These insured institutions would benefit from not turning away potential customers and by being able to continue providing a valuable service to their customers. 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. These trade associations urged the Bureau to count transfers at a country, rather than global level, given that multinational banks typically have very different policies from one country to the next. The Bureau recognizes, however, the serious impact that the COVID-19 pandemic is having on consumers and the operations of many entities. There are thousands of financial institutions worldwide that could receive remittance transfers with new financial institutions being added to the network (or leaving the market) on regular basis. The Bureau found that in 2017, banks and credit unions conducted 4.2 and 0.2 percent of all remittance transfers, respectively. Similar to the feedback the Bureau has received on the normal course of business safe harbor threshold in the past, industry commenters stated that compliance costs related to the Remittance Rule have caused many credit unions and community banks that provide remittance transfers as an accommodation to their account-holding customers to limit the number of transfers they provide or exit the market altogether. Several banks and a trade association urged the Bureau not to sunset proposed 1005.32(b)(4). The insured institution made 500 or fewer remittance transfers in the prior calendar year to that designated recipient's institution. The Bureau did not receive such information. EFTA section 919 is codified at 15 U.S.C. 100. [77] 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. These consumer groups indicated that the Bureau should withdraw its proposal in its entirety and instead consider ways to expand the applicability of EFTA's protections for remittances. [60] 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. for better understanding how a document is structured but For the impact analysis in this section, the Bureau used its 2018 rural counties list. A single entity in this systemthe MSBexerts a high degree of end-to-end control over a transaction. Finally, consumer groups stated that the Bureau's proposal conflates the expiring temporary exception that allows insured institutions to provide estimates in certain circumstances with the proposed normal course of business safe harbor threshold that would exempt most of these institutions from coverage altogether. 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 institutions, and the expansion of the major payment card networks' capacity to support cross-border payments;[57] 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). The Bureau understands that relatively few insured institutions provide most of the remittance transfers that insured institutions provide. The transition period also ensures that an insured institution that estimates exchange rates and inadvertently exceeds the 1,000-transfer threshold will not violate the Rule during the transition period. 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. [64] 2. The Bureau initially concluded that proposed comment 32(b)(5)-1 set 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 sought comment on this provision. Thus, the potential additional costs under the second baseline from the inability to estimate exchange rates by certain insured institutions may be larger than the Bureau has assumed. Overall this is 0.32 percent of transfers in 2018 by insured institutions providing greater than 100 transfers in either 2017 or 2018. 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. In contrast, consumer groups were opposed to the proposed changes. 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. [49] EFTA section 919(g)(3), codified at 15 U.S.C. 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. 1005.15 Electronic fund transfer of government benefits. (ii) Transition periodcoming into compliance. Under the no-action baseline, the temporary exception expires, and therefore no remittance transfer providersincluding small entitieswill be able to provide estimates using that exception. 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. 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). In addition, commenters noted that consumers would not be able to compare prices or easily identify which providers were required to comply with the Rule and offer its protections. Register documents. One trade association that represents community banks and credit unions recommended an exemption for recurring remittance transfers and for transfers under a certain dollar amount, such as $10,000. 65. 1005.34 Procedures for cancellation and refund of remittance As discussed above in considering the impact of the permanent exception for the exchange rate, 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. For a more detailed description of these reporting requirements, see Assessment Report at 24. Two trade associations representing large banks and other financial institutions urged the Bureau to extend the temporary exception for one year to provide entities time to transition to the new permanent exceptions. In this final rule, the Bureau also declines to commit to revisit the sufficiency of the thresholds in proposed 1005.32(b)(4) and (5) shortly after implementation of a final rule to ensure that costs borne by correspondents ineligible to use estimates are not passed on to community institutions that do not themselves exceed the thresholds. As a result, the fact that a person provides only a small number of remittance transfers can strongly indicate that the person is not providing such transfers in the normal course of its business. [37] In either case, consumers would lose the convenience and other benefits of transferring with their preferred bank or credit union. 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 at issue or to use service providers, correspondent institutions, or persons that act as the insured institution's agent. Sent to a person or business in a foreign country. This final rule also adopts comment 32(b)(4)-1 as proposed to provide 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. 101. The new Tax Collection at Source ( TCS) rule will come into effect from October 1, 2023, Ministry of Finance said in a notification on June 28, 2023. 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. 18. 