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37–210 PDF 2007

REMITTANCES: ACCESS, TRANSPARENCY, AND

MARKET EFFICIENCY—A PROGRESS REPORT

HEARING

BEFORE THE

SUBCOMMITTEE ON

DOMESTIC AND INTERNATIONAL

MONETARY POLICY, TRADE, AND TECHNOLOGY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MAY 17, 2007

Printed for the use of the Committee on Financial Services

Serial No. 110–32

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

ALBIO SIRES, New Jersey 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

SPENCER BACHUS, Alabama 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE, AND

TECHNOLOGY

LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York 

MAXINE WATERS, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

GWEN MOORE, Wisconsin 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

WM. LACY CLAY, Missouri 

KEITH ELLISON, Minnesota 

CHARLES A. WILSON, Ohio 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

RON PAUL, Texas 

MICHAEL N. CASTLE, Delaware 

FRANK D. LUCAS, Oklahoma 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JEB HENSARLING, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

(V)

C O N T E N T S 

Page 

Hearing held on: 

May 17, 2007 ..................................................................................................... 1

Appendix: 

May 17, 2007 ..................................................................................................... 23

WITNESSES 

THURSDAY, MAY 17, 2007

Grace, David, Vice President, Association Services, World Council of Credit 

Unions ................................................................................................................... 6

Haider, Tom, Vice President, Government Affairs, Associate General Counsel 

and Chief Compliance Officer, MoneyGram International ............................... 8

Ibarra, Beatriz, Assets Policy Analyst, National Council of La Raza ................. 4

LoVoi, Annette, Field Director, Appleseed ............................................................ 2

Orr, James C., Chairman, Microfinance International Corporation ................... 11

Thompson, Mark A., Associate General Counsel, The Western Union Company ....................................................................................................................... 10

APPENDIX 

Prepared statements: 

Paul, Hon. Ron .................................................................................................. 24

Grace, David ..................................................................................................... 25

Haider, Tom ...................................................................................................... 31

Ibarra, Beatriz .................................................................................................. 39

LoVoi, Annette .................................................................................................. 46

Orr, James C. .................................................................................................... 53

Thompson, Mark A. .......................................................................................... 63

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Gutierrez, Hon. Luis V.: 

Responses to questions submitted to Annette LoVoi ..................................... 71

Paul, Hon. Ron: 

Statement of the Center for Financial Privacy and Human Rights ............. 123

(1)

REMITTANCES: ACCESS, TRANSPARENCY, AND 

MARKET EFFICIENCY—A PROGRESS REPORT 

Thursday, May 17, 2007

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON DOMESTIC AND

INTERNATIONAL MONETARY POLICY, TRADE, AND TECHNOLOGY, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 10 a.m., in room 

2128, Rayburn House Office Building, Hon. Luis V. Gutierrez 

[chairman of the subcommittee] presiding. 

Present: Representatives Gutierrez, Maloney, Clay, Ellison; Paul, 

Bachmann, and Marchant. 

Chairman GUTIERREZ. Good morning. The Subcommittee on Domestic and International Monetary, Policy, Trade, and Technology 

of the Committee on Financial Services will come to order. 

Today’s hearing is an informational hearing on the remittances 

industry entitled, ‘‘Remittances: Access, Transparency, and Market 

Efficiency—a Progress Report.’’ In this hearing, the subcommittee 

will examine consumer access to the remittance transfer outlets, 

the costs associated with sending remittances, current levels of 

transparency regarding fees and exchange rates, and the effect of 

competition in the marketplace. 

The last hearing on transparency and disclosure aspects of remittances in this committee was 4 years ago. I titled this hearing, ‘‘A 

Progress Report,’’ because we are now in a far different, and I 

would like to say a much-improved, environment in terms of remittance transactions and fees than we were back in 2003. 

Today, the subcommittee will review the progress that has been 

made over the last few years and explore whether these improvements are due primarily to increased competition in the marketplace, pressure from Federal legislators, or a combination of the 

two. The subcommittee will also be looking at whether the voluntary improvements in the remittance industry are adequate and 

whether legislation is needed. 

Before we hear from our panel, I just want to say that I have 

reviewed the testimony, and I think the remittance industry and 

consumer groups are closer than ever before on the issue of transparency and fees. There has been movement on both sides, and I 

urge those of you at the table today to keep working together. This 

is a golden opportunity. Do not let it pass us by. Also, I encourage 

you to work together on the Bank Secrecy Act issue for the money 

services businesses. If you demonstrate to Congress that the indusVerDate 0ct 09 2002 11:42 Sep 14, 2007 Jkt 037210 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\37210.TXT HFIN PsN: TERRIE
2

try and consumers are not working at cross purposes, I think we 

can reach some resolution on this issue as well. 

We are actually pressed for time today because the Judiciary 

Committee, on which I sit, will be holding a markup starting at 

10:30, so I apologize ahead of time, but I have to briefly recess the 

hearing to go across the hall to vote. In order to get as far along 

in these proceedings as possible before 10:30, we have agreed to 

dispense with members’ opening statements on both sides and go 

straight to our witness testimony. 

I would like to thank Ranking Member Paul for agreeing to this, 

and of course, all members may submit written statements for the 

record. 

Speaking first is Ms. Annette LoVoi. Ms. LoVoi serves as field director for Appleseed, a national legal advocacy organization. Second, we have Ms. Beatriz Ibarra, who is an assets policy analyst 

with the National Council of La Raza. Next, we have David Grace, 

vice president of the World Council of Credit Unions. Following Mr. 

Grace will be Mr. Tom Haider. Mr. Haider is vice president and 

chief compliance officer for MoneyGram International, Inc. Then we 

will have Mr. Mark Thompson, associate general counsel to Western Union. The last of our panel, but not the least, is Mr. James 

C. Orr. Mr. Orr serves as the chairman of Microfinance International Corporation. 

Welcome to you all, and thank you for being here with us today. 

Ms. LoVoi, you may proceed, please. 

