The CFPB has also observed marketing claims by remittance transfer providers that may mislead consumers about the scope or duration of a temporary low or ‘‘no fee’’ offer or promotional exchange rate. The CFPB has also received consumer complaints about marketing that omits or obscures the cost of a remittance transfer. Marketing claims by remittance transfer providers may fail to communicate the full cost of a remittance transfer, such as advertising that transfers are ‘‘free’’ or advertising that prominently emphasizes zero fees while only including a vaguely worded statement that additional costs related to the exchange rate may apply. Some of these statements use technical jargon or feature confusing language. The CFPB has also received consumer complaints about companies that market ‘‘free’’ remittance transfers through digital wallet and other prepaid products, but that fail to sufficiently disclose costs for currency conversion or for withdrawing funds from the product. Companies that offer remittance transfers through digital wallets and other prepaid products often market them as a faster and cheaper way to send remittance transfers. Certain companies’ websites market ‘‘free account-to-account transfers’’ or that ‘‘receiving money from a friend’’ is free. Providers may disclose only in fine print, however, that these transfers are only free when there is no currency conversion, and that for the recipient to withdraw and use funds in their local currency, they must pay a currency conversion fee. In addition, some digital wallet providers may not make clear that recipients of a remittance transfer must pay a fee to withdraw funds from the digital wallet or other prepaid product. Examples of such fees include fees to transfer funds to an external bank account, credit card, or prepaid card. Consumers have complained to the CFPB that these fees are unexpected when they convert currencies and withdraw funds 12 See, e.g., Consumer Complaint 7007332, https://www.consumerfinance.gov/data-research/ consumer-complaints/search/detail/7007332; Consumer Complaint 6845292, https:// www.consumerfinance.gov/data-research/ consumer-complaints/search/detail/6845292; Consumer Complaint 1972064, https:// www.consumerfinance.gov/data-research/ consumer-complaints/search/detail/1972064. E:\FR\FM\17APR1.SGM 17APR1 Federal Register / Vol. 89, No. 75 / Wednesday, April 17, 2024 / Rules and Regulations transmitted through digital wallets and other prepaid products.13 Analysis lotter on DSK11XQN23PROD with RULES1 Under the CFPA, it is unlawful for a provider of consumer financial products or services to engage in deceptive acts or practices.14 A representation, omission, act, or practice is deceptive if it misleads or is likely to mislead the consumer; the consumer’s interpretation is reasonable under the circumstances; and the misleading representation, omission, act, or practice is material.15 It is deceptive to market remittance transfers as being delivered within a certain time frame, when transfers actually take longer to be made available to recipients. Remittance transfer providers violate the CFPA’s prohibition on deceptive acts or practices if they market remittance transfers as being delivered within a certain time frame, when transfers actually take longer to reach recipients. The CFPB ‘‘presumes that express claims are material.’’ 16 Furthermore, as noted above, the speed of a remittance transfer is often a crucial consideration for consumers sending remittance transfers.17 Recipients may rely on remittance transfers for day-today expenses or for time-sensitive emergencies. As illustrated in the CFPB’s action against Chime Inc., d/b/a Sendwave, marketing claims about the speed of remittance transfers may violate the prohibition on deceptive acts or practices under the CFPA when the actual time for delivery is longer than advertised. In the Sendwave case, the provider told consumers that transfers would be delivered ‘‘instantly,’’ ‘‘in 30 seconds,’’ or ‘‘within seconds.’’ These statements were false and misleading because, although a reasonable customer might expect delivery within the time frame advertised, in many instances, transfers were not actually delivered instantly or within seconds for many consumers.18 In addition, as an express marketing statement regarding a central characteristic of the product—when funds would be available to a 13 See, e.g., Consumer Complaint 2994206, https://www.consumerfinance.gov/data-research/ consumer-complaints/search/detail/2994206. 14 12 U.S.C. 5531, 5536. 15 See FTC Policy Statement on Deception (Oct. 14, 1983), https://www.ftc.gov/system/files/ documents/public_statements/410531/ 831014deceptionstmt.pdf. 16 See id. 17 See 2012 Final Rule, 77 FR 6194 at 6199. 18 Chime, Inc. d/b/a Sendwave, No. 2023–CFPB– 0012, at 8–9 (Oct. 17, 2023) (consent order). VerDate Sep<11>2014 16:02 Apr 16, 2024 Jkt 262001 recipient—the misleading representation was material.19 Providers must thus take care not to engage in deceptive acts or practices in their marketing claims about the speed of a remittance transfer. It is deceptive to market transfers as ‘‘no fee’’ when in fact the remittance transfer provider charges consumers fees to send the remittance transfer. Remittance transfer providers violate the CFPA’s prohibition on deceptive acts or practices if they market remittance transfers as having ‘‘no fee,’’ when in fact the remittance transfer provider charges consumers fees to send the remittance transfer. The cost of sending a remittance transfer is a central consideration for consumers,20 and, as discussed above, fees are an important component of the cost of a remittance transfer.21 Expressly misleading price claims violate the prohibition on deceptive practices.22 For example, as alleged in the CFPB’s action against Chime Inc., d/b/a Sendwave, from at least 2021 to 2022, Sendwave’s website advertised that consumers could transfer funds from the United States to Nigeria ‘‘with no fees.’’ In fact, consumers were charged fees on all transfers from the United States to Nigeria, despite Sendwave continuing to promote its product as having ‘‘no fees’’ on its website with no qualification or disclaimer.23 The CFPB found that Sendwave’s representations were likely to mislead the consumer and that the consumer’s interpretation would be reasonable under the circumstances. Although Sendwave disclosed a 1 percent transfer fee in the FAQ section of its website, this did not correct the misleading statement or communication made at the top of its web page and on a graphic depicting its mobile app.24 And as an express marketing statement regarding a central consideration for consumers 19 See FTC, Policy Statement on Deception (Oct. 14, 1983). 20 See Kangni Kpodar, Patrick Amir Imam, How Do Transaction Costs Influence Remittances? World Development Vol. 177 (May 2024), https://doi.org/ 10.1016/j.worlddev.2024.106537. 21 See 2012 Final Rule, 77 FR 6194 at 6199. 22 See FTC, Policy Statement on Deception (Oct. 14, 1983). 23 Chime, Inc. d/b/a Sendwave, No. 2023–CFPB– 0012, at 8 (Oct. 17, 2023) (consent order). 24 See FTC v. Davison Assocs., Inc., 431 F. Supp. 2d 548, 560 (W.D. Pa. 2006) (‘‘Disclaimers or curative language must be ‘sufficiently prominent and unambiguous’ such that the overall netimpression of the communication becomes nondeceptive.’’); FTC v. Roca Labs, Inc., 345 F. Supp. 3d 1375, 1392 (M.D. Fla. 2018) (‘‘Defendants cannot avoid liability by exclusively advertising that the product costs $480 without any caveats and then burying the conditions of the discount in a separate disclaimer.’’). PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 27359 when sending a remittance transfer— cost —, the misleading representation about transfer fees was material.25 It may be deceptive to market promotional fees or promotional exchange rates for remittance transfers without sufficiently clarifying when the offer is only limited or temporary. Remittance transfer providers may violate the CFPA’s prohibition on deceptive acts or practices by advertising promotional pricing for remittance transfers without sufficiently clarifying that the offer is only limited or temporary in scope, even if the promotional nature of the offer is disclosed in fine print or later in the transaction.26 In such cases, consumers may not understand the pricing is limited and promotional and they may not understand that the cost of sending a remittance transfer through the provider rises after the first or first few transactions. As the CFPB has articulated, consumers may be reasonably misled when financial service providers fail to clearly and conspicuously disclose material terms in advertising, such as when and by how much charges will increase.27 Written disclosures or fine print in marketing materials would often be insufficient to correct a misleading statement or representation in marketing communications.28 When a consumer’s first contact with a remittance transfer provider involves deception, ‘‘the law may be violated 25 See FTC, Policy Statement on Deception (Oct. 14, 1983). 