74. Insured institution cannot determine the exact covered third-party fees. Fees and taxes disclosed under 1005.31(b)(1)(viii) must be disclosed in the currency in which the funds will be received. As such, due to the increase in the normal course of business safe harbor threshold, although these banks and credit unions are currently covered by the Remittance Rule, they will not be covered after this final rule takes effect. The 500-transfer threshold would not include remittance transfers that were sent to branches of Bank XYZ that were located in any country other than Nigeria. the Federal Register. Specifically, the Bureau finds that there were 82 banks in 2018 with assets under $600 million covered by the Rule (because they provided greater than 100 transfers in 2017 or 2018). The Bureau determines this transition period also may help to address issues raised by industry commenters related to mergers and acquisitions, if the combination of two remittance transfer providers could result in the number of transfers exceeding a threshold and thereby imposing requirements that had not applied before. In response to the 2019 Proposal, the consumer group commenters did not support extending the exception in 1005.32(b)(4) to providers that are not insured institutions. 84 FR 17971, 17977 (Apr. The 500-transfer threshold does not include transfers where an insured institution is acting as a correspondent on behalf of a sending institution. Accordingly, the Director certifies that this final rule will not have a significant economic impact on a substantial number of small entities. Under Section 1005.31Disclosures, revise 31(b)(1)(viii) Statement When Additional Fees and Taxes May Apply. Without this provision, insured institutions may find it difficult or impossible to comply with the requirement to provide exact exchange rate disclosures starting January 1 of the next year if they exceed the 1,000-transfer threshold late in the current year. The provider must not include that fee or tax in the amount disclosed pursuant to 1005.31(b)(1)(vi) or (b)(1)(vii). The Bureau did not receive any comments from industry specifically on proposed comments 32(b)(5)-1 and -2 that set forth guidance on whether under proposed 1005.32(b)(5)(i)(B) an insured institution cannot determine the exact covered third-party fees applicable to a remittance transfer at the time the disclosures must be given. The Bureau is also retaining the maximum time period allowed for a person to come into compliance with the Remittance Rule as not to exceed six months after the person is deemed to be providing transfers in the normal course of business. 28, 2013 (78 Fed. 5. 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. Specifically, with respect to the exchange rate, the Bureau proposed to adopt a new, permanent exception in the Remittance Rule 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. For the reasons set forth above, the Bureau amends Regulation E, 12 CFR part 1005, as set forth below: 1. 7. which implements section 919 of the Electronic Fund Transfer Act (EFTA)[2] The insured institution cannot determine the exact exchange rate for the transfer at the time it must provide the applicable disclosures. The list contains countries whose laws the Bureau has decided prevent remittance transfer 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. They indicated that the Bureau's analysis recognizes that market evolutions are giving financial institutions more options for disclosing exact exchange rates and fees, but inexplicably creates exceptions that lasts forever. 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. 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). 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. One of the credit union trade associations stated that credit unions provide reliable information about remittance transfers and charge reasonable rates. 21. These commenters also noted that the Assessment Report found that prices have decreased since the Rule took effect, and that preliminary analysis of statistically robust data sets suggests that the Rule may have contributed to the price decline. The Bureau has received feedback over the years from some remittance transfer providers and their trade associations regarding the Bureau's countries list. 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, the Bureau estimates that approximately 70 insured institutions would need to stop providing estimated disclosures for approximately 822,000 transfers. An insured institution has a correspondent relationship with the designated recipient's institution; ii. The discussion in this impact analysis relies on data the Bureau gathered prior to issuing the 2019 Proposal, which include data obtained from industry, other regulatory agencies, and publicly available sources, and in response to its 2019 Proposal. See comment 32(b)(3)-1. The Bureau concludes that the overall impact of the increase in the normal course of business safe harbor threshold from 100 transfers annually to 500 transfers annually and allowing limited use of estimates for covered third-party fee and exchange rate disclosures is small. For purposes of considering the effects of the permanent exceptions that allow insured institutions to estimate exchange rates and covered third-party fees under certain circumstances, the Bureau used the second baseline (i.e., the baseline in which the temporary exception expires and the Bureau amended the normal course of business safe harbor threshold from 100 transfers annually to 500 transfers annually). These commenters added that losing these protections would be especially critical for transfers provided by banks, given that bank transfers tend to be higher-value transfers, which would in turn mean that more of the consumer's money would be at stake if there was an error or the money was lost. These commenters noted that the temporary exception is not widely used by the entities the Bureau proposed to exempt by expanding the normal course of business safe harbor and cited bank Call Report data indicating that less than 10 percent of the entities providing between 100 and 500 transfers per year use the temporary exception today. at 102. Consumer groups. i. In such cases, they may rely on the temporary exception with respect to the disclosure of the exchange rate.[55]. United States Federal statute or regulation. 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. 68. 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. As noted above, many of the industry commenters that supported raising the normal course of business safe harbor threshold indicated that compliance costs related to the Remittance Rule have caused many credit unions and community banks that provide remittance transfers as an accommodation to their account-holding customers to limit the number of transfers they provide or exit the market altogether. [88] It is possible that there are more banks using the temporary exception than report it on their Call Reports. 