STATEMENT OF ANNETTE LoVOI, FIELD DIRECTOR, 

APPLESEED 

Ms. LOVOI. Good morning, Mr. Chairman. On behalf of the 

Appleseed Board of Directors and staff, let me thank you for inviting our testimony this morning. 

Appleseed is in its fourth year of a project to bring Latin American immigrants into the mainstream financial and banking system, thereby helping them to build assets and credit and reducing 

predatory pricing and high-cost schemes that affect their livelihoods. 

Appleseed first became involved in this project because immigrants were being assaulted on payday because of the large 

amounts of cash that they were carrying. Appleseed quickly realized that bank accounts can not only protect money, but can also 

protect lives. 

As we spoke directly to immigrants in our work to create a fair 

financial playing field for all, we learned that protecting their 

money and understanding costs are crucial. This led us to examine 

more closely the area of remittances, and it became clear to us that 

improving transparency was vital. 

Increasing transparency was the subject of a report Appleseed released last month, proposing a fair exchange brand similar to fair 

trade coffee. Just as consumers may shop for fair trade coffee, 

knowing that such certification signifies that the producers adhere 

to certain labor standards, so, too, with the fair exchange remittance brand; consumers will know that they are being told the deal 

they are getting. 

3

In our view, such industry standards are long overdue. As highlighted in a 2005 Appleseed study, immigrants face daunting and 

unnecessary challenges every single day when they try to perform 

what should be the simple task of sending money to relatives. The 

2005 Appleseed study found enormous fluctuations and inconsistencies in pricing, within the same company, during a 2-week period, from as little as $1.52 to as much as $13.84. We even found 

variations on the same day. A consumer could have spent as little 

as $3.88 or as much as $21.90. 

We know that we are gathered today to look at this and to come 

together around improved pricing mechanisms. We have heard you, 

and we are ready to work on this issue. 

The premise of the Appleseed fair exchange initiative is that offering clear, pretransaction disclosures for remittances will increase the market share for financial institutions, benefiting both 

consumers and the financial institutions. After all, by highlighting 

their pricing up front, financial firms would publicly signal their interest in dealing with customers in a fair and forthright manner. 

This is a solution that Appleseed believes will benefit everyone. 

Appleseed worked with the Fair Exchange Group to develop a 

disclosure template that we believe will be helpful to you in your 

work. Let me share some of the findings from our focus groups. 

All of the participants like the idea of a clear, uniform, 

pretransaction disclosure. Participants focused on the actual value 

of the funds received by the family after fees and after exchange 

rate spreads. Better disclosure will make the process of comparing 

prices less cumbersome. A group participant explained, ‘‘You have 

to go everywhere to get information now.’’ 

We also believe disclosure standards should be developed collaboratively with those of us at the table today and with others who 

have an interest in this issue, and we stand ready to work with all. 

This approach would best accommodate the variety of business 

models and regulatory frameworks in the marketplace today, while 

also serving the best interests of consumers. 

Appleseed has found that State regulation of consumer disclosure 

produces varying and inconsistent standards, and we applaud your 

interest in a Federal measure on this subject. Let me share some 

ideas for legislation. 

We support requiring the Secretary of Treasury to conduct a 

study regarding the use of alternative credit-scoring measures, including data on remittances, and we are involved in pilot work on 

this subject at present. We support requiring an assessment by the 

Comptroller General of how the private sector can match remittances to help economic development in Mexico. Consumer disclosures should be posted publicly at agent or branch locations and be 

available to consumers prior—let me emphasize ‘‘prior’’—to initiating a remittance transaction, particularly for the three top markets served. 

The Federal Reserve Board should be granted rulemaking authority to delineate posting requirements, again, in concert with all 

of the individuals at the table, with industry and consumer participants so that we can get a system that works for all, and the 

Appleseed disclosure template is available to help inform this procVerDate 0ct 09 2002 11:42 Sep 14, 2007 Jkt 037210 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\37210.TXT HFIN PsN: TERRIE
4

ess. Disclosure standards should also include provisions for error 

resolution. 

Thank you again for your time, your consideration, and your invitation. I, along with other Appleseed staff, as well as our six centers around the country and in Mexico, stand ready to assist the 

committee as you move forward toward creating a competitive market that benefits all. 

Thank you, Mr. Chairman. 

[The prepared statement of Ms. LoVoi can be found on page 46 

of the appendix.] 

Chairman GUTIERREZ. Thank you very much, and thank you for 

all of your work. 

Ms. Ibarra. 

STATEMENT OF BEATRIZ IBARRA, ASSETS POLICY ANALYST, 

NATIONAL COUNCIL OF LA RAZA 

Ms. IBARRA. Chairman Gutierrez and members of the subcommittee, my name is Beatriz Ibarra, and I am the assets policy 

analyst at the National Council of La Raza. Thank you for inviting 

us to be here today. 

I want to take this time to: one, explain why remittances are so 

important for Latinos; and, two, provide two recommendations that 

we feel will create a fair remittance market. 

Part of NCLR’s mission includes advancing policies that enable 

Latinos to maintain assets. Our goal is to move the community beyond living paycheck to paycheck. We want Latinos to rise permanently into the ranks of the American middle class. 

Latinos are contributing billions of dollars to the U.S. economy, 

yet we are still struggling to have a piece of the American dream: 

Latinos retain 9 cents for every dollar that a white family earns; 

Latinos are more likely to have no or low credit scores; and 32 percent of Latinos are unbanked—they do not have a basic checking 

or savings account. 

Given these humble financial circumstances, it is incredible that 

more than half of Latinos save between $200 and $300 a month to 

send to their families and communities abroad. Latinos sent $50 

billion to Latin America in 2005. That money was used to pay for 

household needs such as food and housing and education and 

health care. This is why, in the case of remittances, every penny 

counts. 

We must enact reforms that help families keep more of their 

hard-earned money for saving and investing here and abroad. 

