JULY 20, 2011

Report on remittance transfers

Report to the President, the Senate Committee on Banking, Housing, and Urban 

Affairs, and the House of Representatives Committee on Financial Services

Recommendations regarding the transparency and disclosure to consumers 

of exchange rates; analysis of the potential use of remittance histories in the 

calculation of credit scores
Table of contents

Executive Summary...........................................................................................1

I. Background on remittance and other international money transfers .........................3

A. Consumer demand............................................................................................................................. 3

B. Providers and their products ............................................................................................................. 5

C. Consumer purchase and shopping behavior................................................................................... 9

II. Transparency and disclosure of exchange rates in remittance transfers ..................11

A. Exchange rates as a component of remittance transfer prices .................................................... 12

B. Current disclosure practices and legal requirements.................................................................... 16

C. Key characteristics of exchange rates ............................................................................................. 17

D. How consumers understand financial information ........................................................................ 20

E. Recommendations regarding transparency and disclosures of exchange rates ........................ 21

III. The potential for remittance histories to enhance credit scores ...............................25

A. Background on credit reporting and credit scores........................................................................ 26

B. Remittance transfer senders’ potential to benefit from alternative credit data.......................... 30

C. The potential for remittance histories to enhance credit scores.................................................. 32

D. Planned research regarding the potential for remittance histories to enhance credit scores... 32

E. Business model barriers to the use of remittance histories to enhance credit scores ............... 33

F. Legal barriers to the use of remittance histories to enhance credit scores................................. 40

IV. Conclusion......................................................................................................................43

Appendix A...................................................................................................45

Appendix B...................................................................................................48
1 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Executive summary

Each year, consumers in the United States send tens of billions of dollars to family members, 

friends, businesses, and others abroad. Much of this money is sent through remittance transfers, 

which are certain electronic transfers from U.S. senders to recipients in foreign countries.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)requires the 

Consumer Financial Protection Bureau (CFPB) to issue a report on two topics related to remittance 

transfers: (1) the transparency and disclosure to consumers of exchange rates used in remittance 

transfers; and (2) the potential for using remittance histories to enhance the credit scores of 

consumers.

The first topic relates to the cost to consumers of remittance transfers. Exchange rates are a key 

factor in determining the amount a remittance recipient receives and the price a remittance sender 

pays for a transfer. Exchange rates can also be a key factor in how consumers choose among 

remittance transfer providers. Thus, exchange rate information has the potential to educate 

consumers, empower them to compare remittance products, and facilitate competition among 

providers.

Consumers will soon have new ways to learn about exchange rates. The Dodd-Frank Act establishes 

new remittance disclosure standards. For most remittance transfers, the Act requires disclosures that 

list the exchange rate used, as well as the amount of currency that will be received abroad, and other 

information.

The CFPB recommends four principles for maximizing consumers’ ability to receive and use 

exchange rate information: (1) design, test, and use disclosures to maximize consumer 

comprehension; (2) facilitate consumers’ comparisons of remittance offerings; (3) adapt disclosures 

to the growing variety of channels that consumers use to initiate remittance transfers; and (4) couple 

information about exchange rates with an indication or estimate of the combined effects of fees and 

the exchange rate.

Implementation of the Dodd-Frank Act’s requirements will shed light on any need for additional 

exchange rate transparency measures. The CFPB also recommends that any such measures be 

evaluated and considered together with the range of mechanisms for benefiting and protecting 

remittance consumers.

The second topic addressed in this report is the potential use of remittance transfer data in credit 

scoring. Credit scores are measures of credit risk that can affect consumers’ access to credit and 

housing, among other things. The scores are generally based on information contained in consumer 

credit files at one of the three nationwide credit reporting agencies (CRAs). In the past, credit files 

have not routinely included remittance data. Thus, if remittance histories can help assess or predict 

the credit risk that consumers pose to lenders, adding such data to credit files could produce a 

change in the credit scores of some remittance senders. If remittance histories are predictive of 
2 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

credit risk, the addition of remittance data might also allow credit scores to be generated about some 

consumers who were otherwise unscorable.

Inclusion of remittance data in credit scores could have positive consequences for some consumers 

born outside of the United States, who are more likely than others to make certain types of 

remittance transfers. Earlier research suggests that certain foreign-born individuals may be 

disproportionately likely to have credit histories that are insufficient to generate credit scores. For 

other foreign-born consumers, limited credit files may overestimate the credit risk they pose to 

lenders.

Whether and how remittance data might affect the credit scores of individual consumers would 

depend, however, on a number of factors, including the predictiveness of remittance histories, the 

particular scoring and business models developed to use remittance data, and the data already in 

individuals’ credit files. If remittance data can help predict credit risk, in some cases, that data might 

produce an increase in credit scores or permit the generation of credit scores for previously 

unscorable consumers; in other cases, credit scores might remain the same or decrease.

Willingness on the part of market participants – remittance transfer providers, CRAs, credit score 

developers, and lenders – to provide remittance histories and use them in credit scores will depend 

on the incentives and challenges that each would face. Likely business challenges include the size of 

the market for remittance-based scores, and the investments required to record and analyze 

remittance data accurately. Use of remittance histories in credit scores could also require investments 

and changes in business processes to ensure compliance with privacy, credit reporting, and fair 

lending laws.

For all market participants, a critical question will likely be the extent to which remittance histories 

can improve the predictiveness of credit scores, or be used to generate reliable first-time credit 

scores. In addition to discussing the incentives for and challenges of using remittance data in credit 

scores, this report describes planned CFPB research that will assess the predictiveness that 

remittance histories might add to credit scores.

This report is based on the CFPB’s review of existing information and interviews of market 

participants, researchers, and other industry experts. Part I provides background on the remittance 

transfer market, including information about consumer demand, providers, products, and 

consumers’ shopping and purchase behavior. Part II provides recommendations on the disclosure of 

exchange rates. Part III discusses whether and how remittance histories might be used to enhance 

credit scores of remittance senders, the potential barriers to such use, and the CFPB’s planned 

research regarding remittance histories and credit scores.
3 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

I. Background on remittance and other international money 

transfers

A. Consumer demand

Remittance transfers, as defined by the Dodd-Frank Act,1 are a subset of U.S. consumers’ funds 

transfers to recipients abroad. Remittance transfers are electronic, made to designated recipients in 

other countries, and initiated by remittance transfer providers.2

U.S. consumers send funds abroad for many reasons. Funds transfers may be used, for example, to 

pay the tuitions of children studying abroad, to purchase real estate, to pay for online purchases, or 

to assist family members with their expenses. Some transfers may be to businesses. But industry 

participants suggest 

that many or most of 

U.S. consumers’ 

transfers to 

recipients in other 

countries are to 

friends and relatives 

who live abroad.

These transactions 

will be referred to as 

“personal transfers”; 

they are the focus of 

most of the available 

data and research.

The diagram (at left) 

is a notional 

illustration of this 

and other terms.

 

1 Pub. L. 111-203, 124 Stat. 1376 (2010). 

2 Section 1073(a) of the Dodd-Frank Act (15 U.S.C. § 16930-1(g)(2)) provides that, for purposes of the Electronic Fund 

Transfer Act (EFTA), 15 U.S.C. § 1693 et seq., the term “remittance transfer”:

(A) means the electronic (as defined in section 106(2) of the Electronic Signatures in Global and National 

Commerce Act (15 U.S.C. 7006(2)) transfer of funds requested by a sender located in any State to a 

designated recipient that is initiated by a remittance transfer provider, whether or not the sender holds an 

account with the remittance transfer provider or whether or not the remittance transfer is also an electronic 

fund transfer, as defined in section 903 [of the EFTA]; and

(B) does not include a transfer described in subparagraph (A) in an amount that is equal to or lesser than the 

amount of a small-value transaction determined, by rule, to be excluded from the requirements under 

section 906(a) [of the EFTA].

Diagram 1: Remittance transfers and related transfers from U.S. consumers to 

other countries (circles not to scale)
4 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Approximately six million households nationwide send personal transfers each year, a 2008 U.S. 

Census Bureau survey suggests.3 Most of the senders are foreign-born. The Census Bureau survey 

showed that individuals born in Latin America and Asia alone accounted for more than half of the 

sending households; in nearly a quarter of all sending households, all adults were born in Mexico.4

Many of these personal transfers are part of a worldwide phenomenon of migrants sending money 

back to their countries of origin. Globally, the World Bank estimates that the flow of personal 

transfers, and certain compensation, goods, services, and assets from migrants to their native 

countries is significantly larger than the flow of official development aid.5 Individually, personal 

transfers are commonly used to pay for recipients’ basic household needs, support their education, 

fund investments, address emergency needs, or provide similar assistance.6

Consumers’ patterns of sending money abroad can vary. For example, there is a wide range in the 

frequency with which consumers transfer money abroad. In its 2008 survey, the Census Bureau 

found that 33 percent of the households that sent personal transfers did so infrequently (one or two 

times in the prior year). But a similar percentage of households reported making transfers frequently 

(more than 10 transfers in the prior year).7 Similarly, transfers sent abroad for business purposes may 

be one-time or routine transactions, if made to pay recurring obligations like mortgages.

The size of U.S. consumers’ transfers to other countries also varies. Surveys suggest that personal 

 

3 Elizabeth M. Grieco et al., Who in the United States Sends and Receives Remittances? An Initial Analysis of the 

Monetary Transfer Data from the August 2008 CPS Migration Supplement, at 18 (Nov. 2010) (U.S. Census Bureau 

Working Paper No. 87) (online at www.census.gov/population/www/documentation/twps0087/twps0087.pdf) 

(hereinafter “U.S. Census Bureau Analysis”). But other research regarding the number of Latin America-born 

individuals who send money from the United States suggests that the figure may be higher. See Manuel Orozco, 

Understanding the Continuing Effect of the Economic Crisis on Remittances to Latin America and the Caribbean, at 

11 (Aug. 10, 2009) (online at idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=2100503) (estimating that 12.6 

million migrants from Latin America would send “remittances” in 2009); see also Bendixen & Amandi, Survey of Latin 

American Immigrants in the United States, at 27-28 (Apr. 30, 2008) (online at 

idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35063818) (suggesting that in 2006, 12.6 million Latin 

American-born individuals sent “remittances,” but that in 2008, that figure dropped to 9.4 million) (hereinafter 

“Bendixen”). Neither report calculates the number of sending households nor defines the term “remittance,” though 

the term likely refers to personal transfers.

4 U.S. Census Bureau Analysis, supra note 3, at 18; Rachel T. Cortés and David M. Armstrong, Monetary Transfers 

Sent Abroad by Nativity and Region of Birth: An Analysis of the Current Population Survey’s 2008 Migration 

Supplement, at 5, 8 (2011) (submitted as a poster presentation to the annual meeting of the Population Association of 

America, Washington, D.C., Mar. 31-Apr. 2, 2011).

5 The World Bank, Migration and Remittances Factbook 2011, at xvi-xvii, 17, 19 (2d ed. 2011) (online at 

siteresources.worldbank.org/INTLAC/Resources/Factbook2011-Ebook.pdf).

6 Dovelyn Rannveig Agunias, Migration Policy Institute, Remittances and Development: Trends, Impacts, and Policy 

Options. A Review of the Literature, at 20-21 (2006) (online at 

www.migrationpolicy.org/pubs/mig_dev_lit_review_091406.pdf); Appleseed, Remittance Transparency: 

Strengthening Business, Building Community, at 6 (January 2009) (online at 

www.appleseednetwork.org/Portals/0/Documents/Publications/FE%20Final.pdf); Roberto Suro, et al., Billions in 

Motion: Latino Immigrants, Remittances, and Banking, at 7-8 (2002) (online at pewhispanic.org/files/reports/13.pdf). 

7 U.S. Census Bureau Analysis, supra note 3, at 19; see also Bendixen, supra note 3, at 22 (A survey of natives of Latin 

America found that on average, those who sent money back to their families in Latin America did so, on average, 15 

times per year).
5 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

transfers average between $200 and $400, though a substantial number may be in the thousands of 

dollars.8 And consumers may send much larger transfers if, for example, they are sending money to 

purchase a home or make another significant asset purchase.

U.S. consumers annually send tens of billions of dollars to recipients in other countries, the available 

research suggests. There is no precise estimate, however, of either the total volume of U.S. 

consumers’ funds transfers to other countries, or of the subset of such transfers that are remittance 

transfers. Researchers have estimated the volumes of certain categories of U.S. consumers’ transfers 

that include some or all remittance transfers. The estimates of those related flows range from $12 

billion to more than $50 billion annually. The differences in the estimates are due to differences in 

the types of transfers measured and a lack of clear data.9

B. Providers and their products

Under the Dodd-Frank Act, a remittance transfer is initiated by a remittance transfer provider 

(RTP): a “person or financial institution that provides remittance transfers for a consumer in the 

 

8 Ole E. Andreassen, Remittance Service Providers in the United States: How Remittance Firms Operate and How 

They Perceive Their Business Environment, at 15-16 (June 2006) (online at 

siteresources.worldbank.org/INTPAYMENTREMMITTANCE/Resources/BusinessmodelsFSEseries.pdf) (hereinafter 

“Andreassen”); KPMG LLP Economic and Valuation Services, 2005 Money Services Business Industry Survey Study for 

Financial Crimes Enforcement Network, at 47 (Sept. 26, 2005) (online at 

www.fincen.gov/news_room/rp/reports/pdf/FinCEN_MSB_2005_Survey.pdf) (hereinafter “KPMG”); see also Manuel 

Orozco, Inter-American Dialogue, Migration and Remittances in Times of Recession: Effects on Latin American and 

Caribbean Economies, at 14-15 (Apr. 2009) (online at www.oecd.org/dataoecd/48/8/42753222.pdf); Bendixen, at 23; 

Manuel Orozco, Inter-American Dialogue, Worker Remittances in an International Scope, at 10 (Feb. 28, 2003) (online 

at www.iadb.org/document.cfm?id=35076501).

9 $12 billion: The Census Bureau estimate for monetary transfers sent abroad by all U.S. households. The Census 

Bureau acknowledged that the number may be an underestimate. U.S. Census Bureau Analysis, supra note 3, at 2-3, 

12-14.

Around $40 billion: The estimate of both a private consulting firm (for the Financial Crimes Enforcement Network) 

and the Bureau of Economic Analysis (BEA), but for different sets of transfers. The consulting firm estimated in 2005 

that $42 billion was sent internationally through money transmitter companies, but it is unclear whether the figure 

includes transfers sent into the United States, as well as transfers sent from the United States. KPMG, supra note 8, at 

5. The BEA estimated that in 2009, foreign-born consumers who had spent one year or more in the United States sent 

approximately $37 billion in cash and in-kind transfers to households abroad, and that other foreign-born individuals 

in the United States earned $11 billion in compensation, some of which may have been sent abroad. BEA, Balance of 

Payments: International Transactions, 1992-2010 (online at www.bea.gov/international/supplemental_estimates.htm) 

(June 16, 2011); Christopher L. Bach, BEA, Annual Revision of the U.S. International Accounts, 1991-2004, Survey of 

Current Business, at 64-66 (July 2005) (online at www.bea.gov/scb/pdf/2005/07July/0705_ITAAnnual.pdf); 

Congressional Budget Office, Migrants’ Remittances and Related Economic Flows, at 5 (Feb. 2011) (online at 

http://www.cbo.gov/ftpdocs/120xx/doc12053/02-24-Remittances_chartbook.pdf).