26 See FTC v. Davison Assocs., 431 F. Supp. 2d 548 at 560 (‘‘Disclaimers or curative language must be ‘sufficiently prominent and unambiguous’ such that the overall net-impression of the communication becomes non-deceptive.’’). 27 CFPB, Consumer Financial Protection Circular 2023–01: Unlawful negative option marketing practices (Jan. 19, 2023), https://www.consumer finance.gov/compliance/circulars/consumerfinancial-protection-circular-2023-01-unlawfulnegative-option-marketing-practices/. 28 FTC, Policy Statement on Deception (Oct. 14, 1983). See also In re Intuit, Inc., No. 9408, at 43 (FTC Opinion, Jan. 19, 2024) (‘‘Disclaimers or qualifications are not adequate to avoid liability ‘unless they are sufficiently prominent and unambiguous to change the apparent meaning of the claims and to leave an accurate impression. Anything less is only likely to cause confusion by creating contradictory double meanings.’’’) (quoting Removatron Int’l Corp. v. FTC, 884 F.2d 1489, 1497 (1st Cir. 1989)); FTC v. Davison Assocs., 431 F. Supp. 2d 548 at 560 (‘‘Disclaimers or curative language must be ‘sufficiently prominent and unambiguous’ such that the overall net-impression of the communication becomes non-deceptive.’’); FTC v. Roca Labs, 345 F. Supp. 3d 1375 at 1392 (‘‘Defendants cannot avoid liability by exclusively advertising that the product costs $480 without any caveats and then burying the conditions of the discount in a separate disclaimer.’’). E:\FR\FM\17APR1.SGM 17APR1 lotter on DSK11XQN23PROD with RULES1 27360 Federal Register / Vol. 89, No. 75 / Wednesday, April 17, 2024 / Rules and Regulations even if the truth is subsequently made known’’ to the consumer.29 Representations in advertising about ‘‘no fee’’ remittance transfers or specific promotional exchange rates without sufficiently clarifying, when applicable, that the offer is only limited or temporary in scope are presumed to be material, as they relate to cost, a key consumer consideration. In addition, such statements are likely to be material because of their likely impact on a consumer’s initial and subsequent choice of remittance transfer provider. The impact could be particularly significant for promotions offered to first-time customers who seek to continue using the provider to send remittance transfers. Such consumers may face unexpected higher costs after the expiration of the promotion and may also face unexpected hurdles in searching for a different provider. Had they been aware of the limited promotional nature of the offer, a reasonable consumer may have chosen a different provider. It is deceptive to market remittance transfers as ‘‘free’’ if they are not in fact free. Remittance transfer providers would also violate the CFPA’s prohibition on deceptive acts or practices by marketing remittance transfers as ‘‘free’’ if they are not actually free for the consumer. For example, it may be deceptive to market a remittance transfer as ‘‘free’’ if the remittance transfer provider is imposing costs on consumers through the exchange rate spread for the transfer or, with respect to digital wallets or other prepaid products, if the provider imposes costs to convert funds into a different currency or to withdraw funds from the product. The FTC has articulated that, under the FTC Act, offers of ‘‘free’’ services ‘‘must be made with extreme care so as to avoid any possibility that consumers will be misled or deceived.’’ 30 ‘‘The word ‘free’ is a lure. It is the bait. It is a powerful magnet that draws the best of us against our will ‘to get something for nothing.’ ’’ Book-of-the-Month Club, Inc., 48 F.T.C. 1297, 1312 (1952), aff’d, 202 F.2d 486 (2d Cir. 1953). A consumer should generally expect that a ‘‘free’’ product or service is indeed free, and that the seller ‘‘will not directly and immediately recover, in whole or in part, the cost of [] the service.’’ 31 The FTC has explained that terms, conditions, and obligations that 29 FTC, Policy Statement on Deception (Oct. 14, 1983). 30 FTC, Guide Concerning the Use of the Word ‘‘Free’’ and Similar Representations, 16 CFR 251.1(a)(2). 31 16 CFR 251.1(b). VerDate Sep<11>2014 16:02 Apr 16, 2024 Jkt 262001 apply to a ‘‘free’’ item should be set forth clearly, conspicuously, and in close conjunction with the offer of the ‘‘free’’ item, and they should further be made clear at the outset of the offer ‘‘so as to leave no reasonable probability that the terms of the offer might be misunderstood.’’ 32 The same analysis applies to the use of terms that are similar to ‘‘free,’’ such as ‘‘gift’’ or ‘‘given without charge.’’ 33 The FTC has recently reiterated that representations of ‘‘free’’ in marketing are deceptive when the offer is not in fact free or when limitations, restrictions, or hidden charges are inadequately disclosed, such that the claim is likely to mislead a reasonable consumer about information important to them when choosing a product.34 As applied here, marketing representations of remittance transfers as free are deceptive under the CFPA if they are not actually free or when limitations, restrictions, or hidden charges are inadequately disclosed. Marketing a remittance transfer as ‘‘free’’ is likely to cause a reasonable consumer to believe they are sending a remittance transfer without the provider imposing a cost to the consumer. Such interpretation would be incorrect—but reasonable—in instances where the remittance transfer provider is imposing costs through the exchange rate spread for the transfer. In this situation, a remittance transfer provider’s claim that the transfer is ‘‘free’’ would be false and thus likely to be deceptive because there 32 16 CFR 251.1(c). See also In re Intuit, Inc., No. 9408, at 36–52 (FTC Opinion, Jan. 19, 2024); Lesley Fair, Full Disclosure, FTC Business Blog (Sept. 23, 2014), https://www.ftc.gov/business-guidance/blog/ 2014/09/full-disclosure (describing the FTC’s ‘‘4Ps’’—prominence, presentation, placement, and proximity—four key considerations to help business ensure their advertisements are clear and conspicuous). 33 16 CFR 251.1(i) (applying same deception analysis to terms similar to ‘‘free,’’ such as ‘‘gift,’’ ‘‘given without charge,’’ or ‘‘other words or terms which tend to convey the impression to the consuming public than an article of merchandise or service is ‘‘Free’’). 34 See In re Intuit, Inc., No. 9408 (FTC Opinion, Jan. 19, 2024). The FTC regularly brings cases against companies for ‘‘inadequate disclosures of hidden charges in ostensibly ‘free’ offers and other products or services.’’ FTC, Enforcement Policy Statement Regarding Negative Option Marketing, 86 FR 60822, 60823 (Nov. 11, 2021). Both the CFPB and the FTC have also taken action against companies that advertised ‘‘free’’ products and services and deceptively enrolled consumers in a negative option plan. Cf. Equifax Inc. and Equifax Consumer Services LLC, No. 2017–CFPB–0001 (filed Jan. 3, 2017) (consent order); Transunion Interactive, Inc. et al., No. 2017–CFPB–0002 (filed Jan. 3, 2017) (consent order); FTC v. Health Formulas, LLC, No. 2:14–cv–01649 (D. Nev. 2016); FTC v. Complete Weightloss Center, No. 1:08–cv– 00053 (D.N.D. 2008). PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 was a cost imposed on the transfer through the exchange rate spread.35 Remittance transfer providers should also be aware of the risk of deception when marketing ‘‘free’’ remittance transfers for digital wallets or other prepaid products. A claim that remittance transfers are ‘‘free’’ may be misleading if the provider in fact imposes costs for recipients to convert funds into a different currency or to withdraw funds from the product. In these circumstances, marketing ‘‘free’’ transfers may constitute a misrepresentation of the terms for the remittance transfer provider’s services that may mislead a reasonable consumer, even with subsequent disclosure of such fees. About Consumer Financial Protection Circulars Consumer Financial Protection Circulars are issued to all parties with authority to enforce Federal consumer financial law. The CFPB is the principal Federal regulator responsible for administering Federal consumer financial law, see 12 U.S.C. 5511, including the Consumer Financial Protection Act’s prohibition on unfair, deceptive, and abusive acts or practices, 12 U.S.C. 5536(a)(1)(B), and 18 other ‘‘enumerated consumer laws,’’ 12 U.S.C. 5481(12). However, these laws are also enforced by State attorneys general and State regulators, 12 U.S.C. 5552, and prudential regulators including the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the National Credit Union Administration. See, e.g., 12 U.S.C. 5516(d), 5581(c)(2) (exclusive enforcement authority for banks and credit unions with $10 billion or less in assets). Some Federal consumer financial laws are also enforceable by other Federal agencies, including the Department of Justice and the Federal Trade Commission, the Farm Credit Administration, the Department of Transportation, and the Department of Agriculture. In addition, some of these laws provide for private enforcement. Consumer Financial Protection Circulars are intended to promote consistency in approach across the various enforcement agencies and parties, pursuant to the CFPB’s statutory objective to ensure Federal consumer financial law is enforced consistently. 