Strong consumer protections are needed to shield remitters from 

bad actors. There is also an enormous opportunity here for lawmakers and industry leaders to integrate Latinos into the mainstream financial system. 

Remitters who are unbanked rely on check cashers, payday lenders, pawnbrokers, and money transfer organizations to meet their 

financial services needs. Remittances can serve as a gateway to 

connect remitters to banks and credit unions. As account holders, 

they would have access to a wider range of financial products and 

services to build assets, so I would like to take this time to just 

share two recommendations that we believe would go a long way 

toward creating a fair remittances market. 

5

First, in a fair remittance market, remitters would have the information that they need to make wise consumer choices. Currently, there are no clear industry-wide standards regarding disclosures. A growing number of companies provide receipts, but information on receipts varies widely from one company to the next. 

Some receipts do not include information that consumers care 

about, such as guaranteed time of delivery or a list of pickup locations. 

Additionally, there are no standards regarding the type of 

pretransaction information that should be made available to remitters. In other words, what should a consumer know after they walk 

through the door but before they commit to using a particular remittance service provider? 

We must create a uniform disclosure to enable remitters to compare one service provider to the next, and the disclosure would include important cost information. It also would include a notice of 

the remitter’s rights as a consumer. 

The disclosure should also be in languages and formats that are 

accessible and easy to understand. Language access rules do not 

need to be overly rigid. Collectively, I believe we can establish a 

reasonable criteria that trigger language access activities. 

We must also require providers to post in a clear and conspicuous place important cost information. This would include fees 

charged, the exchange rate, pickup fees, and the date and time of 

delivery. The remittance service provider could post this information for sending various amounts, that is, $100, $200, or $300. 

Second, a fair remittance market would include industry oversight and strong consumer protections. There is currently no Federal Government entity that exists to oversee the market. Remittance service providers are regulated by a patchwork of State and 

Federal regulations that have many gaps and leave consumers exposed. 

In regard to consumer protections, remitters should have the 

ability to protect their rights as consumers in every State. This 

would include rights against those who have defrauded them, the 

right to a refund, and the process for resolving disputes with their 

remittance service provider. We often hear from the community 

that the money just does not get there. 

NCLR recommends establishing a Federal Government entity to 

provide oversight to the market. This entity would be authorized 

to license and register remittance service providers, draft rules to 

govern their behavior, and check for compliance with pertinent regulations. This new entity could also conduct spot checks or perform 

audits. 

Additionally, we must establish a process for the resolution of 

transactional errors and disputes between remitters and remittance service providers. We recommend that a new Federal entity 

create and maintain a consumer complaint hotline. Imagine the 

day when a consumer could call a 1–800 number and file a complaint with an independent third party. 

In conclusion, we believe that reforming the market would make 

a significant difference in the economic lives of Latinos living here 

and living abroad. We believe this issue surrounding remittances, 

all of the issues, should be a priority for policymakers. We think 

6

it is critical to establish oversight and enact strong consumer protections to facilitate the staggering amount of money that is flowing. 

We applaud you, Chairman Gutierrez and Ranking Member 

Paul, for your efforts on this issue, and we look forward to working 

with you in the future. Thank you. 

[The prepared statement of Ms. Ibarra can be found on page 39 

of the appendix.] 

Chairman GUTIERREZ. Thank you very much. 

Everybody is, I guess, looking at—the first two witnesses were 

wrapping up when the light turned red. I do not have to use the 

gavel. I do not have much of a right hand anyway. 

Mr. Grace, please, we look forward to your testimony. 

STATEMENT OF DAVID GRACE, VICE PRESIDENT, ASSOCIATION SERVICES, WORLD COUNCIL OF CREDIT UNIONS 

Mr. GRACE. Chairman Gutierrez, Ranking Member Paul, and 

members of the subcommittee, I am David Grace, vice president of 

the World Council of Credit Unions in Madison, Wisconsin. I also 

serve on the board of the Latino Community Credit Union, the Nation’s fastest growing credit union. I appreciate the opportunity to 

appear before this subcommittee today on behalf of the Credit 

Union National Association and the 89 million members that it 

represents, as well as the World Council of Credit Unions, which 

is the global trade association and development agency for credit 

unions globally. 

I will begin by thanking Chairman Gutierrez for his unwavering 

support and understanding of the importance of remittances. 

The World Council has been active in remittances for a decade, 

and during this time, we have always been able to count on your 

support for understanding and championing this issue. I would like 

to address three issues this morning: first, the role that U.S. and 

foreign credit unions play in facilitating access to financial services; 

second, how remittance costs can further be reduced; and third, the 

role of multilateral development banks in the United States Agency 

for International Development in planning and achieving these objectives. 

First, approximately 300 credit union locations throughout the 

United States and 900 credit union locations in Latin America, the 

Caribbean, and Africa are part of the World Council of Credit 

Unions international remittance network. This program has facilitated over $1.5 billion in transactions of money being sent from 

low-income workers here to poor households in developing countries. We believe this is the, if not one of the, largest remittance 

programs of any microfinance network. 

Second, one avenue we see to further reduce the cost of remittances is to ensure that credit unions and regulated microfinance 

institutions abroad can directly access their national payment systems and credit and debit card networks. This will lower costs and 

spur innovations. 

Third, clear positions and actions from all multilateral development banks, the U.S. Treasury, and USAID, encouraging foreign 

governments to allow credit unions to, first, offer remittance services and, second, to have open and fair access to payment and card 

7

networks would help significantly in making remittances and financial services more accessible. I will expand on these points a 

bit. 

As member-owned financial cooperatives serving 157 million 

working individuals globally, credit unions are, by their nature, 

consumer-oriented. As such, it should not be any surprise that 

CUNA and the World Council support transparency in remittance 

transactions. Our most recent research work in Guatemala with 

USAID indicates that 40 percent of remittance receivers in credit 

unions in Guatemala would be living on less than $1 per day if it 

were not for their remittances. 