More than $50 billion: The figure implied by the Inter-American Development Bank (IDB). The IDB estimated that 

Latin American immigrants alone sent approximately $46 billion abroad to their families in 2008. IDB, The Changing 

Patter of Remittances: 2008 Survey of Remittances from the United States to Latin America, at 1 (Apr. 2008) (online at 

idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=1418521); Bendixen, supra note 3, at 2, 30.
6 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

normal course of its business, whether or not the consumer holds an account with such person or 

financial institution.”10

Historically, most personal transfers have been sent by money transmitter companies that are not 

depository institutions. (For purposes of this report, “depository institutions” are banks, thrifts, or 

credit unions).11 These money transmitters have usually focused on cash-to-cash transfers. In other 

words, they permit U.S. consumers to submit cash in the United States, often to a retail agent of the 

money transmitter.12 Money transmitters then distribute transferred funds to recipients in cash, 

usually through a disbursing agent in the destination country. Money may be disbursed to the 

recipient in U.S. dollars or local currency depending on the destination, the money transmitter’s 

service offering, and the preference of either the sender or the recipient. The flows of information 

and funds from sender to recipient are illustrated below in Diagram 2.

These cash-to-cash transactions can be attractive to consumers because of their accessibility: They 

do not require either the sender or the recipient to have a bank account, access to an ATM, or a 

separate financial instrument. Many cash-to-cash transfers are available for pickup within minutes of 

being sent.13

 

10 Dodd-Frank Act § 1073(a); 15 U.S.C. § 16930-1(g)(3).

11 For the purpose of this report, it is assumed that all money transmitters and depository institutions that provide 

remittance transfers are RTPs.

12 In this report, the term “agent” does not denote a particular legal relationship. It includes legal agents, authorized 

delegates, or affiliates that act on behalf of a money transmitter in some capacity.

13 See generally Andreassen, supra note 8, at 4. The money transmitter and its agents may settle their accounts with 

each other after the funds are made available to the recipient. See generally Committee on Payment and Settlement 

Systems and the World Bank, General Principles for International Remittance Services, at 45-46 (Jan. 2007) (online at 

siteresources.worldbank.org/INTPAYMENTREMMITTANCE/Resources/New_Remittance_Report.pdf) (hereinafter 

“General Principles”).
7 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Source: Adapted from The World Bank, Global Economic Prospects: Economic Implications of Migration 

and Remittances, at 151 (2006). A cash-to-cash transfer may involve other intermediaries, not reflected in 

this diagram. For example, depository institutions are often involved in the settlement of funds between a 

money transmitter and its agents.

Industry participants and researchers report that cash-to-cash transfers made through money 

transmitters continue to account for the majority of personal transfers. But as the sophistication of 

consumers and money transmitters has increased, money transmitters have started offering an 

increasing range of other transfer methods as well.14 Some enable consumers to fund transfers with 

their credit or debit cards, or by debiting their bank accounts. Funds can also be received abroad in 

recipients’ bank accounts. And several money transmitters have begun to permit consumers to 

 

14 This analysis relies on CFPB interviews and other research. For other general discussions of the means of 

transferring money, see Board of Governors of the Federal Reserve System, Electronic Fund Transfers, 76 Fed. Reg. 

29,902-04 (May 23, 2011) (hereinafter “Board Proposed Rules”); Red Gillen, Celent, The Would-Be Disruptors: New 

Technologies in the Remittance Space (Apr. 2008); Manuel Orozco, Katy Jacob, and Jennifer Tescher, The Center for 

Financial Services Innovation, Card-Based Remittances: A Closer Look at Supply and Demand, at 7-15 (Feb. 2007) 

(online at cfsinnovation.com/publications/article/2892); U.S. Government Accountability Office, International 

Remittances: Information on Products, Costs, and Consumer Disclosures, at 8-22 (Nov. 2005) (GAO-06-204) (online at 

www.gao.gov/new.items/d06204.pdf).

Diagram 2: Overview of cash-to-cash remittance transfers sent by money transmitters
8 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

transfer or receive money through accounts tied to email addresses or mobile phone numbers (often 

called Internet or mobile phone “wallets”).

Depository institutions can also offer consumers options for transferring money abroad. Unlike 

money transmitters, these institutions have historically focused on sending money from one deposit 

account to another through wire transfers. Often used for larger transactions, wire transfers can be 

received within several days (or sometimes weeks) after they are sent. By partnering with money 

transmitters or building their own products, some depository institutions have also begun offering 

cash-based transfer products that operate similarly to money transmitters’ products. Additionally, the 

Federal Reserve System is working to expand the international reach of its Automated Clearing 

House (ACH) services, which give depository institutions an alternative means of transferring 

money from accounts either to other accounts or to be picked up in cash, depending on the 

destination country.15

Consumers can also send money abroad by mailing ATM, debit, or pre-paid cards to recipients 

abroad. ATM and debit cards can be linked to the sender’s bank account; pre-paid cards can be 

linked to an account funded by the sender.

Under the rules proposed by the Board of Governors of the Federal Reserve System (Federal 

Reserve Board) to implement the Dodd-Frank Act’s remittance provisions, most of the transfer 

methods described above would likely constitute “remittance transfers.” The proposed rules set 

forth definitions of “remittance transfer” and related terms, and the proposed staff commentary lists 

cash, wire, ACH, and certain prepaid card-based transactions as examples of remittance transfers.

But the proposed comments state that if a sender retains the ability to withdraw funds from an 

account, giving a recipient access to that account does not constitute a remittance transfer because 

there is no “designated recipient” for funds.16

Furthermore, not all mechanisms for sending money abroad are electronic. For example, consumers 

can send cash or money orders through the mail or with a courier. The limited information available 

suggests that these and other informal methods of sending money may account for a significant 

portion of the flows of money to some countries or regions.17

 

15 See generally Board Proposed Rules, supra note 14, at 29,903-04; Federal Reserve Bank Services, FedGlobal® ACH 

Payments (online at www.frbservices.org/serviceofferings/fedach/fedach_international_ach_payments.html) (accessed 

June 29, 2011); Federal Reserve Bank Services, FedGlobal® ACH Payment Service Origination Manual, at 11 (Dec. 28, 

2010) (online at www.frbservices.org/files/serviceofferings/pdf/fedach_global_service_orig_manual.pdf).

16 Board Proposed Rules, supra note 14, at 29,907-08, 29,954.

17 In surveys of migrants from Latin America and the Philippines in the United States, the great majority of the survey 

participants reported that they preferred sending money home through banks, credit unions, or non-depository 

money transfer companies (including through ATM and debit cards, or through Internet-based companies), rather 

than through friends, couriers, or other “informal” means. Manuel Orozco, Elizabeth Burgess, Netta Ascoli, Is there a 

Match Among Migrants, Remittances, and Technology?, at 18 (Sept. 30, 2010) (survey of Latin American-born money 

senders) (online at 

www.thedialogue.org/PublicationFiles/a%20match%20in%20migrants%20remittances%20and%20technology%20MO

_FINAL_11.4.101.pdf) (hereinafter “Match”); Bendixen, supra note 3, at 24; Asian Development Bank, Enhancing the 

Efficiency of Overseas Filipino Workers Remittances, at 18 (July 2004) (online at 

www.adb.org/Documents/TARs/PHI/tar-phi-4185.pdf). But based on mathematical models, researchers have 
9 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

C. Consumer purchase and shopping behavior

Consumers’ relationships with RTPs are an important consideration for both exchange rate 

transparency and potential use of remittance histories in credit scores. How consumers shop for and 

select RTPs may bear upon how and when exchange rate disclosures should be made. Likewise,

consumers’ purchase behaviors may affect how their remittance histories could be collected and 

used to inform credit scores.

Most remittance transfers are initiated in-person, at the retail outlets of an RTP. Depository 

institutions generally operate through their local branches, while money transmitters generally 

operate through their own retail storefronts, or through grocery stores, financial services outlets, 

convenience stores, or other retailers that serve as their agents.18 But as RTPs expand beyond cashand account-based transfer products, some are also allowing consumers to initiate transactions by 

phone, through the Internet, with mobile phone text messages, or at automated stand-alone kiosks.

Some RTPs initiate transactions exclusively through technology-based rather than in-person 

channels.

The convenience of a particular location or channel may be one of several factors that consumers 

consider when they shop among RTPs and remittance products. In summarizing the available 

research, the Federal Reserve Board noted that “[s]ignificant factors” in consumers’ choices “include 

trust in the provider, security, reliability (i.e., having funds available at the specified time), and 

convenience to the recipient, particularly in markets where the recipient may have limited options 

where funds can be picked up. Fees and exchange rates are also key factors in choosing a 

provider.”19

Once they have found products and locations that meet their needs, remittance consumers may 

establish ongoing relationships with single RTPs.

20 Though the data on remittance consumer 

behavior is limited, in focus groups conducted to inform the Federal Reserve Board’s proposed 

remittance transfer rules, consumers who sent money abroad reported repeatedly using the same 

RTP for reasons including the convenience of the location, and “the conveniences resulting from 

 

estimated that for transfers to some other regions, such as sub-Saharan Africa, the Middle East, and North Africa, 

informal means account for more than half of the transfers made. Caroline Freund and Nikola Spatafora, Remittances: 

Transaction Costs, Determinants, and Informal Flows (Sept. 2005) (World Bank Policy Research Working Paper No. 

3704) (online at wwwwds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2005/08/30/000016406_20050830164556/Rendered

/PDF/wps3704.pdf).

18 Some RTP-agent relationships are exclusive. In other cases, agents serve multiple RTPs, and therefore can offer 

consumers a variety of sending options from a single storefront.

19 Board Proposed Rules, supra note 14, at 29,904 (footnote omitted); see also ICF Macro, Summary of Findings: 

Design and Testing of Remittance Disclosures, at 3 (Apr. 20, 2011) (online at 

www.federalreserve.gov/newsevents/press/bcreg/bcreg20110512_ICF_Report_Remittance_Disclosures_(FINAL).pdf) 

(hereinafter “ICF Macro”) (“The factors most often identified as the most important in choosing a provider were the 

amount of fees charged, convenience of locations for the recipient, and convenience of locations for the sender.”).

20 Since some retail agent locations represent multiple RTPs, it is possible that some consumers may establish 

ongoing relationships with a single retail agent but switch among RTPs.
10 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

using the same provider, such as having their information already in the provider’s system, an 

understanding of that provider’s process, and loyalty rewards (e.g., a free phone call to the 

recipient).”21

In some cases, shopping for a new RTP may require significant time and effort. The price of a 

remittance transfer can depend on the amount sent, the speed of service, and the sending and 

receiving locations. As a result consumers may need to wait in line, fill out forms, or provide a 

number of details by phone or through the Internet in order to receive exact price quotes. Even 

then, direct price comparisons may be difficult. As explained in more detail in Part II, exchange rates 

– a component of price – may change frequently. 

The effort required to compare remittance transfer offerings may be less for consumers who live in 

neighborhoods where competing RTPs and/or their agents are located near each other; money 

transmitter agents are often concentrated in neighborhoods with large numbers of foreign-born 

consumers. Furthermore, qualitative studies suggest that consumers may avoid the challenges of inperson comparison shopping by collecting price information online or through word-of-mouth 

networks.22 But even in neighborhoods with high concentrations of RTPs or their agents, and with 

access to the Internet or word-of-mouth networks, consumers’ opportunities to switch RTPs can 

vary. For example, a consumer sending funds to an unusual destination, to a rural area, or to a 

country whose business environment is risky may find few RTPs that offer appropriate services. A 

consumer’s options for transfers may also be constrained by the characteristics of that consumer or 

the recipient. If a sender speaks only a foreign language, for example, he or she may seek an RTP 

with staff who speak that language. A sender without Internet access will be unable to shop for or 

initiate transfers online. Similarly, a consumer without an account may be unable to access 

depository institution services. And if a recipient does not have a deposit account, then the sender 

cannot use an RTP that transfers only to such accounts.

Among certain groups of remittance senders and recipients, the limited use of information 

technology and payment instruments other than cash may pose a significant barrier to the adoption 

of emerging remittance products. Surveys suggest that foreign-born Latinos – who account for a 

large portion of remittance senders – use mobile phones in large numbers, but are significantly less 

likely than other consumers to use the Internet,23 have bank accounts,24 or use credit cards.25

 

21 ICF Macro, supra note 19, at 3.

22 In focus groups conducted for the Federal Reserve Board, some consumers indicated that they use the Internet to 

determine rates at different providers, even if they then go to a store to send money in-person. See ICF Macro, supra

note 19, at 3. In another set of focus groups, consumers who sent money to Latin America reported that they found it 

cumbersome to visit competitors’ physical locations to obtain price quotations; the participants instead tended to 

collect price information through word of mouth. Appleseed, The Fair Exchange: Improving the Market for 

International Remittances, at iii (Apr. 2007) (online at 

www.appleseednetwork.org/portals/0/documents/publications/thefairexchangeimprovingmarket.pdf).

23 Gretchen Livingston, Pew Hispanic Center, Latinos and Digital Technology, 2010, at 10 (Feb. 9, 2011) (online at 

pewhispanic.org/files/reports/134.pdf) (reporting that among foreign-born and Puerto Rico-born Latinos, the rate of 

Internet usage was 54 percent, compared to 81 percent for United States-born Latinos, 77 percent for non-Hispanic 

white adults, and 66 percent for non-Hispanic black adults). One survey found that 92 percent of natives of Latin 

America in the United States who made personal transfers had a mobile phone, though only 19 percent had a mobile 

phone that was capable of accessing the Internet. Match, supra note 17, at 20, 24 (using the term “remittance” to 
11 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Remittance recipients in Latin America may face similar constraints; one set of surveys showed that 

only about one-third of remittance recipients in Latin America had bank accounts.26

These characteristics of remittance consumers, RTPs, and remittance products provide context for 

the remainder of this report. In particular, the transparency recommendations in Part II are shaped 

by the range of remittance consumers, providers, and products in the market. Consumers’ shopping 

patterns frame the analysis in Part III regarding the potential for using remittance histories in credit

scores.

II. Transparency and disclosure of exchange rates in remittance 

transfers

This Part provides “recommendations on the manner in which maximum transparency and 

disclosure to consumers of exchange rates for remittance transfers . . . may be accomplished.”27

Exchange rates are one of the key factors that consumers consider in choosing RTPs or remittance 

products. As a result, information about exchange rates has the potential to help remittance senders 

make well-informed choices about which services best meet their needs, and to facilitate 

competition among RTPs.

 

refer to the covered transfers; remittance is undefined, but likely refers to personal transfers). By contrast, in the U.S. 

population generally, 82 percent of adults own a mobile phone, and 31 use their mobile phones to access the 

Internet. Aaron Smith, Pew Internet & American Life Project, Mobile Access 2010, at 12 (July 7, 2010) (online at 

www.pewinternet.org/~/media/Files/Reports/2010/PIP_Mobile_Access_2010.pdf).

24 Match, at 19; Federal Deposit Insurance Corporation, National Survey of Unbanked and Underbanked Households, 

at 11 (Dec. 2009) (online at www.fdic.gov/householdsurvey/full_report.pdf); The Center for Financial Services 

Innovation, A CFSI inBrief on the Underbanked Consumer Study: Characteristics of Latino Un- and Underbanked 

Consumers, at 1-2 (July 2009) (online at cfsinnovation.com/publications/article/330626). 

25 Match, supra note 17, at 21; Kevin Foster, et al., The 2009 Survey of Consumer Payment Choice, at 1 (Apr. 2010) 

(Federal Reserve Bank of Boston Public Policy Discussion Paper No. 11-1) (online at 

www.bostonfed.org/economic/ppdp/2011/ppdp1101.pdf).

26 Manuel Orozco, International Flows of Remittances: Cost, Competition and Financial Access in Latin America and 

the Caribbean—Toward an Industry Scorecard, at 10 (May 12, 2006) (online at 

www.iadb.org/news/docs/internationalflows.pdf). 

