The Dodd-Frank Wall Street Reform and Consumer Protection Act established many new provisions to protect consumers from unfair business practices by financial institutions. As part of these protections, for the first time ever, remittances and remittance providers became subject to regulation. Credit and debit cardholders have limited liability for lost or stolen cards, and banks are required to provide consumers with important information in the form of bank statements, receipts, and notifications. Regulation E, however did not cover all forms of electronic financing, especially when it came to products used by low-income people. Remittances, often used by low-income immigrants to send money to their low-income families overseas, were not protected under the original Electronic Fund Act. Moreover, consumers lack federal protections on lost or stolen Electronic Benefit Transfer (EBT) Cards, which are used by families receiving public assistance, such as Temporary Assistance to Needy Families (TANF) and the Supplemental Nutrition Assistance Program (SNAP). In addition, consumers lack protection regarding prepaid cards, which have become more and more common, especially in the last five years, among the un/underbanked. While Dodd-Frank did not work to protect EBT or prepaid cardholders, the law did put in place protections for people who send remittances.
Originally scheduled to be released by CFPB in January 2012, the final remittance rule was actually published eight months later on August 20th. Like most regulations of Dodd-Frank, the remittance rule was released way past the deadline. As of January 2, 2013, 59.9% of all Dodd-Frank rulemaking deadlines have been missed. As discussed in a previous blog post, this is probably due to the intense Dodd-Frank obstruction efforts.
The regulation requires remittance transfer providers to provide written disclosures to remittance senders. These disclosures must contain information regarding exchange rates, fees, taxes, and the final amount that the designated recipient will receive. The remittance provider is also required to provide a written receipt to the sender that states when the remittance will be received. Remittance consumers have 30 minutes (and sometimes more) to cancel a transfer and receive a refund. Companies must investigate if a consumer reports a problem with a transfer, and for certain errors consumers can receive a refund or have the transfer resent without charge if the money did not arrive as promised.
In December 2012, CFPB announced it was proposing to “narrowly” revise a few aspects of the final rule. The proposed revisions relate to foreign taxes and errors on the part of the sender. They would require providers to disclose foreign taxes imposed by the foreign central government receiving the remittance. Providers would not, however, be required to disclose taxes imposed by foreign regional, provincial, state, or other local government. Additionally, the revisions would protect providers from being liable for lost funds that are the result of consumer errors in providing an account number.
Although the final remittance rules originally were expected to be implemented fully on February 7, 2013, on January 22 CFPB announced that the effective date is being temporarily delayed since the comment period on the proposed revisions has not ended yet. The deadline for comments is February 7, 2013.
The new consumer protections on remittances are a step in the right direction to protect remittance consumers for the first time. Yet, Regulation E still lacks protections for EBT and prepaid cards. Credit and debit cardholders have limited liability for lost or stolen cards, and banks are required to provide consumers with important information in the form of bank statements, receipts, and notifications. These protections do not extend to government-issued prepaid cards (i.e., Electronic Benefit Transfer (EBT) Cards ) that are lost or stolen. Although the government uses EBT cards to disburse public assistance benefits, such as TANF and SNAP, if a beneficiary’s card is stolen the beneficiary does have the same protections that others do. Similarly, prepaid cards, which, especially in the last five years, have become more and more common among the un/underbanked, are also not covered by Regulation E.
In order to assist people to escape the cycle of poverty, prepaid and EBT cardholders also need to be protected.