In part, due to enabling legislation championed last year in Congress and supported by Chairman Gutierrez, for the first time, U.S. 

credit unions are able to compete with corner grocery stores by providing check cashing and remittance services to nonmembers within their fields of membership. We are now seeing increased remittance followings by U.S. credit unions and innovations in the market. A limited number of credit unions in the United States are 

also providing banking and settlement services for small money 

transmitters that have had their accounts closed at large commercial banks. 

If Congress were to restore the credit unions’ ability to actively 

serve small businesses and add underserved areas to their fields of 

membership, as is found in the Credit Union Regulatory Improvement Act, H.R. 1537, I believe we would see further innovation and 

service to immigrant communities. 

The majority of the credit union offices in developing countries 

are located in rural areas. They are organized in cohesive network 

structures, and they have experience managing liquidity. These 

characteristics, as well as the sheer number of credit union locations, make these offices excellent places and ideal transmitting 

points for remittances. However, credit unions must rely on local 

banks abroad to clear and settle their remittance flows with the 

money transmitter since they cannot directly access and settle 

these transactions because of restrictions on the payment system. 

We believe that reducing these restrictions would lower the cost of 

remittances and reduce the risks of credit unions having defaults 

from money transmitters. 

In prior testimony to the Senate Banking Committee, CUNA and 

the World Council encouraged the development of what has become 

the Federal Reserve’s Directo a Mexico program, linking together 

both U.S. and Mexican automated clearinghouses. The second largest originator of transactions of all financial institutions in the 

United States through the Directo a Mexico program is the Latino 

Community Credit Union. Much to our dismay, Mexican credit 

unions still cannot directly access this payment service. We urge 

the Federal Reserve to work with its Mexican counterpart to correct this situation. 

Lastly, while remittances to Latin America and to the Caribbean 

have justifiably received significant attention, the other multilateral development banks should be encouraged to study and promote efficient remittance markets, particularly in Africa, which resembles the Latin American remittance market of a decade ago. 

8

In conclusion, credit unions are leading the way in providing affordable remittance and financial services. To boost these efforts, 

we need Congress to restore credit unions’ ability to provide small 

business loans to new Americans and to allow for greater service 

to underserved communities. 

Thank you for holding this very important hearing, and we welcome the opportunity to continue meeting with the committee in 

the future. 

[The prepared statement of Mr. Grace can be found on page 25 

of the appendix.] 

Chairman GUTIERREZ. Thank you very much. 

Mr. Haider. 

STATEMENT OF TOM HAIDER, VICE PRESIDENT, GOVERNMENT AFFAIRS, ASSOCIATE GENERAL COUNSEL AND CHIEF 

COMPLIANCE OFFICER, MONEYGRAM INTERNATIONAL 

Mr. HAIDER. Good morning, Mr. Chairman, and members of the 

committee. My name is Tom Haider, and I am the vice president 

and chief compliance officer for MoneyGram International. Thank 

you for providing me the opportunity today on behalf of 

MoneyGram to speak with the committee about remittances, including the regulation of money transmitters and the ongoing bank 

discontinuance problem for money services businesses. 

MoneyGram is licensed and regulated as a money transmitter by 

the States. In addition, MoneyGram fully complies with the Bank 

Secrecy Act, the USA PATRIOT Act, and is registered with the 

Treasury Department as a money services business. 

Chairman Gutierrez, MoneyGram appreciates the leadership that 

you have brought to the issue of remittances, and we look forward 

to working with you and this committee on ways to bring greater 

transparency to remittance transactions. MoneyGram strongly supports legislation that would establish a Federal regulator to license 

and regulate the money transfer industry. 

Today, there is widespread inconsistency in the regulation of the 

industry. This leads to unnecessary administrative costs, making 

remittances more expensive for consumers. MoneyGram, however, 

is opposed to simply adding a layer of Federal regulation on top of 

existing State regulation. 

MoneyGram is proud to have been a leader in bringing lower, 

more simplified pricing to the remittance industry. For example, 

when current management took over MoneyGram in 1998, the average foreign exchange rate was nearly 7 percent, but today, the 

global-blended exchange rate is less than 2 percent and less than 

1 percent for many parts of Latin America. 

Likewise, during the same time period, the average fee per transaction has dropped from nearly $22 to less than $10 for most transactions to Mexico and Latin America. Thus, in using the 

MoneyGram service today, consumers can send up to $1,000 to 

many countries for a flat fee of less than $10 with a foreign exchange rate of less than 2 percent. These reduced fees and exchange rates reflect MoneyGram’s commitment to provide consumers with an affordable, reliable, and convenient payment service. 

9

In addition to lower fees and exchange rates, MoneyGram also 

provides consumers with a detailed receipt that indicates: one, the 

amount of money the sending consumer has paid; two, the exchange rate that will be applied to the transaction; three, all fees 

related to the transaction; and, four, and most important to the 

consumer, the amount of local currency that their recipient will receive. 

MoneyGram also maintains a toll-free phone number that consumers can call if they have questions about a transaction, including rates and fees for any transaction they plan to make in the future. Another convenient feature of a MoneyGram transaction is 

the recipient’s ability to receive it in local currency within minutes 

of its having been sent. 

MoneyGram also provides the sender a free calling card they can 

use to alert their recipient that the transaction is on its way. 

MoneyGram also offers an extensive network of locations so its 

transactions can be sent and received, and in Latin America, more 

than 50 percent of MoneyGram’s locations are banks and credit 

unions. These added services make MoneyGram more competitive 

in the marketplace as well as provide consumers with a better 

value. However, they do cost money. 

MoneyGram agrees that it is important for consumers to be 

banked, and that, in the long run, will help consumers improve 

their economic opportunities, but MoneyGram also believes traditional money transmitters can play a critical role in this transition. 

Bank consumers who are new to the United States are generally 

not quick to open a bank account, but rather, tend to move towards 

a banking relationship over time. Encouraging partnerships between money transmitters and banks provides a bridge to these 

consumers. 