12 U.S.C. 5511(b)(4). 35 See In re Intuit, Inc., No. 9408, at 46 (FTC Opinion, Jan. 19, 2024) (finding liability for false misrepresentations about ‘‘free’’ services where it was false 2⁄3 of the time). E:\FR\FM\17APR1.SGM 17APR1 Federal Register / Vol. 89, No. 75 / Wednesday, April 17, 2024 / Rules and Regulations Consumer Financial Protection Circulars are also intended to provide transparency to partner agencies regarding the CFPB’s intended approach when cooperating in enforcement actions. See, e.g., 12 U.S.C. 5552(b) (consultation with CFPB by State attorneys general and regulators); 12 U.S.C. 5562(a) (joint investigatory work between CFPB and other agencies). Consumer Financial Protection Circulars are general statements of policy under the Administrative Procedure Act. 5 U.S.C. 553(b). They provide background information about applicable law, articulate considerations relevant to the Bureau’s exercise of its authorities, and, in the interest of maintaining consistency, advise other parties with authority to enforce Federal consumer financial law. They do not restrict the Bureau’s exercise of its authorities, impose any legal requirements on external parties, or create or confer any rights on external parties that could be enforceable in any administrative or civil proceeding. The CFPB Director is instructing CFPB staff as described herein, and the CFPB will then make final decisions on individual matters based on an assessment of the factual record, applicable law, and factors relevant to prosecutorial discretion. Rohit Chopra, Director, Consumer Financial Protection Bureau. [FR Doc. 2024–08007 Filed 4–16–24; 8:45 am] BILLING CODE 4810–AM–P CONSUMER FINANCIAL PROTECTION BUREAU 12 CFR Chapter X Consumer Financial Protection Circular 2023–03: Adverse Action Notification Requirements and Proper Use of Sample Forms Consumer Financial Protection Bureau. ACTION: Consumer financial protection circular. AGENCY: The Consumer Financial Protection Bureau (CFPB) has issued Consumer Financial Protection Circular 2023–03, titled, ‘‘Adverse action notification requirements and the proper use of the CFPB’s sample forms provided in Regulation B.’’ In this circular, the CFPB responds to the question, ‘‘When using artificial intelligence or complex credit models, may creditors rely on the checklist of reasons provided in CFPB sample forms for adverse action notices even when lotter on DSK11XQN23PROD with RULES1 SUMMARY: VerDate Sep<11>2014 16:02 Apr 16, 2024 Jkt 262001 those sample reasons do not accurately or specifically identify the reasons for the adverse action?’’ DATES: The CFPB released this circular on its website on September 19, 2023. ADDRESSES: Enforcers, and the broader public, can provide feedback and comments to Circulars@cfpb.gov. FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory Implementation & Guidance Program Analyst, Office of Regulations, at 202– 435–7700 or at: https://reginquiries. consumerfinance.gov/. SUPPLEMENTARY INFORMATION: Question Presented When using artificial intelligence or complex credit models, may creditors rely on the checklist of reasons provided in CFPB sample forms for adverse action notices even when those sample reasons do not accurately or specifically identify the reasons for the adverse action? Response No, creditors may not rely on the checklist of reasons provided in the sample forms (currently codified in Regulation B) to satisfy their obligations under ECOA if those reasons do not specifically and accurately indicate the principal reason(s) for the adverse action. Nor, as a general matter, may creditors rely on overly broad or vague reasons to the extent that they obscure the specific and accurate reasons relied upon. Analysis The Equal Credit Opportunity Act (ECOA), implemented by Regulation B, makes it unlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex (including sexual orientation and gender identity), marital status, age (provided the applicant has the capacity to contract), because all or part of the applicant’s income derives from any public assistance program, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.1 ECOA and Regulation B require that, when taking adverse action against an applicant, a creditor must provide the applicant with a statement of reasons for the action taken.2 This statement of reasons must be ‘‘specific’’ and indicate the ‘‘principal reason(s) for 1 See 15 U.S.C. 1691(a). 15 U.S.C. 1691(d)(2); 12 CFR 1002.9(a)(2)(i); see also 12 CFR 1002.9(a)(2)(ii) (allowing creditors the option of providing notice or following certain requirements to inform consumers of how to obtain such notice). 2 See PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 27361 the adverse action’’; 3 moreover, the specific reasons disclosed must ‘‘relate to and accurately describe the factors actually considered or scored by a creditor.’’ 4 Adverse action notice requirements promote fairness and equal opportunity for consumers engaged in credit transactions, by serving as a tool to prevent and identify discrimination through the requirement that creditors must affirmatively explain their decisions. In addition, such notices provide consumers with a key educational tool allowing them to understand the reasons for a creditor’s action and take steps to improve their credit status or rectify mistakes made by creditors.5 The CFPB provides sample forms (currently codified in Regulation B) that creditors may use to satisfy their adverse action notification requirements, if appropriate. These forms include a checklist of sample reasons for adverse action which ‘‘creditors most commonly consider,’’ 6 as well as an open-ended field for creditors to provide other reasons not listed. The sample forms are used by creditors to satisfy certain adverse action notice requirements under ECOA and the Fair Credit Reporting Act (FCRA), though the statutory obligations under each remain distinct.7 While the 3 15 U.S.C. 1691(d)(3); 12 CFR 1002.9(b)(2). U.S.C. 1691(d)(3); 12 CFR 1002.9(b)(2). 5 See Fischl v. Gen. Motors Acceptance Corp., 708 F.2d 143, 146 (5th Cir. 1983); S. Rep. 94–589, 94th Cong., 2d Sess., at 4, reprinted in 1976 U.S.S.C.A.N. 403, 406. 6 12 CFR part 1002, (app. C), comment 3. 7 Like ECOA, FCRA also includes adverse action notification requirements. See 15 U.S.C. 1681m(a)(2). For example, when a person takes adverse action based in whole or in part on any information contained in a consumer report and has used a credit score, the person must disclose the credit score and, among other items, the ‘‘key factors that adversely affected the score of the consumer,’’ the total of which shall generally not exceed four (except if a key factor was the number of inquiries made with respect to a consumer report). 15 U.S.C. 1681g(f)(1)(C), 1681m(a)(2). Although this circular is focused on ECOA’s adverse action notification requirements, similar principles apply under FCRA when a person must disclose the ‘‘key factors that adversely affected the credit score of the consumer.’’ 15 U.S.C. 1681g(f)(1)(C); see also 1681g(f)(2)(B) (defining ‘‘key factors’’ to mean ‘‘all relevant elements or reasons adversely affecting the credit score of the particular individual, listed in the order of their importance based on their effect on the credit score’’). Despite similar underlying principles, the statutory obligations under FCRA and ECOA are distinct. See 12 CFR part 1002 (supp. I), sec. 1002.9, para. 9(b)(2)–9 (‘‘Disclosing the key factors that adversely affected the consumer’s credit score does not satisfy the ECOA requirement to disclose specific reasons for denying or taking other adverse action on an application or extension of credit.’’). Moreover, while ECOA’s requirements only apply to creditors, FCRA’s adverse action notice requirements apply to ‘‘any person’’ that takes adverse action based in 4 15 E:\FR\FM\17APR1.SGM Continued 17APR1

