How CFPB's Remittance Rule Will Reshape Global Money Transfers

May 20, 2013
American Banker  

The Consumer Financial Protection Bureau, at the behest of banks, has revised its rule on international remittance disclosures to make it easier for institutions to comply. Under the latest version, banks will have to make a number of changes, including updating their automated systems and revamping their fee structure. It remains to be seen, meanwhile, whether costs to consumers will rise or fall as a result of the new guidance. Some industry insiders believe the CFPB's requirement that banks reveal price estimates for the entire transfer will push down remittance fees. "Customers could, in effect, shop around to determine who provides the best value of service and that will put some pressure on the industry to create efficiency within the network to reduce costs," speculates James Fleisher of San Francisco-based Bank of the West. Others say banks will hike the fees to defray the cost of the new automated systems needed to ensure compliance with the rule. There is widespread agreement, however, that rule is needed. "A large proportion of the money is drained away by the transaction costs of sending money internationally," wrote the World Bank's Massimo Cirasino in a piece in The Guardian in February. "Given the typically low incomes of migrants and the small amount of each remittance transfer, too much is being spent on these transactions -- and too little of the money is reaching migrants' families."
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