Turning towards the impact of regulations, a pressing issue for 

MSBs today is the challenge of securing and retaining a bank account. Due to increased regulatory pressure imposed on banks, 

many have either closed MSB accounts or have refused to open 

new accounts. As a result, banking costs have risen significantly 

for MSBs, which ultimately affects the price consumers pay for remittance services. 

In seeking to solve this problem, MoneyGram has joined with 

MSBs and bank trade associations to draft legislation that would 

allow banks to rely on a certification by their MSB account holders 

that they are in compliance with their regulatory requirements. 

Another major cost of doing business is complying with 

antimoney laundering regulations. MoneyGram takes very seriously these duties. At MoneyGram, nearly 4 percent of our entire 

global workforce is dedicated exclusively to compliance and fraud 

prevention, but MoneyGram and its agents need help if they are 

going to have the ability to continue to make significant investments in antimoney laundering compliance. We must have 

unimpeded access to banking services, and regulatory mandates 

cannot overwhelm our ability to operate in an efficient manner. 

I want to thank you, Mr. Chairman, and members of the committee, for the honor of having the opportunity to present testimony today on behalf of MoneyGram. We truly appreciate your 

10

continued interest in improving the remittance climate in the 

United States for consumers, banks, and money transmitters. 

Mr. Chairman, we hope that you will view us as a partner in this 

effort and will call upon us for whatever assistance we can provide. 

Thank you again. 

[The prepared statement of Mr. Haider can be found on page 31 

of the appendix.] 

Chairman GUTIERREZ. Thank you. 

Mr. Thompson, please. 

STATEMENT OF MARK A. THOMPSON, ASSOCIATE GENERAL 

COUNSEL, THE WESTERN UNION COMPANY 

Mr. THOMPSON. Thank you, Mr. Chairman. 

The modern international remittance market is relatively young, 

just over 20 years old. Today, Western Union provides a convenient, fast, and reliable way to send money in over 195 countries 

and territories. 

The cost of remittances has dropped significantly over the past 

5 years. The GAO found that competition in the remittance market 

has resulted in a drop in the cost to send remittances. The InterAmerican Dialogue found that the cost of sending remittances from 

the United States to Latin America fell from 12.5 percent in 2003 

to 7 percent in 2005, an average as low as 4 percent in countries 

with higher levels of competition. As competition continues to increase, we anticipate that this trend will continue. 

Price is not the sole factor considered by consumers. In fact, for 

some consumers, price falls behind other factors such as security, 

speed, reliability, and convenience. In addition to the fees and exchange rate, customers will often ask questions such as, ‘‘When will 

I be able to send money? Are you open on weekends? Will my 

money get there? How long will it take to get there? Can my family 

members pick the money up in their village or town? Will my relatives have to open a bank account to get their money?’’ 

Consumers should have adequate information to make an informed decision as they choose among providers, therefore, we support transparency with respect to fees and foreign exchange rates. 

With limited exceptions, at the time a transaction originates in the 

United States, Western Union provides its customers with a written receipt that clearly states the following information: the 

amount stated in U.S. dollars the customer has presented for 

transfer; the fee stated in U.S. dollars that Western Union charges 

for the transfer; the total amount stated in U.S. dollars that the 

customer has provided to Western Union, which is the sum of the 

first two items; the retail currency exchange rate that Western 

Union will apply to the transfer; the amount stated in the currency 

of the payout country that Western Union will provide to the recipient of the transfer; and a statement advising the consumer that 

Western Union makes money from currency conversion. 

Requiring a disclosure that would reflect the difference between 

the exchange rate Western Union offers to a consumer and the exchange rate established by the U.S. Treasury Department, as set 

forth in legislation in the past years, would not be relevant to the 

consumer and could have adverse effects, such as reducing competition in exchange rates. 

11

The Federal Reserve ACH system can provide a lower cost structure when both the sender and the receiver have bank accounts. 

While the majority of our U.S. senders are banked, our experience 

is that banked individuals on both ends of our transactions are the 

exception, not the rule. Studies indicate that a majority of receivers 

in Latin America are unbanked. In Mexico, for example, only about 

29 percent of individuals who receive remittances are banked. 

In order to serve unbanked individuals at a lower cost, we encourage you to consider allowing nonbank money transmitters to 

open an account at the Federal Reserve and utilize the Fed’s services, thus eliminating one layer of the money transfer cost. 

We support the policy goal of making remittances more available 

and affordable to consumers. However, legislation should not create 

an unlevel playing field and place the Congress and Federal agencies in the position of choosing winners and losers in a competitive 

and evolving market. Favoring depository institutions presumes 

that remittance services provided by such financial institutions are 

cheaper than those of traditional remittance providers, ignoring the 

fees and penalties associated with checking accounts, ATM transfers, and other services. 

Thank you, and I am happy to answer any questions you may 

have. 

[The prepared statement of Mr. Thompson can be found on page 

63 of the appendix.] 

Chairman GUTIERREZ. Thank you very much, Mr. Thompson. 

Mr. Orr. 

STATEMENT OF JAMES C. ORR, CHAIRMAN, MICROFINANCE 

INTERNATIONAL CORPORATION 

Mr. ORR. Thank you very much, Chairman Gutierrez, and Ranking Member Paul. It is a great pleasure to be back again with the 

committee after a lot of years. Pretty much everything I know 

about banking, and most of what I know about development, I 

learned in 8 years working as a legislative counsel to this subcommittee some years back. 

I am here today representing Microfinance International Corporation. The company’s mission is to expand affordable, professional financial services for people who are either disconnected 

from mainstream banking or who have faced overpriced financial 

services in the past. We are based here in Washington, D.C. We 

have 11 shops in the mid-Atlantic region, and we work with 20 financial institutions throughout Latin America—in 20 countries of 

Latin America. We are employing microfinance technology and 

methodology, and we bring a commercial banking approach to our 

business. 