Agencies

  • CONSUMER FINANCIAL PROTECTION BUREAU
[Federal Register Volume 89, Number 75 (Wednesday, April 17, 2024)]
[Rules and Regulations]
[Pages 27357-27361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08007]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

========================================================================


Federal Register / Vol. 89, No. 75 / Wednesday, April 17, 2024 / 
Rules and Regulations

[[Page 27357]]



CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Part X


Consumer Financial Protection Circular 2024-02: Deceptive 
Marketing Practices About the Speed or Cost of Sending a Remittance 
Transfer

AGENCY: Consumer Financial Protection Bureau.

ACTION: Consumer financial protection circular.

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

SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) has 
issued Consumer Financial Protection Circular 2024-02, titled, 
``Deceptive Marketing Practices About the Speed or Cost of Sending a 
Remittance Transfer.'' In this circular, the Bureau responds to the 
question, ``When do remittance transfer providers violate the 
prohibition on deceptive acts or practices in the Consumer Financial 
Protection Act (CFPA) in their marketing about the speed and cost of 
sending a remittance transfer?''

DATES: The Bureau released this circular on its website on March 27, 
2024.

ADDRESSES: Enforcers, and the broader public, can provide feedback and 
comments to [email protected].

FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory 
Implementation & Guidance Program Analyst, Office of Regulations, at 
202-435-7700 or at: https://reginquiries.consumerfinance.gov/. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION:

Question Presented

    When do remittance transfer providers violate the prohibition on 
deceptive acts or practices in the Consumer Financial Protection Act 
(CFPA) in their marketing about the speed and cost of sending a 
remittance transfer?

Response

    Remittance transfer providers may be liable under the CFPA for 
deceptive marketing about the speed or cost of sending a remittance 
transfer. Providers may be liable under the CFPA for deceptive 
marketing practices regardless of whether the provider is in compliance 
with the disclosure requirements of the Remittance Rule. For example, 
among other things, it may be deceptive to:
     Market remittance transfers as being delivered within a 
certain time frame, when transfers actually take longer to be made 
available to recipients;
     Market remittance transfers as ``no fee'' when in fact the 
provider charges fees;
     Market promotional fees or promotional exchange rates for 
remittance transfers without sufficiently clarifying when an offer is 
temporary or limited;
     Market remittance transfers as ``free'' if they are not in 
fact free.

Background

Remittance Transfer Speed and Costs

    Pursuant to the CFPB's Remittance Rule,\1\ the term ``remittance 
transfer'' includes most electronic transfers of funds sent by 
consumers in the United States to recipients in other countries. 
Consumers in the United States send hundreds of billions of dollars in 
remittance transfers to recipients in foreign countries each year.\2\ 
Remittance transfers are often consumer-to-consumer transfers of money 
by immigrants sending financial support to family and friends in other 
countries. They also include other types of transfers, such as 
transfers by consumers in the United States to Americans living 
temporarily abroad, such as students. Consumers may send remittance 
transfers regularly as an ongoing source of financial assistance or in 
other circumstances, such as an occasional or emergency form of 
support. Remittance transfers also include cross-border consumer-to-
business payments for goods or services.
---------------------------------------------------------------------------

    \1\ Reg. E, 12 CFR part 1005 et seq.
    \2\ CFPB, Remittance Rule Assessment Report, at 7 (Revised Apr. 
24, 2019), https://files.consumerfinance.gov/f/documents/bcfp_remittance-rule-assessment_report_corrected_2019-03.pdf.
---------------------------------------------------------------------------

    Consumers may choose among a range of bank, credit union, and non-
bank money transmitters when sending a remittance transfer. Non-bank 
money transmitters have traditionally dominated the market for 
remittance transfers from the United States. In recent years, new money 
transmitters have emerged offering digital remittance transfer 
services. Many established money transmitters have also added digital 
services, in addition to in-person options for consumers to go to a 
store or agent to send remittance transfers.\3\
---------------------------------------------------------------------------