27 The Dodd-Frank Act Section 1073(e) requires “a report to the President, Committee on Banking, Housing, and 

Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives regarding—(1) 

the manner in which the remittance history of a consumer could be used to enhance the credit score of the 

consumer; (2) the current legal and business model barriers and impediments that impede the use of the remittance 

history of the consumer to enhance the credit score of the consumer; and (3) recommendations on the manner in 

which maximum transparency and disclosure to consumers of exchange rates for remittance transfers subject to this 

title and the amendments made by this title may be accomplished, whether or not such exchange rates are known at 

the time of origination or payment by the consumer for the remittance transfer, including disclosure to the sender of 

the actual exchange rate used and the amount of currency that the recipient of the remittance transfer received, 

using the values of the currency into which the funds were exchanged, as contained in sections 919(a)(2)(D) and 

919(a)(3) of the Electronic Fund Transfer Act (as amended by this section).”
12 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Any benefit for consumers of a particular exchange rate transparency measure will depend, however, 

on a number of elements. These include the role that exchange rates play in the overall prices that 

RTPs charge for transfers; the effect of other disclosure practices and requirements; the 

characteristics of exchange rates; and how consumers understand any communications about 

exchange rates.

A. Exchange rates as a component of remittance transfer prices

When a consumer submits funds to an RTP, the exchange rate applied to the transaction is one of 

three factors that determine how much money the recipient abroad receives. The other two factors 

are: (1) fees charged at the time of transfer; and (2) fees deducted from the amount sent after the 

time of transfer.28

The same three factors determine the price of the remittance transfer. Consider the situation in 

which a consumer is attempting to send a constant amount of local currency to a recipient. When 

fees increase, the price of that transfer will increase. And, if the amount of foreign currency that is 

equivalent to one U.S. dollar decreases, then the amount that a U.S. consumer will have to pay in 

U.S. dollars for the transfer will increase. 

In calculating the prices of remittance transfers, researchers and other market experts focus on the 

exchange rate “spread”: the percentage difference between the “retail” exchange rate applied to a 

remittance transfer and some “wholesale” exchange rate. The foreign exchange cost to the consumer 

is calculated as the spread times the amount transferred (net of fees).

Though there are a variety of ways to measure the wholesale exchange rate, the concept of exchange 

rate spread is well-recognized in the remittance transfer industry.29 As they do with fees, RTPs may 

increase or decrease exchange rate spreads in order to maximize profit or attract consumers. RTPs 

report as revenue the money that they earn due to exchange rate spreads. Exchange rate spreads can 

also help protect RTPs in case of unexpected changes in currency markets. Though industry practice 

is not consistent, RTPs might also alert consumers to their pricing practices by disclosing the 

exchange spread they add to some wholesale exchange rate, such as the wholesale rate that the RTP 

receives or some reference rate.

 

28 Exchange rates apply to all transactions received in currency other than U.S. dollars. Fees charged at the time of 

transfer are very common. Fees charged after the time of transfer, which can include fees charged for delivery or 

deducted at the destination, are less common. Taxes may be imposed on some remittance transfers sent from

certain states or received in certain localities. Like per-transaction fees charged by RTPs, taxes also can affect the 

amount a recipient receives from, or the amount a sender pays for, a remittance transfer. This report will not, 

however, focus on taxes imposed on remittance transfers.

29 The World Bank, for example, calculates exchange rate spreads by comparing retail exchange rates to interbank 

exchange rates, which are the rates available to large financial institutions exchanging very large quantities of 

currency with each other. See Remittance Prices Worldwide: Making Markets More Transparent (online at 

remittanceprices.worldbank.org/Country-Corridors) (accessed June 27, 2011). By contrast, in calculating their 

revenues, RTPs generally measure exchange rate spreads by comparing their retail exchange rates to the rates at 

which they buy currency, which may be different from interbank rates.
13 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Exchange rate spreads can be useful because they can indicate whether any particular transaction is 

cheap or expensive as compared to another transaction in the same currency or in another currency.

Exchange rates themselves are less informative because, across currency pairs, they are measured on 

widely different scales. Furthermore, while RTPs can largely control spreads, many wholesale 

exchange rates fluctuate frequently in reaction to market conditions.

This report will use the term “total price” to mean the sum of fees charged for a remittance transfer, 

plus the foreign exchange cost, where the foreign exchange cost is the transfer amount, net of fees, 

multiplied by the exchange rate spread. Foreign exchange cost will be based on the interbank rate, 

which is the rate used by large financial institutions exchanging very large amounts of currency with 

each other.

30 Unless otherwise specified, “exchange rate” will refer to the retail exchange rate, or the 

exchange rate applied to a specific transfer.

By way of example, consider an RTP that charges a $10 fee for all transfers to Mexico, and offers an 

exchange rate of 11.76 Mexican pesos per U.S. dollar. The interbank rate is 12.00 Mexican pesos per 

U.S. dollar, so the spread between that rate and the retail rate is 2 percent.31 If a consumer wanted to 

transfer $200 to Mexico, the total price would be $10 plus the foreign exchange cost: $4.00, or 2 

percent times $200. In other words, the total price would be $14. 

1. Total price and the impact of foreign exchange cost

Remittance transfer pricing can be complex. As mentioned above, RTPs may vary the exchange rate

spreads and fees they charge based on a range of factors, including the specific sending and receiving 

locations, the size of the transfer, the speed of transfer, the method of payment, and the method of 

pickup. These pricing variations may reflect both competitive dynamics and actual differences in the 

costs that an RTP incurs to send transfers.

Based on information collected for representative transactions, the World Bank estimates that in 

early 2011, average total prices of $200 transfers from the United States to 24 countries ranged from 

3 percent to 13 percent of the net transfer amount, depending on the destination country. For $500 

transfers, the average total price ranged from 2 percent to 9 percent of the net transfer amount.32

For these modest-sized transfers, the World Bank data show that foreign exchange costs tend to 

represent only a fraction of the total price. As shown in more detail in Appendix A, for $200 or $500 

transfers to nearly all of the surveyed destinations, the average foreign exchange cost equaled 

between 0.5 percent and 2 percent of the transfer amount. To all but two countries, this average 

foreign exchange cost was less than half the average total price. For a consumer who sends $300 

abroad every month, foreign exchange costs of this magnitude would amount to a total annual cost 

of between $18 (0.5 percent spread) and $72 (2 percent spread).

 

30 Though interbank rates are not available to all buyers of currency, or for smaller transactions (even on a 

“wholesale” basis), they are often used as a reference for other exchange rates.

31 The calculation of the exchange rate spread in this example is (12.00 – 11.76)/12.00.

32 See generally The World Bank Group, Remittance Prices Worldwide (online at remittanceprices.worldbank.org) 

(accessed June 27, 2011) (first quarter 2011 data). Figures are based on World Bank data and CFPB analysis.
14 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

However, foreign exchange costs may be more important for larger transactions. An RTP’s fixed 

fees often represent a smaller percentage of the transfer amount for larger transfers. But foreign 

exchange costs – as a percentage of the transfer amount – tend to stay more constant over different 

transaction sizes.33 Furthermore, as described below, foreign exchange costs can be – and have 

historically been – larger.

2. Remittance transfer price trends and drivers

Over the last decade, the prices for transfers from the United States to some popular destination 

countries have been declining. One researcher estimates that the average price of $200 transfers 

from the United States to various Latin American countries halved between 2001 and 2008, though 

it has since increased to 2007 levels.34 A similar trend has been observed in foreign exchange 

spreads. The data suggest that the exchange rate spreads for transfers from the United States to 

Latin America and the Caribbean dropped from the range of 2 percent to 3.5 percent in 2001 to the 

range of 0.5 percent to 1 percent in 2004.35 Though their impact is not known, a number of drivers 

may have been responsible for these declines.

Some industry observers have attributed the price declines to an increase in the number of providers 

competing in the market; one study shows that the average price of transfers from the United States 

to certain countries in Latin America is inversely correlated with the number of transfer providers 

serving the particular country.36

Pricing practices may also have been affected by disclosure requirements, a number of which were 

introduced over the last decade. Prior to 2000, only a few states required money transmitters to 

provide receipts stating their fees and/or exchange rates.37 During the 2000s, several more states 

introduced similar requirements.

38 Also, in the early 2000s, several class action lawsuits against large 

 

33 The World Bank, Global Economic Prospects: Economic Implications of Remittances and Migration, at 137 (2006) 

(online at wwwwds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2005/11/14/000112742_20051114174928/Rendered

/PDF/343200GEP02006.pdf) (hereinafter “Global Economic Prospects”).

34 Manuel Orozco, Elisabeth Burgess, and Landen Romei, Inter-American Dialogue, A Scorecard in the Market for 

Funds Transfers: Trends in Competition in Latin America and the Caribbean, at 13 (June 18, 2010) (online at 

www.thedialogue.org/PublicationFiles/Scorecard%20Report%206.18.2010_FINAL.pdf). 

35 U.S. Government Accountability Office, International Remittances: Information on Products, Costs, and Consumer 

Disclosures, at 31-32 (Nov. 2005) (GAO-06-204) (online at www.gao.gov/new.items/d06204.pdf).

36 Manuel Orozco, Inter-American Dialogue, International Flow of Remittances: Cost, Competition and Financial

Access in Latin America and the Caribbean –Toward an Industry Scorecard, at 4 (May 12, 2006) (online at 

www.iadb.org/news/docs/internationalflows.pdf).

37 See, e.g., 1989 Cal. Legis. Serv. 1196 (similar provision now codified at Cal. Fin. Code § 1843(a)); 1994 Ill. Legis. Serv. 

P.A. 88-643 (codified at 205 Ill. Comp. Stat. 657/65(d)); N.Y. Comp. Codes R. & Regs. tit. 3, § 406.3(f) (available on 

Westlaw, current through December 31, 2002) (including receipt requirement as of last prior amendment in1989).

38 See, e.g., 2007 Alaska Sess. Laws 55 § 1 (2007) (codified at Alaska Stat. § 06.55.830); 2006 Haw. Sess. 153 § 1 (2006) 

(codified at Haw. Rev. Stat. § 489D-20); 2005 N.C. Sess. Laws 104 § 1 (2005) (codified at N.C. Gen. Stat. § 53–208.22A); 

2003 Tex. Sess. Law Serv. 1001 § 7 (West 2003) (codified at Tex. Fin. Code § 278.051); 2003 Wash. Sess. Laws 287 

(2003) (codified at Wash Rev. Code § 19.230.330); Ga. Comp. R. & Regs. 80-3-1-.01(7) (2003).
15 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

money transmitters resulted in settlement agreements requiring, among other things, that certain 

companies make exchange rate estimates available by phone and disclose that exchange rate spreads 

may be a source of revenue.

39

Similarly, the publication of comparative price information might have helped stimulate price-based 

competition that, in turn, could have led to price reductions. In 1998, the Mexican government 

began publishing company-by-company prices for transfers from the United States to Mexico; the 

government’s website now tracks the prices charged by certain companies for transfers from nine 

cities in the United States.40 In 2008, the World Bank’s remittance price database was launched.41

The World Bank also recently joined with the Inter-American Development Bank and a regional 

association of central banks to track and publish prices of remittance transfers from the United 

States to Central America.42

RTPs may also have reduced their prices in reaction to declines in their costs of doing business. The 

World Bank attributed recent price declines in certain popular remittance markets, in part, to the 

industry’s growing use of Internet technology to exchange messages and settle funds.43 In coming 

years, emerging remittance transfer products could lead to further price declines, by reducing the 

need for – and costs associated with – retail agents. For money transmitters that rely on cash-to-cash 

transactions, commissions paid to sending and disbursing agents represent a substantial portion of 

operating costs.44 Additional costs are associated with recruiting, monitoring, and managing agent 

relationships. Internet- and phone-based transfer products have the potential to reduce or eliminate 

the need for sending and/or disbursing agent costs. It is possible that any related cost savings will be 

passed on to consumers. However, it is not yet clear whether market trends will bear this out, and 

these new products may incur operating expenses that cash-to-cash products do not. Furthermore, it 

is not yet clear whether and how fast consumers will adopt emerging remittance transfer products.

As discussed above, access to information technology and payment instruments other than cash may 

pose a challenge for some remittance senders and/or their designated recipients.

 

39 See In re Western Union Money Transfer Litigation, No. CV-01-0335 (CPS), 2004 WL 3709932, at *2 (E.D.N.Y. Oct. 

19, 2004); In re Mexico Money Transfer Litigation (Western Union and Valuta), 164 F.Supp.2d 1002, 1009, 1017-18 

(N.D. Ill. 2000), aff’d, 267 F.3d 743 (7th Cir. 2001). 

40 See Procuraduría Federal del Consumidor Dirección General de Estudios Sobre Consumo, Programa: ¿Quién es 

Quién en el Envío del Dinero de Estados Unidos a México? Origen y Evolución, at 3-4 (Nov. 2008) (online at 

www.profeco.gob.mx/envio/evolucion.pdf); Procuraduría Federal del Consumidor (Profeco), ¿Quién es Quién en el 

Envío del Dinero? (July 12, 2011) (online at www.profeco.gob.mx/envio/envio.asp) (hereinafter “Profeco”).

41 World Bank Global Remittances Working Group, Remittance Price Comparison Databases: Minimum Requirements 

and Overall Policy Strategy; Guidance, and Special-Purpose Note, at 2-3 (online at 

remittanceprices.worldbank.org/~/media/FPDKM/Remittances/Documents/StandardsNationalDatabases.pdf) 

(accessed June 27, 2010).

42 See Envía, Centro America, About Us (online at www.enviacentroamerica.org/english/httpdocs/aboutus.cfm) 

(accessed June 20, 2011).

43 Global Economic Prospects, supra note 33, at 137-138.

44 In a survey of money transmitters other than the two largest global companies, companies reported, on average, 

that for a $300 transfers, they paid $5.91 in commission to the sending agent and $3.23 in commission to the 

disbursing agent. Commissions were frequently mentioned by firms as their largest expense. Andreassen, supra note 

8, at 53-54.
16 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

B. Current disclosure practices and legal requirements

In the current market, a number of RTPs disclose to consumers the exchange rates they use and the 

fees they charge. In some cases, disclosures may be simply a matter of business practice.45 In other 

cases, states require money transmitters to make certain fee and/or exchange rate disclosures.46 For 

some account-based electronic fund transfers, the Electronic Fund Transfer Act (EFTA) has also 

required certain disclosures of fees and charges.47

The Dodd-Frank Act expands on existing law and creates new federal standards regarding the 

disclosure of exchange rates in remittance transfers. Through the addition of a new Section 919 to 

the EFTA, the Dodd-Frank Act requires RTPs to provide remittance senders with disclosures at the 

time that they request remittance transfers, and at the time of payment. Those disclosures are to 

include the exchange rate used, as well as all fees charged, and the amount of currency to be received 

by the recipient (stated in the currency in which it is received).48 Under the Dodd-Frank Act’s

remittance transfer provisions, regulations may also be prescribed to require RTPs to post and 

update notices that show the amount of currency that would be received by designated recipients for 

“model” transfers of one or more amounts.49

In two circumstances, the Dodd-Frank Act’s amendments to the EFTA allow an RTP to provide, at 

the time of transfer, a “reasonably accurate estimate” of the amount of currency to be received (as 

opposed to disclosing a firm figure). First, under an exception that expires five years from the 

Dodd-Frank Act’s enactment date (unless extended), the amendments permit insured depository 

institutions to provide estimates for account-based transfers in instances when the RTPs are “unable 

to know, for reasons beyond [their] control, the amount of currency that will be made available to 

the designated recipient.”50 Second, under a permanent provision, the amendments authorize 

exception rules that would permit all RTPs to estimate the amount to be received, when it is 

determined that the destination country does not legally allow, or the method by which transactions 

are made in that country does not allow, RTPs to know the amount of currency that will be 

received.51

The Dodd-Frank Act’s disclosure requirements are generally more extensive than those required by 

either the class action settlements or the pre-existing state statutes and regulations. Many of those 

state requirements are focused on post-transaction receipts and the fees charged, not pre-transaction 

disclosures or the amount received. Furthermore, the Dodd-Frank Act expands EFTA’s disclosure 

requirements, and broadens its scope to include many transactions that were previously excluded, 

 

45 See generally Andreassen, supra note 3, at 28.

46 See note 39.

47 See 12 C.F.R §§ 205.3(b), 205.3(c)(3), 205.7, 205.8, 205.9. EFTA is codified at 15 U.S.C. § 1693 et seq.

48 Dodd Frank Act § 1073(a); 15 U.S.C. § 1693o-1(a)(2)(A), (B). 

49 Dodd Frank Act § 1073(a); 15 U.S.C. § 1693o-1(a)(6)(A).

50 Dodd Frank Act § 1073(a); 15 U.S.C. § 1693o-1(a)(4)(A).

51 Dodd Frank Act § 1073(a); 15 U.S.C. § 1693o-1(c).
17 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

such as cash-based transfers and consumer wire transfers that meet the statutory definition of

remittance transfer.52

Until July 21, 2011, the Federal Reserve Board had authority to implement the Dodd-Frank Act’s 

amendments to EFTA regarding remittance transfers.53 On May 23, 2011, the Federal Reserve 

Board proposed rules to implement the new disclosure requirements, but the proposed rules would

not require the posting and updating of model disclosure notices.54

On July 21, 2011, the date of this report, the rule-writing authority of the Federal Reserve Board for 

these provisions transferred to the CFPB, which is now responsible for issuance of the final EFTA 

remittance transfer rules.55 The deadline for comments on the Federal Reserve Board’s proposed 

rules is July 22, 2011.56

C. Key characteristics of exchange rates 

To be most useful to consumers, transparency measures and disclosures regarding exchange rates 

will help a consumer understand not only the applicable rates but also their impact. An accurate 

measure of an exchange rate’s impact requires attention to two unique characteristics of exchange 

rates and remittance prices.