I think perhaps one of the best ways for me to address the questions that I was asked to talk about would be to describe briefly 

what our vision was in forming the company and then a little bit 

about our system. 

We started from a very different starting point than most companies. We looked at Latin America and saw the agonizingly slow 

progress towards economic development. We saw the failure of 

many, if not most, large-scale development projects. We saw immigrants being forced to pay exorbitant fees for very basic financial 

12

services that people who have lived in this country for a long time 

take for granted and pay very little for. 

We saw a lack of competition among money transfer companies 

and a pricing structure that often resulted in up to 10 percent of 

the remittance amount being taken in fees when foreign exchange 

transactions were included, and we saw a U.S. banking system failing to meet the needs, the legitimate needs, of loans, insurance, 

and other financial products to the Hispanic community in the 

United States. 

Some of the existing remittance mechanisms had substantial 

weaknesses. Commercial banks using the SWIFT system and their 

correspondent banking relationships take 2 days and charge $35 to 

do the kind of transmission that any company here before you 

today can do almost instantaneously for roughly a third of that 

price. 

Some of the traditional remittance companies that use an agentbased system, that is, an agent on both ends of the transaction, 

have a high-cost structure which, in today’s world of falling prices, 

gives them financial hurdles, and it also presents obstacles when 

trying to work on compliance. 

A real advantage that our firm had was that we began after September 11th, and we knew we were starting in an environment 

where compliance would be the number one key to the success of 

our operation. Our remittance platform, which is really the heart 

of the operation, is Internet-based and enables us to charge low 

fees and guarantee smooth transactions. Only seconds after the 

transaction is booked here in the United States, the recipient can 

collect it in many thousands of locations in Latin America. Perhaps 

I should say hundreds of locations; I am not 100 percent sure that 

we are at the ‘‘thousands’’ stage yet. 

Many of the regulatory compliance aspects of booking a remittance are done automatically by our sophisticated computer system. They are checked in real time, and a teller is immediately 

alerted if there is some evidence of a suspicious transaction. 

This leap in technology allows us to charge lower prices. When 

we began operating in Latin America, the average remittance cost, 

or the average remittance of $300 cost about $15 to send. When we 

opened our doors, we charged $9 for that same remittance. Today, 

the average is about $10. 

I see that I have consumed more time than I imagined. I wanted 

to talk a little bit about our compliance system, and I would be 

happy to do so in the question-and-answer period. I would like to 

make a few comments, thinking about a better compliance regime. 

You know, right after September 11th, regulators were presented 

with a huge problem. They had no system for tracking this, and 

while they were trying to decide what to do, they decided that, 

‘‘perhaps we can make banks, and money transfer companies can 

do this for us,’’ and essentially, they established a system that puts 

the onus on financial institutions to look for suspicious activity, 

and bankers and money transfer agents become, essentially, deputies of the regulatory system. The system cannot work very well for 

many reasons which you can understand. 

When a bank or a financial institution makes a mistake, they get 

a very high penalty from their supervisor, so the tendency becomes 

13

to file suspicious activity reports any time it occurs to the agent to 

do so. That way, they are covered against a huge problem. A much 

better system, if we could start over again, would be to have all financial institutions and remittance companies give to the government a list of all transactions over a certain threshold and let the 

government do the data mining instead of Western Union or Microfinance International. 

A serious problem with our doing it is that we have no idea what 

the other remittance companies are doing, and a clever operator 

wishing to send money illegally could book remittances in a number of different companies, and the system would never see it. 

Thank you very much, Mr. Chairman. It is a pleasure. 

[The prepared statement of Mr. Orr can be found on page 53 of 

the appendix.] 

Chairman GUTIERREZ. Thank you. 

I recognize Dr. Paul for a unanimous consent request. 

Dr. PAUL. Mr. Chairman, I ask unanimous consent to insert an 

article into the record dealing with this subject. 

Chairman GUTIERREZ. So ordered. 

Thank you. It is great to have you all here. I guess I am going 

to ask some questions. 

I am happy to see the change and the progress, and I want to 

see how we can perfect that change and that progress, which is already being made. I want to see how close we can get, so all of the 

panelists—the benefits and the rates that you get as informed consumers, which I am sure you all are and which I certainly am—

so the same kinds of fees that I pay and that you pay and that we 

all pay and that we come to expect, as we have heard in the testimony, Americans have come to expect, that those least able to afford transaction fees and fees are able to get. 

So I kind of look at my situation, and if I go to my bank—and 

banks are pretty good these days except for their fees; it seems like 

every time there is a new fee, and whatever the fee is it seems to 

be going up. 

I lost my ATM card. It is $40. I get a free credit card. What do 

you want $40 for, for an ATM card replacement, when I can get 

a free credit card? They do not charge me $40. I said, ‘‘I will go 

across the street to the other bank if you want $40 for it.’’ 

As you all know, banks recognize your economic ability and leverage to move your money, so those fees many times get waived, 

so that is what I want to get to. I want to get to, how can you help 

us in the industry, and how can you help as advocacy groups to get 

us there? 

Mr. Thompson, in your testimony, you outlined the items that 

Western Union already discloses to its consumers on remittance 

transaction receipts. So does the exchange rate apply to the fees 

charged on the total amounts to the consumer? 

You state that Western Union believes, ‘‘This type of information 

gives consumers the information they require to make an informed 

decision.’’ Most of us can agree that this type of information will 

enable consumers to make an informed decision, but how informed 

that decision is depends on when the consumer gets the information. In this case, it is after the transaction. 

14

Don’t you agree that this information would allow consumers to 

make a more informed decision if it were disclosed before the transaction? What does Western Union currently disclose prior to the remittance transaction? 

Mr. THOMPSON. Mr. Chairman, Western Union provides the consumer with the opportunity to call an 800 toll-free number from 

home to find out about current rates and fees. They can also ask 

the agent, before they start a transaction, to look up what the current exchange rate is, since the exchange rates are changing 3 to 

4 times a day, and they can do that before they give the agent 

money. Then before the transaction is actually finalized, they are 

given the written receipt, and the finalization of the transaction occurs when the consumer signs that receipt that they are given. 