    \3\ See Daivi Rodima-Taylor, The Uneven Path Toward Cheaper 
Digital Remittances, Migration Information Source (June 22, 2023), 
https://www.migrationpolicy.org/article/cheaper-digital-remittances; 
Daniel Webber, Remittances' Shift to Digital: Driving Change in an 
Industry Split Between Yesterday and Tomorrow, Forbes (Mar. 21, 
2023), https://www.forbes.com/sites/danielwebber/2023/03/21/remittances-shift-to-digital-driving-change-in-an-industry-split-between-yesterday-and-tomorrow/?sh=77f07495341.
---------------------------------------------------------------------------

    When sending remittance transfers, consumers may consider a number 
of key factors when deciding among different providers, including the 
speed of the transfer and its cost as well as convenience, security, 
reliability, and trust.\4\
---------------------------------------------------------------------------

    \4\ See 2012 Final Rule, 77 FR 6194, 6199 (Feb. 7, 2012). See 
also Annette LoVoi, Sending Money: The Path Forward, Appleseed, at 
12 (May 2016), https://www.ctappleseed.org/wp-content/uploads/2016/04/Immigrant-Finances-Final-Appleseed-Report-on-Remittance-Use-Sending-Money-Home-5.26.16.pdf; ICF Macro, Summary of Findings: 
Design and Testing of Remittance Disclosures, Report to the Board of 
Governors of the Federal Reserve System, at 2-4 (Apr. 20, 2011), 
https://www.federalreserve.gov/econresdata/bcreg20110512_ICF_Report_Remittance_Disclosures_(FINAL).pdf.
---------------------------------------------------------------------------

    The speed of a remittance transfer varies depending on the type of 
transfer and provider. The World Bank Remittance Prices Worldwide 
database illustrates that a range of transfer speeds can exist within a 
given remittance corridor, with some providers, for example, offering 
delivery in less than an hour, and others offering delivery in three to 
five days.\5\
---------------------------------------------------------------------------

    \5\ See The World Bank, Remittance Prices Worldwide: Making 
Markets More Transparent, https://remittanceprices.worldbank.org/ 
The database also reflects that a range of costs exist for sending a 
remittance transfer in a given corridor.
---------------------------------------------------------------------------

    Costs can also vary significantly within a remittance corridor. 
Remittance transfer costs include fees charged by the remittance 
transfer provider including, if applicable, their agents and third 
parties. Costs also include any exchange rate costs applied by the 
provider to the currency conversion and governmental taxes. The 
exchange rate offered to consumers

[[Page 27358]]

often reflects a spread--meaning, a percentage difference between the 
retail exchange rate offered to the consumer and some wholesale 
exchange rate.\6\ Remittance transfer providers utilize different 
pricing strategies when determining the fees and exchange rate they 
charge to consumers for remittance transfers.
---------------------------------------------------------------------------

    \6\ See 2012 Final Rule, 77 FR 6194 at 6196 (discussing the 
exchange rate as a component of cost). See also CFPB, Report on 
Remittance Transfers, at 12-13 (July 20, 2011), https://www.consumerfinance.gov/wp-content/uploads/2011/07/Report_20110720_RemittanceTransfers.pdf (discussing the ``well-
recognized'' concept of exchange rate spread in the remittance 
transfer industry).
---------------------------------------------------------------------------

Transparency Concerns Around Remittance Transfer Speed and Costs

    Prior to the passage of the Dodd-Frank Wall Street Reform and 
Consumer Financial Protection Act (Dodd-Frank Act), Federal consumer 
protection laws generally did not apply to remittances, and remittance 
transfer providers were not consistently required to disclose 
applicable fees, exchange rates, transfer speeds, and the amount to be 
received in a transaction. Consumers thus did not always know how much 
money would be received on the other end and were not able to easily 
comparison shop among providers.
    With the Dodd-Frank Act's amendments to the Electronic Fund 
Transfer Act and the promulgation of the Remittance Rule, remittance 
transfer providers are now generally required to disclose certain 
information to consumers before the consumer pays for a transfer and 
also when payment is made.\7\ Before the consumer pays for a transfer, 
the information a remittance transfer provider must disclose includes 
(but is not limited to): as applicable, the amount that will be 
transferred to the designated recipient in the currency in which the 
remittance transfer is funded; any fees imposed and any taxes collected 
on the remittance transfer; the total amount of the transaction, which 
is the sum of the amount that will be transferred and any fees imposed 
and any taxes collected, in the funding currency; the exchange rate 
used by the provider for the remittance transfer; any covered third-
party fees; and the amount that will be received by the designated 
recipient in the currency in which the funds will be received. The 
receipt that consumers generally receive when payment is made must 
contain the same information. In addition, the receipt must disclose 
the date in the foreign country on which funds will be available to the 
designated recipient.
---------------------------------------------------------------------------

    \7\ Reg. E, 12 CFR 1005.31.
---------------------------------------------------------------------------

    Compliance with the Remittance Rule disclosure requirements does 
not obviate the obligation to refrain from misleading marketing 
practices. In particular, remittance transfer providers must ensure 
their marketing practices do not violate the prohibition of unfair, 
deceptive, or abusive acts or practices in the CFPA.\8\
---------------------------------------------------------------------------

    \8\ 12 U.S.C. 5531. The CFPB has taken public action against 
multiple remittance transfer providers to enforce various provisions 
of the CFPA and the Remittance Rule. See Chime, Inc. d/b/a Sendwave, 
No. 2023-CFPB-0012 (CFPB filed Oct. 17, 2023); Servicio UniTeller, 
Inc., No. 2022-CFPB-0012 (CFPB filed Dec. 22, 2022); Choice Money 
Transfer, Inc. d/b/a Small World Money Transfer, No. 2022-CFPB-0009 
(CFPB filed Oct. 4, 2022); CFPB v. MoneyGram International, Inc., 
No. 22-cv-3256 (S.D.N.Y. filed Apr. 21, 2022) (pending); Envios de 
Valores la Nacional Corp., No. 2020-BCFP-0025 (CFPB filed Dec. 21, 
2020); Sigue Corporation, et al., No 2020-BCFP-0011 (CFPB filed Aug. 
31, 2020); Trans-Fast Remittance LLC, also doing business as New 
York Bay Remittance, No. 2020-BCFP-0010 (CFPB filed Aug. 31, 2020); 
Maxitransfers Corp., No. 2019-BCFP-0008 (CFPB filed Aug. 27, 2019).
---------------------------------------------------------------------------

    The CFPB has identified problems with transparency and accuracy in 
marketing practices about the speed of a remittance transfer in its 
supervision of remittance transfer providers and enforcement of the 
CFPA's prohibition against deceptive acts or practices. In the CFPB's 
Spring 2022 Supervisory Highlights, the CFPB discussed examiners' 
findings that remittance transfer providers made false and misleading 
representations about the speed of remittance transfers.\9\ In October 
2023, the CFPB issued a consent order against Chime Inc., d/b/a 
Sendwave, finding that the remittance transfer provider made misleading 
statements in advertisements about the speed and cost of its services, 
in violation of the CFPA's prohibition on deceptive acts or 
practices.\10\ This provider claimed in social media marketing that 
remittance transfers would be delivered ``instantly,'' in ``30 
seconds'' or ``within seconds,'' and would incur ``no fees,'' when in 
fact transfers often took much longer, and the provider charged a 
fee.\11\
---------------------------------------------------------------------------

