Shared from CUNA’s question and answer on the CFPB’s Remittance Transfer Rule, effective on October 28, 2013.
Question: What is a "remittance transfer”?
Answer: A "remittance transfer” is an electronic funds transfer (over $15) requested by a consumer sender in the United States to a designated recipient in a foreign country that is sent by a "remittance transfer provider.” That being said:
The rule only covers international electronic fund transfers: domestic wire/ACH transactions are not covered.
The credit union must be the originating institution: transfers where the credit union is the recipient institution of the wire/ACH are not covered by the rule’s requirements. For example, international ACH transactions (IATs) where your CU is the RDFI would not be covered by the rule (e.g., inbound PayPal transactions that debit a member’s account).
There can be more than one provider involved in a transaction: the credit union would generally be considered a remittance transfer provider if it originates wires for members to designated recipients in foreign countries, even when the transactions are routed through another financial institution.
Credit unions that provide remittance transfers in the "normal course of business” are "remittance transfer providers” and are required to comply with rule’s requirements.
A credit union does not provide remittance transfers in the normal course of business if: (1) the CU provided 100 or fewer remittance transfers in the previous calendar year, and; (2) provides 100 or fewer remittance transfers in the current calendar year. If your credit union qualifies for this safe harbor, it is exempt from the rule.
Question: Our credit union doesn’t offer remittance transfer services, although we may occasionally conduct a transfer as an accommodation to members in need of the service. The number of international transfers conducted each year falls way below the 100-transfer safe harbor threshold. Does Reg E require us to track the number of remittance transfers we conduct to show that we qualify for the safe harbor?
Answer: Reg E doesn’t specifically require you to have a system in place to track these transfers. However, according to the CFPB, "the Bureau expects that many small providers will accurately track their remittance transfers to know whether they qualify for the safe harbor described in Sec. 1005.30(f)(2).” – Supplemental information to the final rule published on August 20, 2012.
In addition, NCUA Regulatory Alert 13-RA-06: CFPB’s Amended Remittance Transfer Rule (July 2013) states that credit unions should "track the number of international wire transfers and international ACH transfers your credit union completes each year” to determine safe harbor coverage. So, you’ll need to develop a system to count international EFTs in order to show your examiners that your credit union is exempt from the requirements.
Question: Our credit union is right on the borderline of compliance. We conduct anywhere between 75-90 international remittance transfers a year. If business picks up, we'll eventually cross the 100-transfer threshold. If that happens, will we have to suspend the service while we get our systems in place to comply with the remittance transfer requirements?
Answer: No. The rule provides a "reasonable time period,” not to exceed six months, to begin complying with subpart B of Regulation E. The credit union does not have to suspend its services during this transition period. It can continue to offer remittance services without providing the disclosures, or complying with the error resolution or other protections of the rule -- but it can only do so for no more than six months.
Question: Does the remittance transfer rule apply if the member uses a debit card issued by the credit union to make a purchase from a merchant located in another country?
Answer: No. The definition of ‘‘remittance transfer’’ requires that a transfer be ‘‘sent by a remittance transfer provider.’’ This means that there must be an intermediary that is directly engaged with the sender to send an electronic transfer of funds on behalf of the sender to a designated recipient: "A payment card network or other third party payment service that is functionally similar to a payment card network does not send a remittance transfer when a consumer provides a debit, credit or prepaid card directly to a foreign merchant as payment for goods or services.
In such a case, the payment card network or third party payment service is not directly engaged with the sender to send a transfer of funds to a person in a foreign country; rather, the network or third party payment service is merely providing contemporaneous third-party payment processing and settlement services on behalf of the merchant or the card issuer, rather than on behalf of the sender. In such a case, the card issuer also is not directly engaged with the sender to send an electronic transfer of funds to the foreign merchant when the card issuer provides payment to the merchant.
Similarly, where a consumer provides a checking or other account number, or a debit, credit or prepaid card, directly to a foreign merchant as payment for goods or services, the merchant is not acting as an intermediary that sends a transfer of funds on behalf of the sender when it submits the payment information for processing.” - Comment 30(e)-2(ii) regarding the definition of remittance transfer.
Question: Are online bill payments to recipients in other countries covered by Reg E's remittance transfer rule?
Answer: The answer to this question depends on the terms of the bill payment agreement and the method used to make these payments. The Official Interpretations to Sec. 1005.30 of Reg E (remittance transfer definitions) state that "an electronic transfer of funds occurs for a payment made by a provider under a bill-payment service available to a consumer via computer or other electronic means, unless the terms of the bill-payment service explicitly state that all payments, or all payments for a particular payee or payees, will be made solely by check, draft or similar instrument drawn on the consumer's account to be mailed abroad, and the payee or payees that will be paid in this manner are identified to the consumer."
Question: Are we required to hold off on sending the remittance transfer for 30 minutes after the member submits payment for the transaction?
Answer: No, you’re not required to hold the transfer for 30 minutes, but doing so will probably make the cancellation process a lot easier for you and your members. Section 1005.34 allows the sender 30 minutes to cancel a remittance transfer request after the sender makes payment (although the credit union may provide a longer cancellation time, at its option) if:
The request to cancel enables the credit union to identify the sender’s name and address or telephone number and the particular transfer to be cancelled; and
The transferred funds have not been picked up by the designated recipient or deposited into an account of the designated recipient.
If the sender cancels the request, the credit union will need to provide a full refund for the total amount provided by the sender, including any fees and taxes (to the extent not prohibited by law) imposed in connection with the remittance transfer.
For transfers scheduled in advance, sender may generally cancel the transfer as long as the re-quest to cancel is received by the credit union at least 3 business days before the date of the scheduled remittance transfer.
Question: The 2013 rule creates an exception from the 2012 final rule’s error resolution provisions for certain situations in which a sender provides an incorrect account number or recipient institution identifier (e.g., routing number, Canadian transit number, International Bank Account Number, etc.) and that mistake results in the transfer being deposited in the account of someone other than the designated recipient. Under what circumstances will the exception apply, and a provider not be liable to resend or refund the funds?
Answer: All of the following circumstances must be present in order for the exception to apply:
The provider can demonstrate that the sender provided an incorrect account number or recipient institution identifier to the provider in connection with the remittance transfer;
The provider used a reasonably available means to verify that the recipient institution identifier provided by the sender corresponded to the recipient institution name provided by the sender;
The provider gave notice to the sender before the sender paid for the remittance transfer that, in the event the sender provided an incorrect account number or recipient institution identifier, the sender could lose the transfer amount;
The incorrect account number or recipient institution identifier resulted in the deposit of the remittance transfer into an account that is not the designated recipient’s account; and
The provider promptly used reasonable efforts to recover the amount that was to be received by the designated recipient.
The exception will not apply when the failure to make funds available is the result of a mistake by the provider, or due to incorrect or insufficient information provided by the sender other than an incorrect account number or incorrect foreign recipient institution number (e.g., the wrong name of the recipient institution).