1. Exchange rates alone provide incomplete information

Exchange rates alone do not determine how much money a remittance transfer recipient receives, or 

the total price paid for a transfer. Each of those figures results from the combined effect of the 

exchange rate and any fees charged. Understanding this combined effect can require several steps of 

arithmetic.

There are at least two methods for measuring the combined effect of exchange rates and fees. The 

Dodd-Frank Act’s remittance disclosure requirements focus on one method: calculating the total 

amount of currency received by a remittance recipient. Subject to two exceptions, it requires that 

disclosures state the amount that the designated recipient will receive, in the currency in which the 

funds will be received. A similar framework applies under the two exceptions to the disclosure 

requirements: When exact figures cannot be known at the time of transaction, the statute requires 

RTPs to estimate the amount to be received.

 

52 See generally Board Proposed Rules, supra note 14, at 29,907.

53 See generally Dodd-Frank Act §§ 1011, 1061, 1062, 1084, 1100H; Bureau of Consumer Financial Protection, 

Designated Transfer Date, 75 Fed. Reg. 57,252 (Sept. 20, 2010); 15 U.S.C. § 1693b(a).

54 See generally Board Proposed Rules, supra note 14.

55 Dodd-Frank Act §§ 1011, 1061, 1062, 1084, 1100H; Bureau of Consumer Financial Protection, Designated Transfer 

Date, 75 Fed. Reg. 57,252 (Sept. 20, 2010).

56 Board Proposed Rules, at 29,902.
18 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Under this method, to calculate the amount received, one could start with the amount of funds 

submitted by a consumer, subtracting any fees charged in U.S. dollars, multiplying the remainder by 

the exchange rate, and subtracting any fees charged in local currency.

But the World Bank’s remittance price database relies on an alternative measure of the combined 

effect: the total price for transferring a set amount of money, net of fees. To understand the total 

price paid, one could calculate the foreign exchange cost, and then sum that cost with all the fees 

charged (expressed in the same currency).

57

Under either method, when RTPs charge both fees and foreign exchange costs, the exchange rate 

alone cannot inform the consumer as to which RTP offers the best value. 

Table 1 below relies on the Dodd-Frank Act’s methodology for describing the combined effect of 

exchange rates and fees. It describes three hypothetical examples in which a consumer submits 

funds to an RTP. For the sake of comparison, in each example the total amount of funds (including 

both the amount transferred and the fee) paid to the RTP is the same: $200. In each case, a fee is 

subtracted from the $200, and the remainder is transferred to Mexico, where it is received in 

Mexican pesos. In this example, RTP A offers the lowest fee. RTP B offers the best exchange rate 

(and the lowest exchange rate spread). But, due to the joint effect of exchange rates and fees, RTP C 

offers the consumer the highest amount of Mexican pesos received for a total payment of $200 to 

the RTP.

 

57 See generally The World Bank Group, Remittance Prices Worldwide: Making Markets More Transparent (online at 

remittanceprices.worldbank.org/Country-Corridors) (accessed June 27, 2011) (calculations apparent in detailed data 

tables).
19 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Table 1: Hypothetical comparison of three RTPs’ pricing of a transfer to Mexico

RTP A RTP B RTP C

Transfer amount US$194 US$191 US$192 

Transfer fee US$6 US$9 US$8 

Total funds submitted US$200 US$200 US$200

Interbank exchange 

rate

12.00 12.00 12.00

Exchange rate spread 

(% difference 

between interbank 

rate and exchange 

rate applied)

2.1% 0.4% 0.8%

Exchange rate applied to 

transaction (Mexican 

pesos/1 U.S. dollar)

11.75 11.95 11.90

Pesos received 2,279.50 MXN 2,282.45 MXN 2,284.80 MXN

2. Because of how exchange rates are set, direct comparisons are 

difficult

Many wholesale exchange rates are set largely through currency markets in which rates can fluctuate 

frequently throughout the day, similarly to the prices of heavily traded stocks or bonds.58 To adapt to 

market changes, some RTPs may allow the exchange rates that they apply to transfers to fluctuate 

with the market on a real-time basis; in other cases, RTPs may update their exchange rates several 

times a day or once a day. As a result, consumers who collect comparative fee and exchange rate 

information during the course of several hours or one day may be able to determine, reasonably 

well, which RTP is providing the best deal at a particular moment. But for consumers who cannot 

collect comparative information from a variety of RTPs at generally similar times, direct price 

 

58 Some foreign exchange rates are set by monetary authorities.
20 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

comparisons are more challenging. Consider a consumer seeking price quotations from two RTPs 

on different days. By the time the consumer reaches the second RTP to collect a price quote, the 

first RTP’s prices may have changed, due to fluctuations in the exchange rate.59 The consumer may 

have difficulty determining which RTP provides the best deal at either time.

Consumers seeking to compare RTPs’ offerings may face additional challenges due to the 

complexity of RTPs’ pricing models. As discussed above, RTPs may vary the prices they charge 

based on a number of criteria. To compare two RTPs accurately, a consumer may need to collect 

information related to identical transactions.

D. How consumers understand financial information

The effectiveness of any disclosures and other transparency measures depends on how consumers 

understand and use available information. Research on consumers’ use of other types of financial 

information shows the following:

1. Design is important

Consumers’ understanding of financial disclosures can depend on their design, such as the use of 

headings and white space, delineation between primary and secondary information, and logical 

grouping of concepts and figures.60 But there is no specific formula for designing a form to 

maximize consumer understanding. For example, researchers found that a tabular format was 

effective in communicating mortgage terms but was less effective than simple sentences in 

communicating about overdraft fees.61

2. A significant number of consumers have limited math skills

Almost 25 percent of adults in the United States have only a “below basic” level of quantitative 

literacy: in other words, they can perform “simple quantitative operations (primarily addition) when 

the mathematical information is very concrete and familiar.”62 Consumers with this level of skill may 

not understand disclosures that require them to perform more complicated arithmetic in order to 

understand the relevant information. 

 

59 See generally, General Principles, supra note 13, at 12-13.

60 ICF Macro, Summary of Findings: Design and Testing of Truth in Lending Disclosures for Closed-end Mortgages, at 

23-24 (July 16, 2009) (online at 

www.federalreserve.gov/boarddocs/meetings/2009/20090723/Full%20Macro%20CE%20Report.pdf) (prepared for the 

Board of Governors of the Federal Reserve System); see also James M. Lacko and Janis K. Pappalardo, Improving 

Consumer Mortgage Disclosures: An Empirical Assessment of Current and Prototype Disclosure Forms, at 59-60 

(June 2007) (online at www.ftc.gov/os/2007/06/P025505MortgageDisclosureReport.pdf).

61 Philip Keitel, Consumer Testing Informs Policy: Overdraft Regulation as a Case Study, at 9-10 (June 2010) (online at 

www.philadelphiafed.org/payment-cards-center/publications/discussion-papers/2010/D-2010-June-Overdrafts.pdf) 

(Federal Reserve Bank of Philadelphia Discussion Paper).

62 U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics: 2010, at 576 

(Apr. 2011) (online at nces.ed.gov/pubs2011/2011015.pdf) (Table 393, “Literacy skills of adults, by type of literacy, 

proficiency levels, and selected characteristics: 1992 and 2003”).
21 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

3. Disclosures may not be sufficient

Consumers do not always base their decisions on all of the financial information that is available to 

them. Researchers have found that consumers may rely on shortcuts, rather than evaluating all the 

information provided to them; only trust information provided from certain sources; choose to not 

shop around for prices, even when a large amount of money is at stake; or underestimate the extent 

to which the small costs associated with one transaction may add up over time.63

Yet, while some consumers may misunderstand well-designed exchange rate disclosures,

64 these 

consumers may nevertheless benefit from disclosures or other transparency measures. For example, 

consumers who do understand disclosures may inform other consumers about exchange rates and 

their impact. Or, if a significant proportion of consumers understand exchange rate disclosures and 

are sensitive to them, RTPs may find it profitable to offer more favorable exchange rates to attract 

those customers. The lower foreign exchange costs that result may benefit all consumers, not just 

the ones making use of the disclosures.65

E. Recommendations regarding transparency and disclosures of 

exchange rates

In coming months and years, consumers likely will have new ways to learn about exchange rates 

used in remittance transfers. The Dodd-Frank Act’s amendments to EFTA and the implementing 

regulations will likely change how and when some RTPs communicate with consumers about 

exchange rates. Internet remittance price databases may expand in scope and usage. And as RTPs 

 

63 For a recent review of the literature on the use of shortcuts by consumers, see Gregory Elliehausen, Implications of 

Behavioral Research for the Use and Regulation of Consumer Credit Products (Mar. 31, 2010) (Finance and Economics 

Discussion Series, Federal Reserve Board) (online at 

www.federalreserve.gov/pubs/feds/2010/201025/201025pap.pdf); see also Edna R. Sawady and Jennifer Tescher, 

Financial Decision Making Processes of Low-Income Individuals (Feb. 2008) (Joint Center for Housing Studies) (online 

at www.jchs.harvard.edu/publications/finance/understanding_consumer_credit/papers/ucc08-2_sawady_tescher.pdf); 

Susan E. Woodward and Robert E. Hall, Diagnosing Consumer Confusion and Sub-Optimal Shopping Effort: Theory 

and Mortgage-Market Evidence (May 2010) (NBER working paper) (online at 

federation.ens.fr/ydepot/semin/texte0910/HAL2010DIA.pdf). For testing consumers’ reactions to disclosure of 

financial information, see Suzanne B. Shu, Consumer Behavior in Relation to Truth in Lending Disclosures (Working 

Paper) (May 2010) (online at cfdmc.colorado.edu/2010/Submissions/Session%202/session2_Shu_yes%20-%2006-02-

2010%201033.pdf); Marianne Bertrand and Adair Morse, Information Disclosure, Cognitive Biases and Payday 

Borrowing (Oct. 2009) (online at faculty.chicagobooth.edu/marianne.bertrand/research/PayField091008.pdf).

64 Recent studies of financial literacy show that survey respondents have difficulty answering basic questions about 

simple financial products. See FINRA, Financial Capability in the United States: Initial Report of Research Findings 

From the 2009 National Survey (Dec. 1, 2009) (online at 

www.finrafoundation.org/web/groups/foundation/@foundation/documents/foundation/p120536.pdf); Annamaria 

Lusardi, Financial Literacy: An Essential Tool for Informed Consumer Choice? (June 2008) (online at 

www.dartmouth.edu/~alusardi/Papers/Lusardi_Informed_Consumer.pdf). Many consumers who view improved 

mortgage disclosures still do not correctly answer important questions about loan terms. See James M. Lacko and 

Janis K. Pappalardo, The Failure and Promise of Mandated Consumer Mortgage Disclosures: Evidence from 

Qualitative Interviews and a Controlled Experiment with Mortgage Borrowers, American Economic Review Papers 

and Proceedings 100, at 519 (May 2010).

65 See generally Howard Beales et al., Information Remedies for Consumer Protection, 71 Am. Econ. Rev., at 410 (May 

1981).
22 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

introduce new methods for sending money, they may develop complementary new methods for 

communicating with consumers about exchange rates and other elements of remittance prices.

Existing transparency measures, the Dodd-Frank Act, and any new disclosures or other transparency 

measures may benefit consumers if they enable consumers to make more informed decisions about 

remittance transfers, if they reduce any consumer confusion about the cost or value of remittance 

transfers, or if they enable the remittance transfer market to operate more competitively. But the 

extent, pace, and impact of the changes to come cannot be known. The impact of the Dodd-Frank 

Act’s new disclosure requirements will depend, for example, on the details of the final implementing 

rules, and RTPs’, agents’, and consumers’ reactions to the new requirements.

The CFPB therefore recommends that policymakers and other stakeholders learn from the 

implementation of the new Dodd-Frank Act requirements, existing state disclosure requirements,

and other transparency measures in the United States. Policymakers and other stakeholders can also 

learn from the transparency measures used in other countries. These measures include Internet

remittance price databases that exist for transfers sent to Mexico and Central America, and for 

transfers sent from France, Germany, Italy, the Netherlands, Norway, Australia, and New Zealand.66

The World Bank has suggested standards for such databases, and is tracking prices for transfers 

among a number of other countries.67The implementation of Europe’s 2007 Payment Services 

Directive may also be instructive. Pursuant to that directive, European Union countries have 

adopted or will adopt laws requiring exchange rate disclosures for certain international money 

transfers.68 Other actions to implement international statements on transparency may provide 

additional lessons. “Transparency and consumer protection” is the first of five “General Principles 

for International Remittance Services” developed by an international task force and published by the 

Committee on Payment and Settlement Systems and the World Bank in 2007.69 In 2009, the Group 

of Eight industrialized nations (G8) set an objective for reducing remittance transfer prices, and 

identified “enhanced information” and “transparency” as key mechanisms for achieving that goal.

70

 

66 Global Remittances Working Group, Remittance Price Comparison Databases: Minimum Requirements and Overall 

Policy Strategy, Guidance and Special-Purpose Note, at 2-3 (online at 

remittanceprices.worldbank.org/~/media/FPDKM/Remittances/Documents/StandardsNationalDatabases.pdf) 

(accessed June 27, 2010); notes 40, 42, supra.

67 Id. at 6-12.

68 Parliament and Council Directive 2007/64, arts. 37, 38, 39, 42, 47 (EC).

69 See General Principles, supra note 13, at 21-22. In contrast to the Dodd-Frank Act, the General Principles define 

remittance transfers as “cross-border person-to-person payments of relatively low value” and state that “[i]n practice, 

the transfers are typically recurrent payments by migrant workers.” Id. at 6. Both participants at a G8 meeting and the 

Group of Twenty industrialized and emerging nations have endorsed implementation of these principles. G8 2007, 

The 7 Recommendations of the G8 Outreach Meeting on “Remittances” 28-30 November 2007, Berlin (2007) (online 

at siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1215617363964/7recommendations.pdf); G20 

Seoul Summit 2010, Multi-Year Action Plan on Development (Annex II), at 7 (online at 

www.g20.org/Documents2010/11/seoulsusmmit_annexes.pdf); see generally G20 Seoul Summit 2010, The G20 Seoul 

Summit Leaders’ Declaration November 11-12, 2010, at 49 (2010) (online at 

www.g20.org/Documents2010/11/seoulsummit_declaration.pdf).

70 G8 Summit 2009, G8 Leaders Declaration: Responsible Leadership for A Sustainable Future, at ¶ 134 (2009) (online 

at www.g8italia2009.it/static/G8_Allegato/G8_Declaration_08_07_09_final%2c0.pdf). Like the General Principles, the 
23 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

The CFPB also recommends that any new transparency measures be considered together with other 

mechanisms for increasing the competitiveness of the remittance transfer market, or promoting 

other consumer protection goals.