    \9\ CFPB, Supervisory Highlights, 87 FR 26727, 26734 (May 5, 
2022).
    \10\ Chime, Inc. d/b/a Sendwave, No. 2023-CFPB-0012 (Oct. 17, 
2023) (consent order).
    \11\ Id. at 8. The CFPB also found deceptive acts or practices 
in actions against Trans-Fast Remittances LLC and Maxitransfers 
Corp. See Trans-Fast Remittance LLC, also doing business as New York 
Bay Remittance, No. 2020-BCFP-0010 (CFPB filed Aug. 31, 2020) 
(consent order); Maxitransfers Corp., No. 2019-BCFP-0008 (CFPB filed 
Aug. 27, 2019) (consent order).
---------------------------------------------------------------------------

    In addition, consumers have reported, and the CFPB has observed, 
problems with price transparency in the marketing practices of 
remittance transfer providers, resulting in consumers encountering 
unexpected costs.\12\ The CFPB has received consumer complaints about 
promotional pricing by remittance transfer providers who do not 
sufficiently inform consumers that the advertised fee or exchange rate 
is only a limited scope or temporary offer. The CFPB has also observed 
marketing claims by remittance transfer providers that may mislead 
consumers about the scope or duration of a temporary low or ``no fee'' 
offer or promotional exchange rate.
---------------------------------------------------------------------------

    \12\ See, e.g., Consumer Complaint 7007332, https://www.consumerfinance.gov/data-research/consumer-complaints/search/detail/7007332; Consumer Complaint 6845292, https://www.consumerfinance.gov/data-research/consumer-complaints/search/detail/6845292; Consumer Complaint 1972064, https://www.consumerfinance.gov/data-research/consumer-complaints/search/detail/1972064.
---------------------------------------------------------------------------

    The CFPB has also received consumer complaints about marketing that 
omits or obscures the cost of a remittance transfer. Marketing claims 
by remittance transfer providers may fail to communicate the full cost 
of a remittance transfer, such as advertising that transfers are 
``free'' or advertising that prominently emphasizes zero fees while 
only including a vaguely worded statement that additional costs related 
to the exchange rate may apply. Some of these statements use technical 
jargon or feature confusing language.
    The CFPB has also received consumer complaints about companies that 
market ``free'' remittance transfers through digital wallet and other 
prepaid products, but that fail to sufficiently disclose costs for 
currency conversion or for withdrawing funds from the product. 
Companies that offer remittance transfers through digital wallets and 
other prepaid products often market them as a faster and cheaper way to 
send remittance transfers. Certain companies' websites market ``free 
account-to-account transfers'' or that ``receiving money from a 
friend'' is free. Providers may disclose only in fine print, however, 
that these transfers are only free when there is no currency 
conversion, and that for the recipient to withdraw and use funds in 
their local currency, they must pay a currency conversion fee. In 
addition, some digital wallet providers may not make clear that 
recipients of a remittance transfer must pay a fee to withdraw funds 
from the digital wallet or other prepaid product. Examples of such fees 
include fees to transfer funds to an external bank account, credit 
card, or prepaid card. Consumers have complained to the CFPB that these 
fees are unexpected when they convert currencies and withdraw funds

[[Page 27359]]

transmitted through digital wallets and other prepaid products.\13\
---------------------------------------------------------------------------

    \13\ See, e.g., Consumer Complaint 2994206, https://www.consumerfinance.gov/data-research/consumer-complaints/search/detail/2994206.
---------------------------------------------------------------------------

Analysis

    Under the CFPA, it is unlawful for a provider of consumer financial 
products or services to engage in deceptive acts or practices.\14\ A 
representation, omission, act, or practice is deceptive if it misleads 
or is likely to mislead the consumer; the consumer's interpretation is 
reasonable under the circumstances; and the misleading representation, 
omission, act, or practice is material.\15\
---------------------------------------------------------------------------

    \14\ 12 U.S.C. 5531, 5536.
    \15\ See FTC Policy Statement on Deception (Oct. 14, 1983), 
https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
---------------------------------------------------------------------------

    It is deceptive to market remittance transfers as being delivered 
within a certain time frame, when transfers actually take longer to be 
made available to recipients.
    Remittance transfer providers violate the CFPA's prohibition on 
deceptive acts or practices if they market remittance transfers as 
being delivered within a certain time frame, when transfers actually 
take longer to reach recipients. The CFPB ``presumes that express 
claims are material.'' \16\ Furthermore, as noted above, the speed of a 
remittance transfer is often a crucial consideration for consumers 
sending remittance transfers.\17\ Recipients may rely on remittance 
transfers for day-to-day expenses or for time-sensitive emergencies.
---------------------------------------------------------------------------

    \16\ See id.
    \17\ See 2012 Final Rule, 77 FR 6194 at 6199.
---------------------------------------------------------------------------

    As illustrated in the CFPB's action against Chime Inc., d/b/a 
Sendwave, marketing claims about the speed of remittance transfers may 
violate the prohibition on deceptive acts or practices under the CFPA 
when the actual time for delivery is longer than advertised.
    In the Sendwave case, the provider told consumers that transfers 
would be delivered ``instantly,'' ``in 30 seconds,'' or ``within 
seconds.'' These statements were false and misleading because, although 
a reasonable customer might expect delivery within the time frame 
advertised, in many instances, transfers were not actually delivered 
instantly or within seconds for many consumers.\18\ In addition, as an 
express marketing statement regarding a central characteristic of the 
product--when funds would be available to a recipient--the misleading 
representation was material.\19\
---------------------------------------------------------------------------

    \18\ Chime, Inc. d/b/a Sendwave, No. 2023-CFPB-0012, at 8-9 
(Oct. 17, 2023) (consent order).
    \19\ See FTC, Policy Statement on Deception (Oct. 14, 1983).
---------------------------------------------------------------------------

    Providers must thus take care not to engage in deceptive acts or 
practices in their marketing claims about the speed of a remittance 
transfer.
    It is deceptive to market transfers as ``no fee'' when in fact the 
remittance transfer provider charges consumers fees to send the 
remittance transfer.
    Remittance transfer providers violate the CFPA's prohibition on 
deceptive acts or practices if they market remittance transfers as 
having ``no fee,'' when in fact the remittance transfer provider 
charges consumers fees to send the remittance transfer. The cost of 
sending a remittance transfer is a central consideration for 
consumers,\20\ and, as discussed above, fees are an important component 
of the cost of a remittance transfer.\21\ Expressly misleading price 
claims violate the prohibition on deceptive practices.\22\
---------------------------------------------------------------------------