Chairman GUTIERREZ. So I would know the exchange rate? In 

Mexico, I would know the exchange from dollars to pesos? I would 

know that these dollars would then create so many pesos on the 

other end? 

Mr. THOMPSON. Yes, before the transaction is finalized. You are 

actually required to sign the agent copy of the receipt that is printed that details that information. 

Chairman GUTIERREZ. Thank you. 

Mr. Haider, following up with you, in your testimony, you state 

that MoneyGram maintains a toll-free number that consumers can 

call if they have questions about a transaction, including rates and 

fees for future transactions. 

What if a consumer calls and gets a rate and a fee quoted to 

them and then goes to a MoneyGram location, makes a transaction, 

and the amount actually paid is different from the amount quoted? 

I am not saying this happens at MoneyGram, but there is anecdotal evidence that it happens in the industry. In such a case, is 

there any recourse for the consumer? 

Mr. HAIDER. Mr. Chairman, a situation as you have described 

could certainly happen. A consumer could call in the morning and 

ask what the transaction exchange rate would be and then not go 

to a location, say, until late in the afternoon. By then, for some currencies, there may have been fluctuations in the exchange rate. 

The fee portion of the transaction will not change; our fees tend 

to remain fixed for long periods of time. But the exchange rates, 

as we know with all of the different currencies around the world, 

are volatile, and they can fluctuate during the day. So we caution 

a consumer when they call and speak to one of our representatives 

to find out what the cost of the transaction will be. We always caution them on the phone that the exact exchange rate will be set at 

the time they conduct the transaction. 

Chairman GUTIERREZ. I see that my time is up. 

I want to say to Mr. Grace and to the credit unions, thank you 

for the great and wonderful work that you do in giving consumers 

new alternatives. 

To Ms. LoVoi and to Ms. Ibarra, I look forward to working with 

you as we work with the industry. As you see, we do not have two 

separate panels here today. We try not to divide people up into 

good guys and bad guys but into all active participants, and I 

would say to the industry that we are going to help make sure that 

the system works for you and that it allows you to reduce your 

15

costs, and with those reductions in cost, that it allows you to get 

better services and a reduction in cost to consumers. 

So we understand that not everybody is going to have an account, but you know, because we want—I mean, my goal is, you 

know, Mr. Haider and Mr. Thompson, to phase you guys out eventually. 

I mean, come on. We all know if our grandmas were in Mexico 

or in Guatemala or in Poland, we would send them an ATM card, 

and we would put some money in there, and we would send them 

to the bank to go get that money, and we would have conversations. We know what we would be doing. And I think what we 

wanted to do—the goal is, again, as I stated earlier, to allow them 

to have the same kind of access to consumer instruments that we 

enjoy and that are plentiful to us. 

Dr. Paul, please, you are recognized for questions. 

Dr. PAUL. Thank you very much, Mr. Chairman. 

My interest in this subject is in working to keep the costs down 

because it is beneficial to the consumer, and also in maintaining 

competition. 

Obviously, there is a lot of competition, and prices have come 

down. Sometimes I think that the price came down because of technology and in spite of the government because what government 

does tends to raise the prices. 

Also, I am very interested in the privacy issue. 

So, in dealing with some of the things that Mr. Orr talked about, 

that is not so easy. I do not like the idea that the burden is put 

on the bank to do the policing, but then there are times when I am 

not so sure that the government does a much better job because, 

you know, they have suspicious lists of terrorists, and if you get 

your name on there, you cannot get it off. So it is really a tough 

choice. 

I do not agree that you should be the policeman. At the same 

time, turning everything over to the government is not very attractive either because there is so much abuse of individual privacy. 

Also, when individuals like yourselves are in the business, it is 

really hard—you are well set up, and you have the computer programs. For new people to come in is a real challenge. So, in some 

ways, complicated technology is an exclusionary factor for new people coming into the market and is challenging for those who are already there. 

Today, we have a situation where the government does want a 

lot of information. We live in the age of terrorism; they want to be 

checking for that. There is concern about illegal immigrants, and 

if you overly regulate and immigrants are frightened about it and 

they, you know, use other sources because they are afraid of being 

detected, there are IRS reasons why they want this information—

and there is also the drug war that goes on—so then the burden 

falls on you. 

I am just wondering a little bit—I am going to make some comments, and I will let any of you answer to this. What type of information do you get at the beginning, and how long do you keep this 

information? Do you all gather the same information? What is the 

purpose of that? 

16

As to the suspicious activity reports, Mr. Haider said that 4 percent of his workforce is dealing in this, and we already have the 

Bank Secrecy Act, we have the PATRIOT Act, we also have the 

money laundering business to deal with, and now they are talking 

about adding more controls on through the Real ID Act. 

I am just wondering, is there a limit to how the technology can 

compete with this? When do you run into a problem? Do you think 

you need more regulations about the Real ID on top of all of these 

other regulations that you have? 

Also, if any of you could give me information—you must fill out 

a lot of these forms, these suspicious activity reports. How many 

people do you know who have been caught? I mean, how many people have you really helped arrest? What is the percentage? What 

is the return on this? 

So I would like to hear your comments about this subject. 

Mr. HAIDER. Thank you, Dr. Paul. 

Tom Haider, again, from MoneyGram. I am happy to respond to 

those questions. 

You are absolutely correct that the regulatory environment today 

is extremely complex. MoneyGram, however, recognizes our role in 

helping to combat terrorism and in helping to prevent money laundering. We are dedicated, and we work very closely with law enforcement entities, and very closely with FinCEN and OFAC of the 

Treasury Department to try and prevent those things from occurring. 

We do file a lot of suspicious activity reports. In any given year, 

we file more than 10,000 suspicious activity reports. In terms of 

what the government does with that information, your guess is as 

good as mine, Congressman, because we do not really get much 

feedback on that. 