Finally, the CFPB recommends the following principles to maximize consumers’ ability to receive 

and use exchange rate information. This report does not provide detailed recommendations on 

policies to implement these principles because of the pending rulemaking to implement the DoddFrank Act’s new remittance disclosure requirements. Comments received on the proposed rules, as 

well as the impact of the final rules, will yield further insights on how to promote transparency 

regarding exchange rates.

1) Disclosures to consumers about remittance transfers should be designed, tested, and used to maximize 

consumer comprehension. As discussed above, consumers’ understanding of financial information 

can depend on the design of disclosure forms and consumers’ financial literacy, among other 

factors.

The EFTA, as amended by the Dodd-Frank Act, includes several provisions that reflect this 

principle. It requires that remittance transfer disclosures be made in the languages principally used 

by the RTP or its agents to advertise, solicit, or market at the office in question; the statute also 

mandates that information be disclosed “clearly and conspicuously.”71 Further, the Federal Reserve 

Board has proposed model forms and format standards, and has tested potential model disclosure 

forms with consumers.72

In evaluating existing disclosures and other transparency measures, or considering new ones, 

policymakers and stakeholders should similarly focus on how consumers understand and use any 

information provided.

Education and outreach campaigns could further enhance consumers’ use and comprehension of 

disclosures and other exchange rate information. The Dodd-Frank Act requires the CFPB and other 

federal regulators to assist in the execution of a national financial literacy and education strategy as it 

relates to remittance transfers.

73 Additional education and outreach efforts could be provided by a 

range of entities, including foreign governments – some of which already seek to educate emigrants 

who send money to their native countries.74

2) Exchange rate information should be communicated in a manner that facilitates consumers’ comparisons of 

remittance transfer offerings. Because exchange rates help determine how much a remittance 

 

G8 Declaration’s use of the word “remittances” appears to focus on person-to-person transfers, often from migrants 

to their native countries, regardless of whether those transfers are conducted electronically.

71 Dodd-Frank Act § 1073(a); 15 U.S.C. § 1693o-1(a)(3), (b).

72 Board Proposed Rules, supra note 14, at 29,905, 29,909-10, 29,915-16, 29,943-53.

73 Dodd Frank Act § 1073(c)(2); see generally 20 U.S.C. §§ 9703(f), (h).

74 See, e.g., Profeco, supra note 40 (Mexican government website educating Mexican migrants about sending money 

from the United States to Mexico); General Principles, supra note 13, at 32 (discussing pre-departure orientation 

program conducted for Filipino emigrants that addresses, among other things, topics related to remittance transfers).
24 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

recipient receives, and the price a sender pays, effective transparency measures may enable 

consumers to compare various providers and their offerings.

The Dodd-Frank Act’s remittance disclosure requirements have the potential to facilitate such 

comparison. Consumers may be able to compare providers based on the standard set of information

that the Dodd-Frank Act requires for disclosures. If there is evidence that consumers can 

understand and use additional exchange rate-related information – such as comparative information 

about exchange rates, exchange rate spreads, or total price – policymakers and other stakeholders 

should consider further measures to facilitate consumers’ access to such information.

Consumers may be informed not only by RTPs’ disclosures, but also by third-party comparative 

pricing information. Existing Internet price databases, which provide company-by-company price 

data collected on or near a single date, represent one such model for providing comparative 

information. But because RTPs may vary their prices according to the sending and receiving 

locations, such databases might not practically be able to include all possible pricing variations.

As mentioned above, education campaigns could further help consumers access and understand 

comparative information relating to exchange rates.

To maximize consumer benefit, any such measures should reflect the variety of ways in which 

consumers may compare RTPs. Some consumers may search for the RTP that will provide them the 

best product for a single transaction; others may search for the RTP that will best suit their needs 

for repeated transactions. Furthermore, some consumers may be able to compare prices on a single 

day, while others may tend to collect price quotations over multiple days, making direct comparisons

more difficult. In each circumstance, different types of exchange rate information may assist 

consumers in identifying the most appropriate providers.

The need for or potential impact of transparency measures beyond those required by the DoddFrank Act is not clear at this time, however. Research regarding the effects of the Dodd-Frank Act’s 

remittance disclosure requirements and existing transparency measures could be instructive.

3) Disclosures about exchange rates should be adaptable to the growing variety of channels that consumers use to 

initiate remittance transfers. As discussed above, consumers are being offered an increasing 

number of means of initiating remittance transfers. To maximize transparency for all 

consumers, useful exchange rate information should be available to all consumers for all 

remittance transfers, regardless of the channel by which they are initiated.

The need for adaptability to multiple channels has informed the Federal Reserve Board’s proposed 

rules implementing the Dodd-Frank Act remittance requirements. For example, the Federal Reserve 

Board expressly sought comment on how its proposed disclosure format standards could be applied 

to transactions conducted via text message or mobile phone applications.

75 Additionally, the Federal 

Reserve Board’s proposed comment notes that required disclosures can be printed on a variety of 

 

75 Board Proposed Rules, supra note 14, at 29,915, 2916.
25 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

paper sizes, including standard register receipt paper,76 which is limited in size, and which may also 

have font and graphics limitations.

Any additional transparency measures should be implementable for remittance transfers initiated 

through both existing and emerging channels.

4) When feasible, information about exchange rates should be coupled with an indication or estimate of the 

combined effects of fees and the exchange rate. An exchange rate alone usually does not determine 

the amount that a recipient receives or the price of a remittance transfer.

As described above, there is more than one method for calculating the combined effect of fees and 

the exchange rate. The Dodd-Frank Act focuses on informing consumers of the amount received by 

recipients. By contrast, the World Bank’s remittance price database focuses on the total price of a 

remittance transfer.

In evaluating the need for other disclosures to consumers about exchange rates, policymakers and 

other stakeholders can learn from the implementation of the Dodd-Frank Act disclosure 

requirements, as well as other transparency measures, and evaluate the extent to which different 

combined effect messages – including any estimates – may improve consumers’ ability to learn about 

exchange rates and their effects, and thereby make informed decisions.

III. The potential for remittance histories to enhance credit scores

This Part discusses “(1) the manner in which the remittance history of a consumer could be used to 

enhance the credit score of the consumer” and “(2) the current legal and business model barriers 

and impediments that impede the use of the remittance history of the consumer to enhance the 

credit score of the consumer.”77

A credit score is a numerical summary of the relative credit risk that a consumer poses, based on the 

information in the consumer’s credit file. Credit risk can mean different things in different contexts, 

but typically means the relative likelihood that a consumer will default on a debt. A higher score 

suggests that a consumer poses a lower credit risk, and vice versa. A lack of a credit score or a low 

credit score can limit a consumer’s access to credit or other products, or raise the price a consumer 

might pay for those products.78

The issues addressed in this Part may well reflect a hypothesis that the credit files of many 

remittance senders contain insufficient information to permit the calculation of credit scores or that 

the credit scores generated from those files may overestimate the credit risk that these consumers 

pose. There is limited direct information available regarding the extent to which this hypothesis is 

 

76 Id. at 29,910, 29,955.

77 Dodd-Frank Act § 1073(e).

78 A fuller discussion of credit scores is included in the CFPB’s July 19, 2011 report to Congress titled “The Impact of 

Differences Between Consumer- and Creditor-Purchased Credit Scores.”
26 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

true, however. Furthermore, it is not known whether and how adding remittance histories to 

remittance senders’ credit files will affect the credit scores of those consumers.

This Part begins by providing background on credit reporting and credit scores. It then discusses 

why remittance senders might benefit from use of their remittance histories in credit scores, 

evaluates the potential predictiveness of remittance data, and describes an ongoing research project 

of the CFPB to assess the potential for using remittance history as a predictive factor in credit 

scores. Finally, this Part describes potential business and legal barriers to the introduction of 

remittance data into credit reports and credit scores.

In the context of this discussion, the phrase used in the Dodd-Frank Act – “to enhance the credit 

score of the consumer” – could mean either to increase that score, or to make it a more accurate 

measure of credit risk. These two meanings are not necessarily in conflict. For consumers for whom 

credit scores overestimate credit risk, or for whom there is no credit score, making the score more 

accurate would mean increasing the score, or creating one for the first time. In either case, the 

consumer would benefit. In other cases, however, making a score more accurate may mean 

decreasing it. To provide clarity, the analysis below will refer, as appropriate, to the improved 

accuracy of credit scores, and to increases or improvements in the credit score of a consumer.

A. Background on credit reporting and credit scores

Credit scores are primarily distributed by companies called consumer reporting agencies (CRAs) that 

gather, organize, standardize and disseminate information that relates to consumers’ credit risk.

There are three nationwide CRAs; this report will use the term “CRAs” to refer to these three 

firms.79 For purposes of this report, “credit scores” will refer to scores derived primarily from a 

consumer’s credit files at these CRAs.

Based on the information they gather, the CRAs compile files regarding individual consumers.

Mostly, these files contain information about credit accounts (also referred to as “trade lines”), items 

sent for collection, and public records, such as judgments and bankruptcies.80 CRAs also track and 

record requests that lenders or others make for a consumer’s file, called “inquiries.”81

From these files, CRAs generate consumer-specific reports commonly known as “credit reports.”

The CRAs generate credit scores by applying mathematical algorithms, or “scoring models,” to the 

information in a consumer’s credit report. Some users of credit scores, such as large credit card 

issuers, obtain consumers’ credit data from the CRAs and generate and use proprietary credit scores 

using their own scoring models.

 

79 Federal Trade Commission, Free Annual File Disclosures, 75 Fed. Reg. 9726, at n. 2 (Mar. 3, 2010).

80 For a detailed summary of the data compiled by CRAs, see Robert B. Avery et al., An Overview of Consumer Data 

and Credit Reporting, Federal Reserve Bulletin, Vol. 89, at 47-73 (Feb. 2003) (online at 

www.federalreserve.gov/pubs/bulletin/2003/0203lead.pdf). 

81 Records of requests from the consumer for copies of his or her report, as well as requests by lenders in connection 

with “firm offers” of credit, are typically not reflected in credit reports or scores that are provided to creditors and 

other users.
27 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

1. Key participants in the credit reporting and scoring market

To help explain how remittance history might be used in the process of generating a credit score, it 

is useful to review the roles typically played by various entities in the process of creating credit files, 

formulating credit scores, distributing credit reports and scores, and using these reports and scores 

to make credit and other decisions.

1. Data furnishers are the sources of information contained in credit files. They are most 

commonly creditors that have extended credit to consumers; creditors report regularly to 

CRAs on their credit arrangements with consumers, and consumers’ behavior under those 

arrangements, including whether consumers are meeting their repayment obligations. Other 

data furnishers to CRAs include collection agencies and specialized companies that provide

public record information, such as information about judgments, bankruptcies, tax liens, and 

criminal convictions.

2. CRAs receive data from furnishers and add them to consumer files for resale in the form of 

credit reports to users (and file disclosures to consumers).

3. Score developers are specialized entities that use statistical modeling to develop credit scoring 

algorithms that use the information contained in credit files to predict a consumer’s credit 

risk relative to other consumers. In general, a score developer earns a licensing fee whenever 

a score using its scoring algorithm is created and distributed by a CRA. The CRAs also offer 

credit scores generated from models developed by their own internal score development 

operations.

4. Users of credit reports and scores, such as lenders, purchase credit reports and scores from 

one or more CRAs. They purchase these reports and scores to identify prospective 

borrowers, to make lending decisions, and to manage existing consumer credit accounts and 

other relationships.

82

It is useful to consider the incentives and interdependencies of the participants in this process. For 

example, lenders have incentives to furnish consumer data, because (1) they rely on credit reports 

containing information on as many of a consumer’s obligations as possible (so they can assess risk as 

accurately as possible); and (2) reporting gives consumers another incentive to pay their debts. The 

CRAs, in turn, allow score developers access to their data and distribute scores to users because 

credit scores make the CRAs’ credit information more valuable to users. These interdependencies 

and the challenges that they pose are discussed further in Section E below.

 

82 There are also other users of credit reports besides lenders, and some of these users employ scoring models.

Employers and landlords use credit report information when making hiring and rental decisions, and automobile and 

homeowners insurance companies use credit-based insurance scores in underwriting and rating, except where 

prohibited by state law. While these are important uses of credit reports and scores that have serious implications for 

consumers, they are beyond the scope of this report.
28 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

2. Information used in credit scores

Whether developed by independent score developers, modelers at CRAs, or lenders, credit scoring 

models factor in various types of information from consumers’ credit files. The primary factors 

scoring models use to compute scores often include:

83

• Payment history, including late payments and collection items;

• Balances, available credit, and utilization (the percentage of existing credit lines already 

borrowed);

• Negative public records such as (bankruptcies, judgments, and liens, etc.);

• Length of the credit history and the mix of credit types; and

• Evidence of taking on new debt, such as new accounts or inquiries.

In this framework, consumers who have only recently begun using mainstream credit – loans or 

other credit accounts reported to a CRA for inclusion in the consumer’s credit file – will tend to 

have lower scores than consumers who have been using such credit longer, provided that the 

consumers with the longer credit histories have paid their debts as agreed and have not incurred 

excessive debt. Similarly, if a consumer does not use mainstream credit products, the consumer may 

have little or no credit history. This phenomenon is referred to as having a “thin file.” Because 

scoring models require certain minimum amounts of data, consumers with thin files may not be 

“scorable,” meaning that credit scoring models may not generate any credit score at all for these 

consumers.

An estimated 35 million to 54 million adult consumers in the United States have no credit history or 

credit files that are too thin to be scored.84 The impact of this state of affairs can be significant.

Absent a credit score, many lenders are unwilling to extend credit to a consumer, or will do so only 

at a relatively high cost and on restricted terms, such as a lower credit limit. In other words, thin-file 

consumers’ ability to obtain credit is more uncertain, and the cost of credit they are able to obtain is 

likely to be higher than that of consumers with more extensive credit histories.

 

83 Board of Governors of the Federal Reserve System, Report to Congress on Credit Scoring and Its Effects on the 

Affordability of Credit, at 24-26 (Aug. 2007) (online at 

www.federalreserve.gov/boarddocs/rptcongress/creditscore/creditscore.pdf) (hereinafter “Federal Reserve 2007 

FACTA Report”).

84 Bruce Mohl, Verizon’s ‘Free Gift’ to Customers: Giving Payment Data to Credit Bureaus, Boston Globe, at D1 (May 

21, 2006). The higher figure is cited from the Fair Isaac Corporation in Julia S. Cheney, Federal Reserve Bank of 

Philadelphia, Alternative Data and Its Use in Credit Scoring Thin- and No-File Consumers, at 6 (Feb. 2008) (Payment 

Card Center Discussion Paper) (online at www.philadelphiafed.org/payment-cards-center/publications/discussionpapers/2008/D2008FebAlternativeData.pdf).
29 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

3. Alternative or supplemental information in credit reporting and 

scoring

To address the issue of thin credit files, in the late 1990s, an assortment of businesses, policymakers, 

and consumer advocates began to explore what could be done to obtain more reliable indicators of 

the credit risk of thin-file consumers to enable lenders more easily to discern such consumers’ credit 

risk.

A number of these efforts have focused on two types of payment histories that could be analogized 

to loan repayments: rental housing payments, and telephone and utility bill payments.85 Like the 

trade line data on which CRAs have traditionally relied, rent, telephone, and utility payments are 

made regularly and pursuant to contractual obligations. Moreover, in each instance, as with a loan, 

the consumer’s payment is not guaranteed. The service provider directly takes on credit risk by 

allowing the consumer to pay in arrears, or by assuming a similar risk of loss in entering the contract, 

even though payment may be received prior to the provision of a product or service.