    \20\ See Kangni Kpodar, Patrick Amir Imam, How Do Transaction 
Costs Influence Remittances? World Development Vol. 177 (May 2024), 
https://doi.org/10.1016/j.worlddev.2024.106537.
    \21\ See 2012 Final Rule, 77 FR 6194 at 6199.
    \22\ See FTC, Policy Statement on Deception (Oct. 14, 1983).
---------------------------------------------------------------------------

    For example, as alleged in the CFPB's action against Chime Inc., d/
b/a Sendwave, from at least 2021 to 2022, Sendwave's website advertised 
that consumers could transfer funds from the United States to Nigeria 
``with no fees.'' In fact, consumers were charged fees on all transfers 
from the United States to Nigeria, despite Sendwave continuing to 
promote its product as having ``no fees'' on its website with no 
qualification or disclaimer.\23\
---------------------------------------------------------------------------

    \23\ Chime, Inc. d/b/a Sendwave, No. 2023-CFPB-0012, at 8 (Oct. 
17, 2023) (consent order).
---------------------------------------------------------------------------

    The CFPB found that Sendwave's representations were likely to 
mislead the consumer and that the consumer's interpretation would be 
reasonable under the circumstances. Although Sendwave disclosed a 1 
percent transfer fee in the FAQ section of its website, this did not 
correct the misleading statement or communication made at the top of 
its web page and on a graphic depicting its mobile app.\24\ And as an 
express marketing statement regarding a central consideration for 
consumers when sending a remittance transfer--cost --, the misleading 
representation about transfer fees was material.\25\
---------------------------------------------------------------------------

    \24\ See FTC v. Davison Assocs., Inc., 431 F. Supp. 2d 548, 560 
(W.D. Pa. 2006) (``Disclaimers or curative language must be 
`sufficiently prominent and unambiguous' such that the overall net-
impression of the communication becomes non-deceptive.''); FTC v. 
Roca Labs, Inc., 345 F. Supp. 3d 1375, 1392 (M.D. Fla. 2018) 
(``Defendants cannot avoid liability by exclusively advertising that 
the product costs $480 without any caveats and then burying the 
conditions of the discount in a separate disclaimer.'').
    \25\ See FTC, Policy Statement on Deception (Oct. 14, 1983).
---------------------------------------------------------------------------

    It may be deceptive to market promotional fees or promotional 
exchange rates for remittance transfers without sufficiently clarifying 
when the offer is only limited or temporary.
    Remittance transfer providers may violate the CFPA's prohibition on 
deceptive acts or practices by advertising promotional pricing for 
remittance transfers without sufficiently clarifying that the offer is 
only limited or temporary in scope, even if the promotional nature of 
the offer is disclosed in fine print or later in the transaction.\26\ 
In such cases, consumers may not understand the pricing is limited and 
promotional and they may not understand that the cost of sending a 
remittance transfer through the provider rises after the first or first 
few transactions.
---------------------------------------------------------------------------

    \26\ See FTC v. Davison Assocs., 431 F. Supp. 2d 548 at 560 
(``Disclaimers or curative language must be `sufficiently prominent 
and unambiguous' such that the overall net-impression of the 
communication becomes non-deceptive.'').
---------------------------------------------------------------------------

    As the CFPB has articulated, consumers may be reasonably misled 
when financial service providers fail to clearly and conspicuously 
disclose material terms in advertising, such as when and by how much 
charges will increase.\27\ Written disclosures or fine print in 
marketing materials would often be insufficient to correct a misleading 
statement or representation in marketing communications.\28\ When a 
consumer's first contact with a remittance transfer provider involves 
deception, ``the law may be violated

[[Page 27360]]

even if the truth is subsequently made known'' to the consumer.\29\
---------------------------------------------------------------------------

    \27\ CFPB, Consumer Financial Protection Circular 2023-01: 
Unlawful negative option marketing practices (Jan. 19, 2023), 
https://www.consumerfinance.gov/compliance/circulars/consumer-financial-protection-circular-2023-01-unlawful-negative-option-marketing-practices/.
    \28\ FTC, Policy Statement on Deception (Oct. 14, 1983). See 
also In re Intuit, Inc., No. 9408, at 43 (FTC Opinion, Jan. 19, 
2024) (``Disclaimers or qualifications are not adequate to avoid 
liability `unless they are sufficiently prominent and unambiguous to 
change the apparent meaning of the claims and to leave an accurate 
impression. Anything less is only likely to cause confusion by 
creating contradictory double meanings.''') (quoting Removatron 
Int'l Corp. v. FTC, 884 F.2d 1489, 1497 (1st Cir. 1989)); FTC v. 
Davison Assocs., 431 F. Supp. 2d 548 at 560 (``Disclaimers or 
curative language must be `sufficiently prominent and unambiguous' 
such that the overall net-impression of the communication becomes 
non-deceptive.''); FTC v. Roca Labs, 345 F. Supp. 3d 1375 at 1392 
(``Defendants cannot avoid liability by exclusively advertising that 
the product costs $480 without any caveats and then burying the 
conditions of the discount in a separate disclaimer.'').
    \29\ FTC, Policy Statement on Deception (Oct. 14, 1983).
---------------------------------------------------------------------------

    Representations in advertising about ``no fee'' remittance 
transfers or specific promotional exchange rates without sufficiently 
clarifying, when applicable, that the offer is only limited or 
temporary in scope are presumed to be material, as they relate to cost, 
a key consumer consideration.
    In addition, such statements are likely to be material because of 
their likely impact on a consumer's initial and subsequent choice of 
remittance transfer provider. The impact could be particularly 
significant for promotions offered to first-time customers who seek to 
continue using the provider to send remittance transfers. Such 
consumers may face unexpected higher costs after the expiration of the 
promotion and may also face unexpected hurdles in searching for a 
different provider. Had they been aware of the limited promotional 
nature of the offer, a reasonable consumer may have chosen a different 
provider.
    It is deceptive to market remittance transfers as ``free'' if they 
are not in fact free.
    Remittance transfer providers would also violate the CFPA's 
prohibition on deceptive acts or practices by marketing remittance 
transfers as ``free'' if they are not actually free for the consumer. 
For example, it may be deceptive to market a remittance transfer as 
``free'' if the remittance transfer provider is imposing costs on 
consumers through the exchange rate spread for the transfer or, with 
respect to digital wallets or other prepaid products, if the provider 
imposes costs to convert funds into a different currency or to withdraw 
funds from the product.
    The FTC has articulated that, under the FTC Act, offers of ``free'' 
services ``must be made with extreme care so as to avoid any 
possibility that consumers will be misled or deceived.'' \30\ ``The 
word `free' is a lure. It is the bait. It is a powerful magnet that 
draws the best of us against our will `to get something for nothing.' 
'' Book-of-the-Month Club, Inc., 48 F.T.C. 1297, 1312 (1952), aff'd, 
202 F.2d 486 (2d Cir. 1953).
---------------------------------------------------------------------------

    \30\ FTC, Guide Concerning the Use of the Word ``Free'' and 
Similar Representations, 16 CFR 251.1(a)(2).
---------------------------------------------------------------------------

