CFPB Proposes Regulating Nonbank International Money Transmitters

29 Jan

On January 23, 2014 the Consumer Financial Protection Bureau (CFPB) published a request for comment on a proposed regulation that would establish the CFPB’s supervisory authority over certain nonbanks that transfer money internationally.  If adopted, the rule would bring large participants in international money transfers within the CFPB’s supervisory jurisdiction.  Comments on the proposed rule are due 60 days after publication in the Federal Register.

Large participants in international money transfers are defined in the proposed rule as companies that send at least one million aggregate annual international money transfers on behalf of U.S. senders to a designated recipient in a foreign country.  A company would be able to dispute whether it qualifies as a large participant.  Any company that meets the “large participant” criteria will be subject to examination by the CFPB.  Exams may involve site visits by CFPB staff, exam reports, supervisory letters, and compliance ratings.

If this topic sounds familiar, it may be because last October CFPB regulations relating to remittance transfers went into effect.  That remittance rule imposes consumer protection requirements on international money transfers, while this regulation distinguishes larger participants in the market and subjects them to supervisory authority.  This rule would authorize the CFPB to examine for compliance with the earlier remittance transfer rule and for compliance with other consumer financial laws.  In addition, the CFPB would coordinate with State regulatory authorities in examining larger participants of the international money transfer market. 

International money transfers may be cash-to-cash transfers, or may be initiated using credit cards, debit cards, or bank account debits.  The transfers may use websites, agent locations, stand-alone kiosks, or phone lines.  Funds sent abroad may be deposited directly onto prepaid cards, credited to mobile phone accounts, or transferred to consumers’ nonbank accounts identified by email addresses or mobile phone numbers.  All such transfers would come within the ambit of the proposed rule.

The CFPB requests comment on all aspects of the proposed rule, including on any appropriate modifications or exceptions to it.  In particular the CFPB asks whether measures other than the number of transfers should be adopted to determine who qualifies as a “larger participant”, and whether a threshold other than one million transactions is more appropriate.  Submitting comments provides a great opportunity to influence the ultimate regulation.

Industry participants and regulators alike have grappled with the burgeoning money transmitter market and regulatory environment.  This proposal adds one more brick to the wall of regulation sure to surround the industry.

–Holli Targan, Attorney and Partner, Jaffe, Raitt, Heuer & Weiss, P.C.

Holli Targan

Attorney & Partner

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