A 2006 study found that individuals’ histories of paying bills for utilities and mobile phone and other 

telephone services could serve as a useful means of predicting their likelihood of making loan 

repayments.86 In other words, these bill payments had “predictive power.” The study found that 

adding bill payment information to the data used to generate credit scores greatly reduced the 

percentage of consumers whose credit reports could not be scored. The new data made a majority of 

thin-file consumers scorable; in other words, addition of the data made these consumers’ credit risks

assessable by lenders who relied on credit scores.87 As a result, the researchers urged that such 

recurring bill payments be used to supplement the credit files that CRAs generally use in calculating 

credit scores.88

Rental history data also may prove useful in predicting credit risk. In 2010, Experian, one of the 

three nationwide CRAs, acquired an early stage company called RentBureau after assessing the 

credit-predictiveness of the acquired company’s database of rental payment history collected from 

large rental property managers.89 Experian asserts that of the 87 percent of customers in its 

RentBureau database who lacked credit scores based on their existing credit files, a majority became 

scorable when rental history data was added to their existing credit files and used in a scoring model 

 

85 See generally Political and Economic Research Council and the Brookings Institution Urban Markets Initiative, Give 

Credit Where Credit Is Due: Increasing Access to Affordable Mainstream Credit Using Alternative Data (Dec. 2006) 

(online at perc.net/files/downloads/alt_data.pdf) (hereinafter “Give Credit Where Credit Is Due”).

86 Id. at 19.

87 Id. at 19-21. Just adding utility data reduced the share of credit reports that could not be scored, with the particular 

scoring model used in the study, from 12 percent to 2 percent. Similarly, just adding telephone bill payment data 

reduced the share that could not be scored from 17 percent to 1 percent. Different samples were used to evaluate 

the impact of utility and telephone payment data, which is why 12 percent of reports were initially unscorable in the 

study of utility data, and 17 percent were initially unscorable in the study of telephone data. 

88 See, e.g., Michael Turner et al., New to Credit from Alternative Data, Policy and Economic Research Council (Mar. 

2009) (online at perc.net/files/New_to_Credit_from_Alternative_Data_0.pdf).

89 Analysis provided to CFPB by Experian, June 14, 2011 (hereinafter “Experian analysis”). 
30 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

that incorporated these data.90 Moreover, adding rental data increased the credit scores of a 

significant number of renters who already could receive credit scores based on the information in 

their existing credit files.91 Experian has not disclosed how many renters would have seen the scores 

relating to them decline.

More research could better establish whether factoring these new sources of predictive data into 

credit scores has the potential to enable lenders to assess more accurately the credit risks posed by 

some consumers who otherwise have little or no credit history. The incorporation of new data may 

allow these consumers to access credit, or credit terms, that they may not have been able to obtain 

previously. However, new sources of data used to improve the predictiveness of credit scores – like 

traditional credit report data – may not help all consumers: They may cause some consumers’ credit 

scores to decline.92

Analysis planned by CFPB may provide further information as to whether another new source of 

data – remittance histories – could similarly help predict loan repayments, be used in credit scores, 

and thus increase some remittance senders’ access to credit. This planned research is discussed 

below in Section D.

At the same time, it is important to note that market adoption of credit reports and credit scores 

that incorporate rental and bill payment data has been slow. Widespread reporting of consumers’ 

telephone and bill payment histories to any of the CRAs may face state and federal utility and 

telecommunications regulations that limit how these data can be used.93 In the case of rental data, 

only a minority of housing renters are likely to find their rental payment histories reflected in their 

credit reports and scores in the near term. This is because a majority of rental units exist in 

properties of 10 units or less, and it is difficult for a CRA to collect information reliably from such 

small businesses.94

Market participants that seek to change credit reports and credit scores to include remittance 

histories may face challenges similar to those encountered in the use of rental and bill payment 

histories. The principal business and legal barriers are discussed in Sections E and F, below. 

B. Remittance transfer senders’ potential to benefit from 

alternative credit data

Little information is available about remittance transfer senders overall. But as noted above, 

 

90 Id.

91 Jennifer Tescher, A Big Score for Alternative Data, American Banker (Feb. 24, 2011) (hereinafter “A Big Score for 

Alternative Data”).

92 See, e.g., John Howat, National Consumer Law Center, Full Utility Credit Reporting: Risks to Low Income 

Consumers (Dec. 2009) (online at www.nclc.org/images/pdf/credit_reports/credit_reports_full_utility_dec2009.pdf).

93 Information Policy Institute, Giving Underserved Consumers Better Access to the Credit System: The Promise of 

Non-Traditional Data, at 20 (July 2005) (online at perc.net/files/downloads/nontrad.pdf).

94 Joint Center for Housing Studies of Harvard University, America’s Rental Housing: Homes For A Diverse Nation, at 

30 (2006) (online at www.jchs.harvard.edu/publications/rental/rh06_americas_rental_housing.pdf).
31 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

information about personal transfers shows that foreign-born individuals comprise the majority of 

U.S. consumers who send them.

Compared to other groups, these foreign-born consumers may benefit disproportionally from the 

inclusion of supplemental data in credit reports and credit scores. The available evidence, though 

limited, suggests that these consumers or some subset of these consumers are more likely than 

others to have thin files; may receive credit scores that overstate their credit risk; and have fewer 

opportunities than other consumers to obtain credit, due to their limited engagement with 

depository institutions that might offer credit opportunities.

For example, one study based on the credit files of a sample of 3,000 individuals sending money to 

Latin America through a money transmitter found that only 22 percent had credit scores.95 Similarly, 

a recent report by the Federal Reserve Board on credit reports and credit scoring found that certain 

recent immigrants had credit histories that were similar to younger native-born consumers.96 The 

recent immigrants were less likely to become seriously delinquent on their debts than their credit 

scores would indicate, suggesting that the lack of a long or rich credit history was leading to a lower 

credit score than one that would accurately reflect these consumers’ actual credit risk.

There are two reasons why foreign-born consumers may be more likely than others to have no or 

low credit scores.

First, on average, foreign-born consumers are less integrated into the mainstream credit system than 

other U.S. consumers. A survey of natives of Latin America who send personal transfers from the 

United States found, for example, that only 25 percent had credit cards, as compared to the 72 

percent of consumers nationwide who have credit cards.97 Similar disparities exist in the use of bank 

accounts – which do not directly affect credit scores, but indicate access to other mainstream credit 

products that may do so. Fourteen percent of households headed by a foreign-born individual do 

not have bank accounts, as compared to 6.7 percent for other households. For households headed 

by foreign-born individuals who are not U.S. citizens, the rate is much higher: 21.9 percent.98

Second, foreign-born consumers may have limited credit histories in the United States due simply to 

the length of time they have had to borrow money in the United States, and the fact that any 

 

95 Appleseed, Leveraging Remittance Relationships: For Consumer Empowerment and Asset Building Opportunities, 

at 13 (presentation given in December, 2007, at the Council on Foundations annual conference, held in Seattle, WA)

(online at www.cof.org/files/Documents/Conferences/AC2007/Bottoms%20Up%20Philanthropy.pdf) (2007).

96 Federal Reserve 2007 FACTA Report, supra note 83, at S-2, S-4. The Federal Reserve Board researchers did not 

have direct information on the date on which the foreign-born consumers had entered the United States. “Recent 

immigrants” were defined as individuals who were not born in the United States, were over 30 years old, and had 

applied for a Social Security card for the first time within the last ten years. This approach was used to identify 

consumers who had likely entered the United States as adults within the last 10 years.

97 Match, supra note 17, at 21; Kevin Foster, et al., The 2009 Survey of Consumer Payment Choice, at 1 (Apr. 2010) 

(Federal Reserve Bank of Boston Public Policy Discussion Paper No. 11-1) (online at 

www.bostonfed.org/economic/ppdp/2011/ppdp1101.pdf).

98 Federal Deposit Insurance Corporation, National Survey of Unbanked and Underbanked Households, at 48 (Dec. 

2009) (online at www.fdic.gov/householdsurvey/full_report.pdf). The head of household, in this context, is the 

individual who owns or rents the home. Id. at 10 n.5.
32 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

borrowing history from outside the United States will not appear in credit reports.

Given the potential of foreign-born consumers to benefit from supplemental data, some have 

advocated that remittance data, like utility and rental payment data, be used in generating credit 

scores. If predictive of credit risk, remittance data might benefit consumers whose existing credit 

histories render them “unscorable,” and, in some cases, might raise the scores of remittance senders 

whose relative lack of credit history causes their scores to overstate the credit risk they present.

C. The potential for remittance histories to enhance credit scores 

A pattern of remittance transfers may indicate that a consumer is able and willing to make regular 

payments to meet a financial obligation, such as a loan, but the existence of any such connection is 

unclear, and could vary depending on the consumer and the nature of the remittance transfers being 

sent.

Certain remittance histories could be analogous to the credit trade line data on which the CRAs have 

traditionally relied. Some remittance transfers may be used to pay creditors. Other transfers, similar 

to bill or rental payments in the United States, could require regular transactions, involve single 

payees, and satisfy contractual obligations for services that have already been provided. But without 

such payments being reported by the non-U.S. payees, it is not possible to know from payment 

histories alone whether remittance senders are meeting payment obligations.

Furthermore, many, if not most, remittance transfers are personal transfers, which likely are not 

payments for mortgages, utilities, rent, or other credit-like obligations. Such transfers are likely 

voluntary and are not made pursuant to a contract or other legal obligation; and they may be sent 

with varying frequencies and for varying reasons. Unlike paying a utility or a landlord, sending 

transfers for personal reasons on a regular basis does not necessarily indicate that any formal 

obligation has been met. Similarly, an interruption or reduction in the frequency of such remittance 

transfers does not necessarily demonstrate that a sender has failed to meet an obligation. 99

Given the differences between many remittance transfers and recurring payments for debts or other 

contractual obligations, it is difficult to know, without empirical analysis, what patterns or attributes 

of remittance history might be predictive of a sender’s credit risk.

D. Planned research regarding the potential for remittance 

histories to enhance credit scores

To better address the question of whether remittance histories can enhance credit scores, the CFPB 

will carry out empirical research regarding the potential value of such data in predicting a consumer’s 

loan repayments. The research will be based on information that the CFPB has obtained from a 

 

99 An interruption in a consumer’s pattern of personal remittance transfers, for example, may not represent a late or 

missed payment; it may simply reflect the fact that the sender chose to use funds for another valid purpose, sent 

double the amount of funds the following month, or visited his or her home country and delivered funds in person. A 

change in remittance transfer pattern may also reflect changes in a recipient’s needs – for example, a family 

member’s reaching adulthood and no longer requiring support.
33 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

large RTP and a large CRA. The information includes remittance transfer data for a large number of 

consumers (the “remittance senders” or “remitter sample”), and credit history information and 

credit scores for both the remittance senders and a large random sample drawn from the general 

pool of credit files maintained by the CRA (the “control sample”). Appendix B provides a more 

detailed description of the database being assembled for the research project.

With these data, the CFPB will conduct several analyses to determine whether remittance histories 

can help predict consumers’ credit repayment behavior. The CFPB will also analyze whether the 

inclusion of remittance data may make it feasible to create credit scores for consumers for whom 

scores cannot be generated by standard credit scoring models using more traditional data.

A finding that consumers who send remittance transfers are more likely to repay their debts than 

other consumers with similar credit histories could suggest that adding remittance data to credit 

scores would tend to raise credit scores relating to remittance senders. If, conversely, remittance 

senders are more likely to become delinquent on their debts than other consumers with similar 

credit files, then reflecting remittance data would tend to lower those scores. The data may also 

reveal that different patterns of remittance sending are associated with better or worse performance 

on debts. Regardless of the overall conclusion, the result of reflecting remittance transfer data may 

well differ, consumer-to-consumer, in both direction and magnitude.100

E. Business model barriers to the use of remittance histories to 

enhance credit scores

If remittance histories proved predictive of credit risk, their incorporation into consumer credit 

reports and credit scores would depend on adoption of new practices by participants in the business 

ecosystem of credit reporting and scoring. Some participants would need to make changes in their 

business practices, make significant investments, or take on new risks. These changes, investments, 

or risks could serve as business model barriers or impediments to the development and use of 

remittance-based scores. To overcome these barriers and impediments, each type of participant

would likely need sufficient incentives in the form of new revenues and cost reductions, or new 

advantages vis-à-vis competitors.

The investments and operational changes required would most directly affect three key groups of 

participants that comprise the business ecosystem for credit information: (1) data furnishers; (2) 

CRAs and score developers; and (3) users.

For the purpose of the following discussion, it is assumed that remittance histories do have the 

potential to improve the predictiveness of credit scores, and that in so doing, such data may result in 

increases in some scores and decreases in others, depending on what the histories show and how 

they are used.

 

100 The impact of remittance-based scores could also vary among groups of customers, and would – in practice –

depend on how remittance-based scores were developed, what they were designed to predict, and how they were 

used in credit decisions.
34 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

1. Lenders’ incentives

If remittance histories were predictive, they would allow lenders to better understand and predict the 

credit risk presented by consumers who have sent remittance transfers. As a result, two 

opportunities could encourage lenders to begin using credit scores that incorporate remittance

histories.

First, remittance-based credit scores could enable a lender to better assess the credit risks posed by 

some potential customers whom the lender would otherwise not have been able to evaluate,

101 or 

whose risk the lender would otherwise have deemed unacceptable.102 Such change could enable the 

lender to make loans to a higher proportion of remittance senders who apply for credit than it 

would otherwise have made.

Second, early use of remittance-based credit scores could enable a lender to gain an advantage over 

its competitors for a period of time. For example, if such scores enabled the lender to ascertain that 

certain consumers were more or less risky than competitors’ less-informed assessments suggested, 

the lender might be able to make more appropriate decisions as to whether to offer loans to those 

consumers. If the remittance-based scores were higher than traditional credit scores with regard to 

some consumers, the lender could offer those consumers more attractive interest rates than its 

competitors would offer to a similar class of consumers.

Both of these opportunities might enable a lender to expand its business among some consumers 

who send remittance transfers, at least in the short run, until competitors began taking advantage of 

the same data source.

Importantly, a lender assessing whether to pursue these opportunities might weigh the potential 

benefits of doing so against those that might accrue from pursuing other opportunities. In this 

regard, it might find these opportunities to be less promising when compared to other opportunities 

that might result from the use of other supplemental or alternative credit information, such as rental 

or bill payment information.

The Census Bureau survey found that only about 5 percent of households in the United States 

(approximately six million) make personal transfers in a given year.103 The total population of

remittance senders may be larger. But even if remittance histories had the potential to change credit 

scores, they would presumably do so only for some portion of the total remittance-sending 

population. Some remittance senders might remain unscorable. For other remittance senders who 

 

101 See Experian analysis, supra note 89.

102 Cf. A Big Score for Alternative Data, supra note 91. As reported by Experian, when adding rental data to the files 

of consumers who were previously unscorable, some experienced significant score increases. In a scoring system in 

which a score of 700 is entry-level prime for some lenders, addition of rental data meant that “[o]ne in three 

consumers whose score was in the lowest band, 501 to 600, moved up to at least the next level, between 601 and 

700.” Id. While this is movement within the sub-prime range, it is still upward and would probably have a positive 

effect on the respective renters’ access to credit and the prices they would pay.

103 U.S. Census Bureau Analysis, supra note 3, at 18. 
35 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

already have extensive credit files, the incorporation of remittance history might add little 

incremental predictiveness to credit scores regarding them.

By comparison, there are 37.7 million households making payments on rental housing nationwide,

104

and a substantial majority of the 117.5 million households in the United States make one or more 

monthly utility or telecommunications payments.105 Given the larger market opportunities presented 

by these alternative data streams, lenders might choose to experiment with credit reports and scores 

that have been enhanced by these other data first before evaluating or field-testing credit 

underwriting using remittance history.106

2. Changes and investments by lenders

Score developers and CRAs report that lenders do not automatically incorporate newly available 

consumer data or credit scores into their underwriting processes. Some large lenders typically test 

new data and scores against a sample of consumers from whom they are receiving credit applications 

or to whom they intend to make credit offers or solicitations. Such testing can involve substantial 

investments of time and cost. Considerations as to whether to test a new source of underwriting 

data or scoring algorithm include the size of the consumer market that any added predictive power 

could help to address, the likelihood that such data will be available on demand for use in automated 

underwriting systems and processes in the future, and the cost of purchasing the data or scores from 

the CRAs.