    A consumer should generally expect that a ``free'' product or 
service is indeed free, and that the seller ``will not directly and 
immediately recover, in whole or in part, the cost of [] the service.'' 
\31\ The FTC has explained that terms, conditions, and obligations that 
apply to a ``free'' item should be set forth clearly, conspicuously, 
and in close conjunction with the offer of the ``free'' item, and they 
should further be made clear at the outset of the offer ``so as to 
leave no reasonable probability that the terms of the offer might be 
misunderstood.'' \32\ The same analysis applies to the use of terms 
that are similar to ``free,'' such as ``gift'' or ``given without 
charge.'' \33\
---------------------------------------------------------------------------

    \31\ 16 CFR 251.1(b).
    \32\ 16 CFR 251.1(c). See also In re Intuit, Inc., No. 9408, at 
36-52 (FTC Opinion, Jan. 19, 2024); Lesley Fair, Full Disclosure, 
FTC Business Blog (Sept. 23, 2014), https://www.ftc.gov/business-guidance/blog/2014/09/full-disclosure (describing the FTC's 
``4Ps''--prominence, presentation, placement, and proximity--four 
key considerations to help business ensure their advertisements are 
clear and conspicuous).
    \33\ 16 CFR 251.1(i) (applying same deception analysis to terms 
similar to ``free,'' such as ``gift,'' ``given without charge,'' or 
``other words or terms which tend to convey the impression to the 
consuming public than an article of merchandise or service is 
``Free'').
---------------------------------------------------------------------------

    The FTC has recently reiterated that representations of ``free'' in 
marketing are deceptive when the offer is not in fact free or when 
limitations, restrictions, or hidden charges are inadequately 
disclosed, such that the claim is likely to mislead a reasonable 
consumer about information important to them when choosing a 
product.\34\ As applied here, marketing representations of remittance 
transfers as free are deceptive under the CFPA if they are not actually 
free or when limitations, restrictions, or hidden charges are 
inadequately disclosed.
---------------------------------------------------------------------------

    \34\ See In re Intuit, Inc., No. 9408 (FTC Opinion, Jan. 19, 
2024). The FTC regularly brings cases against companies for 
``inadequate disclosures of hidden charges in ostensibly `free' 
offers and other products or services.'' FTC, Enforcement Policy 
Statement Regarding Negative Option Marketing, 86 FR 60822, 60823 
(Nov. 11, 2021). Both the CFPB and the FTC have also taken action 
against companies that advertised ``free'' products and services and 
deceptively enrolled consumers in a negative option plan. Cf. 
Equifax Inc. and Equifax Consumer Services LLC, No. 2017-CFPB-0001 
(filed Jan. 3, 2017) (consent order); Transunion Interactive, Inc. 
et al., No. 2017-CFPB-0002 (filed Jan. 3, 2017) (consent order); FTC 
v. Health Formulas, LLC, No. 2:14-cv-01649 (D. Nev. 2016); FTC v. 
Complete Weightloss Center, No. 1:08-cv-00053 (D.N.D. 2008).
---------------------------------------------------------------------------

    Marketing a remittance transfer as ``free'' is likely to cause a 
reasonable consumer to believe they are sending a remittance transfer 
without the provider imposing a cost to the consumer. Such 
interpretation would be incorrect--but reasonable--in instances where 
the remittance transfer provider is imposing costs through the exchange 
rate spread for the transfer. In this situation, a remittance transfer 
provider's claim that the transfer is ``free'' would be false and thus 
likely to be deceptive because there was a cost imposed on the transfer 
through the exchange rate spread.\35\
---------------------------------------------------------------------------

    \35\ See In re Intuit, Inc., No. 9408, at 46 (FTC Opinion, Jan. 
19, 2024) (finding liability for false misrepresentations about 
``free'' services where it was false \2/3\ of the time).
---------------------------------------------------------------------------

    Remittance transfer providers should also be aware of the risk of 
deception when marketing ``free'' remittance transfers for digital 
wallets or other prepaid products. A claim that remittance transfers 
are ``free'' may be misleading if the provider in fact imposes costs 
for recipients to convert funds into a different currency or to 
withdraw funds from the product. In these circumstances, marketing 
``free'' transfers may constitute a misrepresentation of the terms for 
the remittance transfer provider's services that may mislead a 
reasonable consumer, even with subsequent disclosure of such fees.

About Consumer Financial Protection Circulars

    Consumer Financial Protection Circulars are issued to all parties 
with authority to enforce Federal consumer financial law. The CFPB is 
the principal Federal regulator responsible for administering Federal 
consumer financial law, see 12 U.S.C. 5511, including the Consumer 
Financial Protection Act's prohibition on unfair, deceptive, and 
abusive acts or practices, 12 U.S.C. 5536(a)(1)(B), and 18 other 
``enumerated consumer laws,'' 12 U.S.C. 5481(12). However, these laws 
are also enforced by State attorneys general and State regulators, 12 
U.S.C. 5552, and prudential regulators including the Federal Deposit 
Insurance Corporation, the Office of the Comptroller of the Currency, 
the Board of Governors of the Federal Reserve System, and the National 
Credit Union Administration. See, e.g., 12 U.S.C. 5516(d), 5581(c)(2) 
(exclusive enforcement authority for banks and credit unions with $10 
billion or less in assets). Some Federal consumer financial laws are 
also enforceable by other Federal agencies, including the Department of 
Justice and the Federal Trade Commission, the Farm Credit 
Administration, the Department of Transportation, and the Department of 
Agriculture. In addition, some of these laws provide for private 
enforcement.
    Consumer Financial Protection Circulars are intended to promote 
consistency in approach across the various enforcement agencies and 
parties, pursuant to the CFPB's statutory objective to ensure Federal 
consumer financial law is enforced consistently. 12 U.S.C. 5511(b)(4).

[[Page 27361]]

    Consumer Financial Protection Circulars are also intended to 
provide transparency to partner agencies regarding the CFPB's intended 
approach when cooperating in enforcement actions. See, e.g., 12 U.S.C. 
5552(b) (consultation with CFPB by State attorneys general and 
regulators); 12 U.S.C. 5562(a) (joint investigatory work between CFPB 
and other agencies).
    Consumer Financial Protection Circulars are general statements of 
policy under the Administrative Procedure Act. 5 U.S.C. 553(b). They 
provide background information about applicable law, articulate 
considerations relevant to the Bureau's exercise of its authorities, 
and, in the interest of maintaining consistency, advise other parties 
with authority to enforce Federal consumer financial law. They do not 
restrict the Bureau's exercise of its authorities, impose any legal 
requirements on external parties, or create or confer any rights on 
external parties that could be enforceable in any administrative or 
civil proceeding. The CFPB Director is instructing CFPB staff as 
described herein, and the CFPB will then make final decisions on 
individual matters based on an assessment of the factual record, 
applicable law, and factors relevant to prosecutorial discretion.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-08007 Filed 4-16-24; 8:45 am]
BILLING CODE 4810-AM-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.