U.S. Agency Exempts More Firms From Wire-Transfer Rule
08/07/2012| 03:45pm US/Eastern
By Maya Jackson Randall
A U.S. consumer-protection agency has scaled back a new rule on wire transfers to make it easier for more banks and credit unions to offer the service.
The Consumer Financial Protection Bureau unveiled a rule earlier this year that would require firms such as Western Union Co. (>> The Western Union Company) and MoneyGram International Inc. (>> Moneygram International Inc) that offer wire-transfer services to disclose upfront the fees, exchange rate and the amount that the recipient will receive. These services, which consumers use to send billions of dollars abroad every year, generally had been excluded from existing federal consumer-protection regulations. But the 2010 Dodd-Frank financial overhaul law, which created the consumer bureau, directed the consumer agency to set rules for this corner of the financial market.
Thousands of banks and credit unions offer wire transfers, enabling consumers to send money overseas to family and friends. The consumer agency announced Tuesday it would spare a larger pool of firms from the new consumer-protection requirements, which are set to take effect in February.
"We recognize that in regulations, one size does not necessarily fit all," said the consumer agency's director, Richard Cordray. "The final remittance rule will protect the overwhelming majority of consumers while making the process easier for community banks, credit unions, and other small providers that do not send many remittance transfers."
Initially, the agency had proposed exemptions for companies that conducted 25 or fewer wire transfers a year. But after gathering feedback from stakeholders, the consumer-protection agency has decided to boost that threshold to 100 transfers a year. Community banks and other small institutions had argued that the rule would deal an unfair blow to small firms that only sparingly offer the service.
The consumer-protection agency has faced criticism from small financial institutions that fear the agency will issue a slew of new federal requirements too costly for them to meet. In several congressional hearings this year, community banks and credit unions have argued that their compliance costs are rising already, putting them at a disadvantage compared to giant banks that should find it easier to comply with new federal regulations due to more lawyers and more money.
Mr. Cordray has said the bureau is being careful to consider the impact of its rules on small businesses.
In the updated rule, the agency noted that some companies could face uncertainty and litigation risk absent the new 100-transfers-a-year threshold. By exempting firms that don't do more than 100 wire transfers a year, the bureau said it believes it "can reduce compliance burden by increasing legal certainty in the market."
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