In deciding whether to test a new score, a lender is also likely to take into account such factors as 

how widespread use of the score is, whether the score comes from a source with which the lender 

has a prior relationship or experience, and the extent to which the score may require associated 

changes in underwriting practices.

Even if a new source of data and associated credit scores proved incrementally predictive for certain 

consumers, some lenders might look to secondary market participants to endorse loans that had 

been underwritten using the new scores (by agreeing to purchase such loans). Obtaining the 

necessary endorsement could require sharing test results with securitizers, ratings agencies, or loan 

investors, or persuading those market participants to undertake their own analyses or tests of such 

loans’ repayment and default characteristics.

 

104 U.S. Census Bureau, Statistical Abstract of the United States: 2011, at 622 (2011) (online at 

www.census.gov/compendia/statab/2011/tables/11s0992.pdf) (Table 992. Renter-Occupied Housing Units – Gross 

Rent by State: 2008).

105 U.S. Census Bureau, Current Population Survey, 2010 Annual Social and Economic Supplement: Households, by 

Type, Age of Members, Region of Residence, and Age of Householder: 2010 (2010) (Table H2, available at 

www.census.gov/population/www/socdemo/hh-fam/cps2010.html).

106 Give Credit Where Credit is Due, supra note 85. The authors assessed the potential for various data sets as 

possible predictive variables in credit scoring, including utility, telecommunications, rental, and remittance data.

Remittance data were ranked lower than rental, utility, or telecommunications payment data on “coverage,” i.e., the 

percent of the credit-eligible population about whom information was available.
36 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Similarly, lenders that depend heavily on secondary markets for funding might rely on the investors 

that purchase their loans to dictate whether certain underwriting criteria – including the use of 

certain alternative data streams and scores – are acceptable. For example, the government-sponsored 

entities (GSEs), Fannie Mae and Freddie Mac, publish underwriting criteria for mortgage loans they 

will buy, including which types of credit reports and scores may be used. These criteria are 

incorporated into the automated underwriting and loan origination software the GSEs license to 

lenders for use in originating mortgage loans.

An investor, in turn, might enjoy a new or expanded market opportunity as a result of using credit 

reports and scores incorporating remittance histories. For example, during the 2000s, both the GSEs 

evaluated – or planned loan pilots to test – various alternative underwriting techniques and criteria, 

including use of credit reports and scores that contained supplemental data.

3. Incentives for CRAs and score developers

CRAs earn sales revenues and score developers earn licensing fees when users, principally lenders, 

use their reports and scores in credit underwriting and other risk assessments. As a result, these 

companies’ willingness to add consumers’ remittance histories to credit reports or to incorporate 

such data into their scoring models would likely hinge on users’ interest in purchasing their products.

More specifically, interviews with score developers and two of the nationwide CRAs indicate that 

their willingness to invest in and offer remittance-based products would be contingent on the extent 

to which remittance histories proved to be incrementally predictive of the credit risk of a significant 

group of consumers. To be an attractive prospect, the new data likely would need to add 

predictiveness about the credit risk presented by such consumers that is beyond that provided by 

other kinds of payment history data that might already be available and applicable to a larger 

proportion of consumers.

If, in fact, remittance histories proved useful in predicting credit risk for a significant number of 

consumers, the incentive for any one of the CRAs to incorporate this information into its credit files 

could be powerful. This is due to the fact that each of the CRA’s data are largely duplicative of the 

others’ data. Most lenders furnish loan performance information to all three companies, and the 

companies obtain their public records information from similar or identical sources. If, by 

incorporating a new type of data on an exclusive basis, a CRA could offer users even a modestly 

superior ability to assess a prospective borrower’s credit risk, the CRA could enjoy a substantial 

competitive advantage. Such an advantage could enable the company to charge higher prices for its 

services and/or capture a larger share of the market for supplying credit reports.

4. Changes and investments by CRAs and score developers

Significant investments on the part of CRAs and score developers would be required to evaluate a 

new source of data for its predictiveness, contract with sources to furnish it, add such data to 

consumer files, develop scores that incorporate the new data, and implement marketing and sales 

programs to convince lenders to use these new scores.

Four unique characteristics of remittance data, as collected and maintained by RTPs, might pose 

particularly high initial costs and start-up challenges. First, remittance histories exist in RTP 

transaction databases that are not automatically organized by consumer. Second, remittance histories
37 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

may not be readily related – if at all – to a specific payment obligation of the sender. Third, RTPs do 

not always need to capture accurate or comprehensive information regarding remittance senders’ 

identities. Fourth, the record of a single consumer’s remittance history may be split among several 

RTPs, not captured simply by one.

Data in CRA databases are normally furnished by creditors and others in the form of discrete 

consumer records. The CRAs require furnishers to provide these records in a standardized format, 

and they categorize data according to consumer names, addresses, phone numbers, dates of birth, 

and Social Security numbers or individual taxpayer identification numbers.107 Remittance transfers

processed by RTPs may be recorded and organized in RTP databases on a significantly different 

basis – for example, by geography, date, and the particular retail location at which a transaction was 

initiated. Thus, a CRA or RTP might need to develop computer programs to convert the transaction 

data into individual consumer records that are usable by the CRA.

The fact that consumers’ remittance histories do not necessarily reflect ongoing payment obligations

has been discussed above. This difference could also pose challenges to incorporating such histories 

into established scoring algorithms. Most scoring algorithms are calculated using credit file attributes 

that, in turn, are based on individual trade lines that characterize the status of a consumer’s 

relationship with a creditor. Trade line information in a credit file typically includes the amount of 

the credit line, the amount of the obligation outstanding, the period of time the credit relationship 

has been active, whether or not payments have been made on time, and whether or not the 

consumer is current with her or his obligation. The attributes of a consumer’s remittance history that 

may be most relevant to predicting credit risk are likely to be different from those of credit trade 

lines; discovering those attributes and reflecting them in a scoring model could require a large 

amount of research and analysis on the part of score developers.

Another problematic aspect of remittance histories is that information about senders’ identities is 

usually more limited and may be less accurate than what is ordinarily contained in a CRA’s credit 

file. For example, money transmitters are likely to record senders’ names and contact information, as 

a matter of business practice and legal compliance. Federal law provides that money transmitters 

must generally obtain senders’ names and addresses for transactions of $3,000 or more; for many 

such transactions, money transmitters are also required to record the senders’ Social Security 

numbers or other identification numbers, and verify the identities of senders who initiate 

transactions in-person.

108 For the large number of transactions below the $3,000 threshold, money 

 

107 See generally Consumer Data Industry Association, Metro 2® Format for Credit Reporting, (online at 

www.cdiaonline.org/Metro2/content.cfm?ItemNumber=853&pnItemNumber=506) (accessed June 27, 2011).

108 31 C.F.R. §§ 1010.410(e)(1) (regarding all “transmittals of funds” of $3,000 or more), (e)(2) (additional requirements 

for transactions made by consumers who are not established customers); see also 31 C.F.R. §§ 1010.312, 1022.312 

(regarding certain physical transfers of currency). It is assumed that all money transmitters that are RTPs under EFTA 

Section 919 are also considered nonbank financial institutions and money services businesses under the relevant 

federal law, and vice versa, though there may be some exceptions. Similarly, it is assumed that all remittance transfers 

initiated by money transmitters are “transmittals of funds” as defined in 31 C.F.R. § 1010.100(ddd), though there may 

be some exceptions. Similar federal standards apply to some money transfers initiated by depository institutions. See 

31 C.F.R. §1020.410(a). But for account- based transactions initiated at a depository institution, as a practical matter, 

identifying information is likely to be recorded with every transaction, and in most cases, should have been verified 
38 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

transmitters are also likely to record senders’ names and contact information for use in case of a 

transaction error, or to help identify transactions that violate federal restrictions on transfers from 

certain designated individuals.109 But for these smaller transfers, money transmitters might never 

verify senders’ names and contact information, or collect other personal identifiers that CRAs use,

such as dates of birth, Social Security numbers, or individual taxpayer identification numbers.

Furthermore, if provided on a handwritten form, any customer data received by a money transmitter 

may be entered inaccurately by a clerk. The likelihood of inconsistencies or inaccuracies is increased 

by the fact that some remittance senders wish to maintain some anonymity, so they may not 

consistently represent who they are.

The elevated possibility of inaccuracy in information about senders would likely present challenges 

for CRAs, who are directed by the Fair Credit Reporting Act (FCRA) to have “reasonable 

procedures” in place to assure maximum possible accuracy of the reports they provide.110 With the 

addition of remittance histories to credit files, the costs of screening furnishers and incoming data to 

prevent inaccuracies in credit reports may be high. Furthermore, consumer records that contain only 

names and addresses may be difficult to match with a CRA’s credit files. This could make using 

remittance histories a challenge; a CRA might not be able to match some remittance histories with 

any credit files at all, and would need to develop reasonable procedures to ensure that remittance 

histories were not placed in the credit file of the wrong consumer.

CRAs and score developers might also face challenges in collecting complete and accurate 

remittance histories for individual consumers. As described in Part I, remittance senders may form a 

relationship with a single RTP and make repeated and multiple transactions with that RTP. But 

other regular remittance senders may routinely or sporadically switch providers. To gather accurate 

remittance histories for these consumers would require collecting and combining data from multiple 

RTPs – all of whom could have different systems of recording and storing transaction data, as well 

as different practices relating to the furnishing of data to CRAs.

5. RTPs as data furnishers: Incentives and barriers

In the prevailing business ecosystem of credit reporting, most lenders that use credit reports and 

scores are also data furnishers. Each has a shared interest with other lenders that use credit reports 

to furnish customer information so that the CRAs’ credit files and credit reports capture as complete 

a picture as possible of borrowers’ credit histories.

Because remittance senders presenting cash or good funds do not generally pose any credit or other

risks to RTPs, the RTPs do not need to assess these risks and are generally not users of credit 

 

after the opening of the account, under the relevant financial institution’s customer identification program. See 

generally 31 C.F.R. § 1020.220.

109 See generally U.S. Department of the Treasury, Office of Foreign Assets Control, Resource Center: Specially 

Designated Nationals List (SDN) (June 29, 2011) (online at www.treasury.gov/resource-center/sanctions/SDNList/Pages/default.aspx).

110 15 U.S.C. § 1681e(b). 
39 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

reports. Thus, RTPs would not have the same incentives that lenders have to report their customers’ 

transaction histories to one or more CRAs.

There are two primary challenges that an RTP might face if it were to report its consumers’ 

remittance histories to a CRA.

First, as an information furnisher to a CRA, the RTP would be required to establish reasonable 

policies and procedures designed to ensure that the furnished data (including information about 

consumers’ identities) were accurate.111 The FCRA prohibits furnishers from reporting information 

to a CRA if they “know[] or have reasonable cause to believe that the information is inaccurate.”112

Compliance with these requirements could involve significant costs.

Second, by reporting remittance histories to a CRA, whose credit files can be accessed by any 

company that is an authorized user of consumer reports, an RTP might risk alienating remittance 

senders who wish to maintain some level of anonymity. An RTP that was viewed as widely sharing 

information could be put at a disadvantage in competing for the business of certain categories of 

remittance senders.113

To help address these challenges, an RTP might consider creating a program in which a remittance 

sender would have the option to report his or her remittance history to a CRA in order to “build 

credit.” This opt-in approach to reporting might enable the company to build loyalty among certain 

remittance senders without alienating other senders who wished to retain their anonymity. Such a 

program would have the further advantage of helping to ensure that reported information about 

customers who chose to have their transactions reported was accurate – the RTP could require 

consumers enrolling in the credit reporting program to provide positive identification and other 

relevant information. Some RTPs already have loyalty card programs that require one-time 

enrollments and are used to track members’ transaction histories.

An RTP might find also stronger incentives to participate in the development of remittance-based 

credit evaluations if it offered credit or credit-like products to its remittance customers directly. In 

this scenario, the RTP would only be acting on remittance histories it had created internally; no CRA 

would need to acquire or cleanse the data. As a provider of both loans and remittance services, the 

RTP might reap incremental revenue and profit. Further, there would be less risk of alienating 

customers who valued their anonymity. On the other hand, for money transmitters that rely on 

agent networks, the indirect relationship between the RTP and the remittance senders might 

complicate loan marketing, origination, and servicing. Depository institutions that serve as RTPs 

could more easily offer loans, but might face other challenges. Only a limited number of depository 

 

111 15 U.S.C. § 1681s-2(e).

112 15 U.S.C. § 1681s-2(a)(1)(A).

113 It is also possible that RTPs that report their customers’ remittance histories to a CRA would be providing an 

advantage to competitors who may be able to obtain credit reports on these customers, and use the reports to make 

marketing solicitations to such customers. The FCRA, however, establishes important limitations on the permissible 

uses of, and the circumstances under which persons may obtain, credit reports. See, e.g., 15 U.S.C. § 1681b.
40 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

institutions have chosen to offer remittance transfer services that compete for the large segment of 

remittance senders who use cash-based transfers.

In any case, under any scenario, the most critical business question for market participants will be 

the impact of remittance histories. The incentives for market participants to invest in remittancebased credit scores will be strongest if remittance data can be shown to significantly improve the 

accuracy of credit scores for a large number of consumers.

F. Legal barriers to the use of remittance histories to enhance 

credit scores

To develop and use remittance-based credit scores, market participants might also need to adjust 

their processes and systems to comply with federal laws and regulations that would be implicated.

The costs of such compliance could deter adoption of the necessary new practices.114

1. Privacy and notification requirements

The Gramm-Leach-Bliley Act (GLBA) and the implementing regulations (Privacy Regulations) place 

various privacy protection obligations on an entity that qualifies as a “financial institution” under 

that law.115 The requirements of the GLBA and the Privacy Regulations do not prohibit financial 

institutions from disclosing remittance data to CRAs, but an RTP that is a “financial institution”

must provide notices to consumers, under certain circumstances, in order to comply with these

requirements.

116

The requirements of the GLBA and the Privacy Regulations distinguish between a consumer who is 

a “customer” of a financial institution, that is, a consumer who has a customer relationship with the 

institution, and other consumers, such as those who only engage in isolated transactions with the 

institution.117

Under the GLBA and the Privacy Regulations, an RTP that is a financial institution is required, 

among other things, to provide an initial privacy notice and annual privacy notices to each 

“customer.”118 This requirement applies regardless of the RTP’s disclosure practices. However, if the 

 

114 State law, which is not discussed here, may impose additional requirements and deterrents.

115 15 U.S.C. §§ 6802-6809. These provisions have been implemented through regulations of the Federal Trade 

Commission (FTC) and several other federal agencies. See 15 U.S.C. § 6804(a)(1) (authorizing the FTC and other 

agencies to issue Privacy Regulations); see also 16 C.F.R. Pt. 313 (FTC Privacy Regulation).

116 The GLBA does not list the types of “financial institutions” subject to its coverage. The GLBA broadly defines the 

term “financial institution” to include, subject to limited exceptions, “any institution the business of which is 

engaging in financial activities as described in” section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 

§ 1843(k)). See 15 U.S.C. § 6809(3). These activities include “transferring . . . money.” 12 U.S.C. § 1843(k)(4)(A); see also

16 C.F.R. § 313.3(k)(2)(vi) (FTC Privacy Regulation listing as an example of a financial institution a “business that 

regularly wires money to and from consumers“). 

117 16 C.F.R. § § 313.3(h)-(i).

118 15 U.S.C. § 6803.
41 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

RTP decided to start disclosing nonpublic personal information (such as remittance data) to a 

nonaffiliated third party (such as a CRA), it might need to change its privacy notices to reflect the 

new type of disclosure.