95. 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. They indicated that the Bureau's analysis recognizes that market evolutions are giving financial institutions more options for disclosing exact exchange rates and fees and noted the important forcing effect of a compliance deadline, Start Printed Page 34886the existing trend away from reliance on the temporary exception, and the evolution of methods for sending money. For example, an insured institution exceeds the 500-transfer 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. [4] [40] Subpart B is also issued under 12 U.S.C. This final rule also adds a new comment 32(b)(5)-4 to provide additional guidance on the provision related to United States Federal statutes or regulations as discussed above. These consumers may also be able to do so at lower prices under the Rule if, without the Rule and under the second baseline, an insured institution would pass on the higher costs incurred to obtain exact exchange rate information. [15] The Bureau conducted an assessment of the Remittance Rule (Assessment), as required pursuant to section 1022(d) of the Dodd-Frank Act. These comments generally are addressed in this section in relation to 1005.32(b)(4) and are addressed in the section-by-section analysis of 1005.32(b)(5) in relation to 1005.32(b)(5). at 126, 131. A. 1. Revise 32(c)(3) Covered Third-Party Fees, and 32(d) Bases for Estimates for Transfers Scheduled Before the Date of Transfer. 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. Based on this information, the Bureau expects that under both the second baseline and the 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. If any conflicts exist between the redline and the text of the Remittance Rule or this final rule, the rules themselves, as published in the Federal Register, are the controlling documents. These changes to the normal course of business safe harbor threshold appear in the definition of remittance transfer provider in 1005.30(f) and related commentary. (5) Permanent exception for estimation of covered third-party fees by an insured institution. 1. 1005.33 Procedures for resolving errors. Relatedly, several other industry commenters, including a few credit union trade associations and one community bank trade association, stated that credit unions and community banks have strong connections to the communities they serve and that they exist to serve their customers. 30661) (May 22, 2013). However, these costs may not be large to the extent that there is not a great difference between the estimated amounts and the actual amounts. Under the Paperwork Reduction Act of 1995 (PRA),[105] Other approaches suggested by commenters. The baseline under this approach includes the following: (1) The expiration of the Rule's existing temporary exception, which allows insured institutions to disclose estimates instead of exact amounts to consumers under certain circumstances, and (2) the normal course of business safe harbor threshold of 100 transfers in the current Rule. These numbers are from the bank and credit union Call Reports. The permanent exceptions permitting estimation of exchange rate and covered third-party fees do not have any additional effect on the insured institutions (and their customers) that the Rule no longer covers. Assessment Report at 113-16. 69. A request to cancel a remittance transfer is valid so long as the remittance transfer provider is able to identify the remittance transfer in question. As described in more detail below, the changes herein are adopted pursuant to the Bureau's authority under EFTA section 904(a) and (c). First, 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. The Bureau also concludes, based on the feedback of several industry commenters, that consumers that are customers of the entities that will newly qualify for the revised normal course of business safe harbor threshold might still receive protections similar to those provided under the Remittance Rule. 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). For these reasons, the Bureau declines at this time to raise the normal course of business safe harbor threshold to a number other than 500 transfers annually. 2. The Bureau did not receive any specific comments on 1005.32(b)(4)(i)(B) or comment 32(b)(4)-1. The Bureau expects that larger insured institutions that cannot estimate the exchange rate or covered third-party fees for their own transfers under the exceptions in 1005.32(b)(4) or (5) will continue to act as correspondent banks for sending institutions that can continue to estimate the exchange rate or covered third-party fees under the exceptions in 1005.32(b)(4) or (5) for their transfers. Assume that a person provided 90 remittance transfers in 2012 and 90 such transfers in 2013. to the courts under 44 U.S.C. 77 FR 50244, 50249-50 (Aug. 20, 2012). For example, if the designated recipient's institution is an agent of the provider and thus, non-covered third-party fees cannot apply to the transfer, the provider must disclose all fees imposed on the remittance transfer and may not provide the disclaimer regarding non-covered third-party fees. These technical corrections address clerical errors the Bureau found in the Remittance Rule. The OFR/GPO partnership is committed to presenting accurate and reliable A "remittance transfer" is an international electronic transfer of funds requested by a sender to a designated recipient and sent by a remittance transfer provider ("provider"). The RFA defines a small business as a business that meets the size standard developed by the Small Business Administration pursuant to the Small Start Printed Page 34903Business Act. Cancellation request provided to agent. See also id. 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: (A) Provided 500 or fewer remittance transfers in the previous calendar year; and. [80] One credit union and one trade association representing credit unions recommended that the Bureau consider simplified exceptions that treat a sending institution's reliance on exchange rate and covered third-party fee amounts provided by its correspondent bank as sufficient for disclosure purposes. 601(3) (the Bureau may establish an alternative definition after consultation with the Small Business Administration and an opportunity for public comment). While the Bureau does not have information on how many transfers might be affected, it expects the number of transfers to be relatively small and, as such, the costs to consumers of receiving estimates for additional transfers is likely to be limited.
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