119 In addition, it is possible that, in order to furnish remittance histories to 

CRAs, an RTP might need to change its business processes in a manner that would result in having 

additional “customers” entitled to privacy notices.

With regard to all consumers, the GLBA also generally prohibits a covered RTP from disclosing 

nonpublic personal information to any nonaffiliated third party unless the institution first provides a 

privacy notice to the consumer covering such disclosure and a reasonable opportunity to prevent or 

opt out of the disclosure, and the consumer does not elect to opt out.120 However, the GLBA 

contains a number of exceptions to the notice and opt-out requirements, including for disclosures of 

nonpublic personal information to a CRA in accordance with the FCRA.121 Additionally, the GLBA 

notice and opt-out requirements do not restrict the disclosure of nonpublic personal information 

from a CRA’s credit report.122 Thus, in general, the GLBA and the Privacy Regulations would not 

limit a lender’s ability to receive remittance histories directly from a CRA – or a CRA’s ability to 

provide such data – when the information is included or reflected in a credit report or credit score.123

The CRA exceptions to the GLBA’s opt-out requirements do not excuse a financial institution from 

providing initial and annual privacy notices to “customers.”124 Nevertheless, the GLBA privacy 

provisions should generally not operate as a bar to the use of remittance transfer data in credit 

reports or credit scores.

2. Credit reporting requirements

The CRAs, data furnishers, and users of credit reports also must comply with relevant provisions of 

the FCRA, which addresses, among other things, the accurate and fair reporting of credit 

information.125 The FCRA does not limit what kind of entity may furnish information to a CRA.126

But, an RTP or other entity that furnished remittance histories to a CRA would have to comply with 

FCRA requirements. Any CRAs that accepted remittance data and users of credit reports or scores 

reflecting such data would also have to ensure that they were in compliance with the FCRA.

The FCRA would prohibit an RTP from furnishing remittance data to a CRA if the RTP knew or 

had reasonable cause to believe the information was inaccurate.127 More broadly, an RTP would have 

 

119 16 C.F.R. § 313.8; see also 15 U.S.C. § 6803.

120 15 U.S.C. §§ 6802(a),(b); see also 16 C.F.R. § 313.4.

121 15 U.S.C. §§ 6802(e)(6)(A).

122 15 U.S.C. §§ 6802(e)(6)(B).

123 See generally 15 U.S.C. §§ 6802-6809.

124 15 U.S.C. § 6803.

125 15 U.S.C. § 1681 et seq.

126 See, e.g., 15 U.S.C. § 1681s-2 et seq.

127 15 U.S.C. § 1681s-2(a)(1)(A).
42 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

to institute reasonable policies and procedures designed to ensure the accuracy and integrity of the 

data it furnished to a CRA.128 Furthermore, an RTP that furnished data would be required to notify 

the CRA of any disputes regarding the completeness or accuracy of furnished data, investigate 

disputes about the data submitted to a CRA, and correct and report any errors in information 

brought to its attention.129 An RTP that furnished data to a CRA would also have to comply with 

requirements of the implementing regulations to the FCRA relating to conducting a reasonable 

investigation of a direct dispute by a customer.130

Any CRAs that accepted remittance data would also have to ensure that they were in compliance 

with the FCRA in including that data in credit reports. In this regard, the FCRA requires the CRAs 

to follow reasonable procedures to ensure the maximum possible accuracy of the data in credit 

reports.131

Like the GLBA requirements, the FCRA requirements could impose regulatory costs on an RTP 

seeking to furnish remittance data to a CRA. They might also pose a compliance challenge to RTPs 

and the CRAs, if, as discussed above, the accuracy of the data maintained by RTPs that links 

transactions to specific individuals is uncertain or known to be deficient.132

3. Fair lending requirements

Any use of remittance-based credit scores would have to be in compliance with the Equal Credit 

Opportunity Act (ECOA).133 That statute prohibits discrimination against credit applicants on the 

basis of race, color, religion, national origin, sex, marital status, age, receipt of income from any 

public assistance program, or exercising in good faith a right under the Consumer Credit Protection 

Act.134 The ECOA could be implicated by remittance-based credit scores in two ways.

Using remittance histories in credit scores could increase the risk of lenders violating the ECOA by 

treating applicants differently based on their race, national origin, or one of the other prohibited 

bases.135 Although a credit score standing alone may not reveal whether a consumer is a remittance 

sender, a credit report could. Because a large number of remittance senders are foreign-born,136a 

creditor reviewing the credit file of a remittance sender could presume the consumer is of a 

particular race or national origin and use that information to discriminate illegally. Lenders using 

 

128 15 U.S.C. § 1681s-2(e).

129 See generally 15 U.S.C. § 1681s-2. 

130 16 C.F.R. § 660.4.

131 See generally 15 U.S.C. § 1681e.

132 See Part III, Section E.

133 15 U.S.C. §§ 1691–1691f. The ECOA is implemented by Regulation B. 12 C.F.R. pt. 202.

134 15 U.S.C. § 1691(a). For the Consumer Credit Protection Act, see 15 U.S.C. §§ 1601-1693r.

135 12 C.F.R. pt. 202 Supp. I § 202.4(a).

136 See note 4.
43 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

remittance-based scores might have to enhance their processes to ensure that staff understand and 

comply with the ECOA.

Lenders would also need to comply with the ECOA’s prohibition on certain practices that 

unintentionally discriminate against members of a protected class.137 Because foreign-born 

consumers account for a substantial portion of remittance senders, the use of remittance-based 

credit scores in credit decisions could disproportionately and adversely impact consumers of certain 

races and national origins. The existence or extent of any such disparate impact cannot be known 

without further analysis regarding a particular creditor’s use of remittance information and its 

impact. But if such disparate impact existed, the creditor’s use of remittance-based credit scores 

would have to be justified by a legitimate business need that cannot reasonably be achieved by a less 

discriminatory alternative.138 As a result, in developing any systems to use remittance-based credit 

scores, lenders or other credit score users might incur costs to evaluate the business need for and 

impact of such scores.

To the extent that credit scores or credit reports containing remittance histories are used in other 

contexts, such as housing or employment, similar legal issues might arise under other antidiscrimination laws, such as the Fair Housing Act (regarding housing) or Title VII of the Civil 

Rights Act of 1964 (regarding employment).139

IV. Conclusion

This report discusses how U.S. consumers who regularly send a portion of their earnings abroad 

might be better served by markets for two financial services: remittance transfers and credit. For 

these consumers, remittance transfers can be a vital link to family members and friends abroad who 

depend on their support. Affordable and accessible credit, in turn, can help remittance senders 

establish and improve their financial lives in the United States. Credit can enable the purchase of a 

vehicle to commute to a job, provide the means to study a trade, or allow a consumer to purchase a 

home or start a small business.

The remittance transfer market is changing. New channels and technologies are emerging for 

sending and receiving money, and for becoming informed about RTPs’ products and pricing. The 

disclosures required by the Dodd-Frank Act should provide consumers with additional tools for 

identifying the remittance transfer options that best meet their needs. Combined, these 

developments may foster increased transparency, which in turn could create a more competitive

market. But the impact of these developments is not yet known. The lessons learned from existing 

 

137 12 C.F.R. pt. 202 Supp. I §§ 202.6(a)-2; 202.2(p)-4.

138 12 C.F.R. pt. 202 Supp. I § 202.6(a) – 2; see also Department of Housing and Urban Development et al., Policy 

Statement on Discrimination in Lending, 59 Fed. Reg. 18,266, 18,269 (Apr. 15, 1994).

139 See generally 42 U.S.C. §§ 3604, 3605 (prohibiting discrimination in, among other things, the sale, rental, or 

financing of dwellings on the basis of race, color, national origin and other prohibited bases); 42 U.S.C. § 2000e-2(a) 

(prohibiting failing or refusing to hire or otherwise discriminating against any individual with respect to 

compensation, terms, conditions, or privileges of employment because of race, color, national origin or other 

prohibited bases).
44 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

transparency measures, the impact of the new Dodd-Frank Act requirements, and the principles 

recommended in Part II of this report can inform any future efforts to enable consumers to receive, 

understand, and use information about exchange rates and other components of remittance transfer 

prices.

In the credit market, supplementing credit files with remittance histories may give some senders new 

opportunities to enter the financial mainstream – if those histories permit the creation or improve 

the accuracy of credit scores, and in some cases, increase them. The CFPB is initiating research that 

will shed light on the nature and extent of this opportunity. The research will analyze the extent to 

which remittance histories might enable or improve predictions of credit risk, and, if so, whether 

these histories tend to increase or decrease credit scores relating to remittance senders. Even if 

remittance history aids the prediction of credit risk, its use in credit scores and credit decisions may 

present significant business obstacles, new legal questions, and regulatory burdens.

Further research on the behavior and finances of consumers who send remittance transfers may 

provide new insights into the factors most conducive to their financial success, and the best 

practices of the financial services providers with whom they do business.
45 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Appendix A: Estimated average prices for sending money transfers from the United States to select countries

$200 Transfer from the United States $500 Transfer from the United States 

Receiving 

Country 

Fee 

($) 

Foreign 

Exchange 

Cost (% of 

$200)* 

Total 

Transfer 

Price (% of 

$200) 

Total 

Transfer 

Price ($) 

Foreign 

Exchange 

Cost 

(% of Total 

Transfer 

Price)* 

Receiving 

Country 

Fee 

($) 

Foreign 

Exchange 

Cost (% of 

$500)* 

Total 

Transfer 

Price (% of 

$500) 

Total 

Transfer 

Price ($) 

Foreign 

Exchange 

Cost (% of 

Total Transfer 

Price)* 

Brazil 8.89 3.9 8.34 16.68 47 Brazil 10.83 3.9 6.06 30.32 64 

China 18.02 2.17 11.19 22.37 19 China 19.56 2.23 6.15 30.73 36 

Colombia 7.59 0.51 4.3 8.61 12 Colombia 14.32 0.51 3.38 16.88 15 

Dom. Rep. 8.01 1.96 5.96 11.93 33 Dom. Rep. 17.08 1.96 5.38 26.88 36 

Ecuador* 7.37 0 3.68 7.37 0 Ecuador* 14.59 0 2.92 14.59 0 

El Salvador* 10.43 0 5.22 10.43 0 El Salvador* 14.5 0 2.9 14.5 0 

Ghana 12.1 4.75 10.8 21.61 44 Ghana 15.94 4.75 8.79 43.97 54 

Guatemala 9.72 1.13 6 11.99 19 Guatemala 11.26 1.02 3.27 16.35 31 

Guyana 11.59 1.36 7.15 14.31 19 Guyana 26.48 1.36 5.56 27.82 24 

Haiti* 12.1 0 6.05 12.1 0 Haiti* 17.61 0 3.52 17.61 0 

Honduras 10.83 0.18 5.6 11.19 3 Honduras 15.25 0.18 3.23 16.15 6 
46 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

 

Source: The World Bank Group, Remittance Prices Worldwide: Making Markets More Transparent (online at 

remittanceprices.worldbank.org) (accessed June 27, 2011) (first quarter 2011 data); CFPB analysis. Averages are based on 

Receiving 

Country 

Fee 

($) 

Foreign 

Exchange 

Cost (% of 

$200)* 

Total 

Transfer 

Price (% of 

$200) 

Total 

Transfer 

Price ($) 

Foreign 

Exchange 

Cost 

(% of Total 

Transfer 

Price)* 

Receiving 

Country 

Fee 

($) 

Foreign 

Exchange 

Cost (% of 

$500)* 

Total 

Transfer 

Price (% of 

$500) 

Total 

Transfer 

Price ($) 

Foreign 

Exchange 

Cost (% of 

Total Transfer 

Price)* 

India 5.13 0.89 3.45 6.9 26 India 5.94 0.89 2.07 10.37 43 

Indonesia 11.44 1.46 7.17 14.35 20 Indonesia 18.03 1.46 5.06 25.31 29 

Jamaica 10.32 2.00 7.16 14.32 28 Jamaica 16.66 2.00 5.34 26.68 37 

Lebanon 24.66 0.23 12.56 25.13 2 Lebanon 26.5 0.23 5.53 27.66 4 

Mexico 11.11 1.31 6.87 13.74 19 Mexico 13.59 1.31 4.03 20.16 33 

Nicaragua* 11.4 0 5.7 11.4 0 Nicaragua* 19.6 0 3.92 19.6 0 

Nigeria 10.62 1.59 6.9 13.81 23 Nigeria 12.12 1.59 4.02 20.08 40 

Pakistan 13.23 1.27 7.88 15.77 16 Pakistan 15.95 1.27 4.46 22.31 28 

Panama* 15.25 0 7.62 15.254 0 Panama* 25 0 5 25 0 

Peru 7.71 0.12 3.97 7.94 3 Peru 14.3 0.12 2.98 14.89 4 

Philippines 10.31 1.08 6.23 12.46 17 Philippines 12.05 1.08 3.49 17.44 31 

Thailand 21.41 1.51 12.22 24.44 12 Thailand 26.2 1.51 6.76 33.78 22 

Vietnam 13.8 0.32 7.22 14.44 4 Vietnam 21.9 0.32 4.7 23.51 7 
47 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

surveys of a selection of firms sending transfers to each country. Averages focus on cash-to-cash transfers, but also 

include other types of transfers, and are not adjusted to reflect the volumes transferred by each surveyed firm. Foreign 

exchange costs reflect the spread, as compared to the interbank rate (or, in the case of transfers to Brazil, the “parallel” 

rate). Fees listed reflect fees charged at the time of sending. Additional fees may be charged at the destination.

Methodology is described in more detail at Remittance Prices Worldwide: Making Markets More Transparent (online at 

remittanceprices.worldbank.org/Methodology) (accessed June 27, 2011).

* For transfers to Ecuador, El Salvador, Haiti, Nicaragua, and Panama, all the surveyed providers pay out transfers in U.S. 

dollars, and thus there is no foreign exchange cost. For transfers to other countries, a subset of the surveyed providers 

may pay out transfers in U.S. dollars (and thus not charge foreign exchange costs). Other surveyed providers may not have 

provided exchange rate information. As a result, the average foreign exchange costs may be underestimated.
48 REPORT ON REMITTANCE TRANSFERS, JULY 20, 2011

Appendix B: Description of database to be used in planned CFPB research

The Remitter Sample and Remittance Data

The remitter sample will consist of 500,000 consumers who sent one or more transfers from the 

United States to a foreign location during 2007 or 2008, and for whom the RTP has contact 

information. The sample will be drawn from customers, rather than from transactions, so that a 

customer who sent one transfer would have the same probability of being selected as a customer 

who sent ten transfers.

Once the remittance sample has been selected, all transactions made by those customers during the 

period January 1, 2007, to January 1, 2011, will be identified. The RTP will provide the following 

data about each of those transactions to the CFPB:

• customer ID number created for this study;

• date;

• amount;

• mode of payment (e.g., cash, credit card, debit card);

• destination; and

• how funds are received:

o point of sale/cash; or

o deposited into a bank account.

The RTP will not forward to the CFPB any personally identifiable information, such as consumers’ 

names or addresses.

The Credit History and Credit Score Data

The RTP will forward to the CRA the names and addresses of the customers in the remitter sample.

The CRA will attempt to match those names and addresses to its database of credit files. For those 

customers for whom the CRA is able to locate a credit file in its database, the CRA will provide the 

following information to the CFPB, via the RTP:

• customer ID number created for this study; and

• credit history information as of January 1, 2009, and January 1, 2011:

o consumer report, including information on, for example:

! trade line information with payment history; and

! public judgment information;

o set of attributes; and

o standard credit score, such as a VantageScore or FICO score.

The CRA will also select a random sample of 200,000 consumer reports from its database, after 

consulting with Bureau staff on the sampling process (the “control sample”). The CRA will provide 

the same credit history information to the CFPB for the control sample that it provides for the 

remitter sample.

Again, neither the CRA nor the RTP will forward to the CFPB any personally identifiable 

information, such as consumers’ names, addresses, or Social Security numbers.