I think the real challenge, though, that I was trying to address 

earlier in my testimony, when it comes to compliance and the 

changes that have been brought about since 9/11, is the fact that 

today our States—that are the primary regulators of money services businesses and money transmitters—are now interpreting the 

Federal antimoney-laundering laws each in their own way and directing us to apply different standards from State to State. This 

adds a layer of complexity to our compliance that far exceeds anything that I believe exists out there on the Federal financial side. 

So we are faced today with multiple States’ interpreting Federal 

antimoney-laundering and terrorist prevention laws and telling us 

how we must comply with them. That is the area of complexity 

that we are wrestling with today. That is why, at MoneyGram, we 

are proposing the concept of a uniform Federal regulator for the industry. We think that will not only ease a lot of the administrative 

costs and regulatory burdens we face, but it will be a real benefit 

to law enforcement in getting uniform information and uniform 

compliance. 

Mr. ORR. Dr. Paul, if I can comment briefly? 

Chairman GUTIERREZ. I will extend extra time so you can answer 

that. 

Mr. ORR. Thank you. 

Dr. Paul, you asked about privacy and whether we were inadvertently contributing to the problem of sharing information. I 

17

think most money transfer companies collect essentially the same 

information—name, address, the phone number of the remitter, 

and information on the recipient of the remittance. So there is not 

really much in the way of any sensitive information there. 

In terms of what the government does with the data that is 

turned over to them, it would typically be one of the government 

agencies with an intelligence—an antimoney-laundering function, 

probably the Treasury Department, that would mine this data. So 

I do not think there is a particular concern about the information 

from a suspicious activity report, for instance, being used for purposes that you would not support. 

In terms of the numbers of SARs, suspicious activity reports, 

that are filed, the regulators who were before a different subcommittee of this committee last week admitted in questioning that 

they do not even examine all of the SARs that are filed these days, 

and part of the problem, of course, is that financial institutions are 

filing these for defensive reasons these days. 

Chairman GUTIERREZ. Thank you, Mr. Orr. 

I recognize the gentleman from Minnesota, Mr. Ellison, for 5 

minutes. 

Mr. ELLISON. Thank you, Mr. Chairman, and thank you for having this hearing. It is a very important issue. 

I want to thank all of the panelists as well. 

Mr. Haider, I know that MoneyGram has done extensive work in 

Central and Latin America, and I think it is good that people can 

get some income from their family members and loved ones here, 

but let me ask you about Africa and the Middle East. 

I come from a district where there is a large Somali community, 

and I know that they have institutions that they call hawalas, and 

there has been significant difficulty with their being able to do wire 

transfers to their loved ones in that part of the world. 

Can you tell me whether one of the administrative regimes or 

whether the—well, I guess, let me keep the question broad. 

Could you describe to me whether doing business in Latin America and doing business in East Africa is similar or different? What 

are some of the differences? What are some of the different challenges? 

Mr. HAIDER. Thank you, Mr. Congressman. 

There are a lot of challenges, country by country, in conducting 

remittance services, and it depends a lot on the regulations in the 

remit country. So, for example, in Latin America, we face fewer 

barriers than we do in some of the African countries. Somalia is 

a classic example. 

Today, there is no true central government there. There is no 

central banking system in Somalia, so, at MoneyGram, we are not 

serving Somalia today. 

We very much would like to. We know that there are consumers 

who greatly need this service, but due to the disruption of the government there, the chaos, we simply do not feel that it is a prudent 

risk at this time to venture into that country. 

Again, sometimes it is due to the regulations in that country. 

Sometimes it is due to the regulations right here at home, and we 

recognize the fact that, if we take these kinds of risks and go into 

18

certain countries, we are exposing ourselves to potential problems 

with our own regulators. 

Mr. ELLISON. Well, when you talk about Somalia—and again, 

you know, my district—you know, our cards are up on the table—

has more people of Somali ancestry than any other part of the 

country, including Columbus, Ohio. So I am going to ask some 

questions about that. 

How would you describe your risk in doing business with people 

who live in or near Somalia? I know a lot of their relatives are in 

refugee camps in Kenya or in Djibouti. Where does the risk lie? Is 

it on that side or is it on our side? 

Mr. HAIDER. It is a bit of both. We do serve the surrounding 

countries for Somalia. The biggest challenge today is to find reputable entities that could operate in Somalia and serve as our location there to pay out the transaction to the recipient. 

So it is very difficult to find, as I say, reputable entities that can 

represent us there and be relied upon to consistently pay out the 

proper amount to the citizens. 

Mr. ELLISON. What about here? I mean, does MoneyGram encounter sort of like a danger in terms of, perhaps, engaging in remittance activity because the U.S. regulatory system would raise 

flags about sending money to certain countries because of fears of 

terrorism that are, perhaps, legitimate? 

Mr. HAIDER. Certainly, there are situations like that. The Sudan 

is one example that quickly comes to mind. 

In the Sudan, we have to be extremely careful that none of our 

transactions are for a business purpose. They can only be for family 

remittances, and you are basically relying upon the truthfulness of 

the sender and the recipient that it is not connected to a business 

transaction, because the Treasury Department’s Office of OFAC 

prohibits most business transactions. 

So that is a constant challenge to know are these, in fact, truly 

family remittances? 

Mr. ELLISON. Do you think that in the post-9/11 world that we 

live in—after 9/11, you know, of course, there were a lot of legitimate reasons to sort of get some regulation down. 

Here we are in 2007. In this period since, have we gotten a better sense of how we can more accurately tailor our remittance policy to keep the money away from the people we do not want to get 

it, but make sure it does flow to the people who we do want to get 

it? 

Mr. HAIDER. Well, I think with companies like MoneyGram and 

with my competitor, Western Union, and with your other reputable 

money transfer companies, we are taking very aggressive steps, a 

very large investment— 

Mr. ELLISON. I am sorry, Mr. Haider. 

What I am getting at is: Are there some regulatory changes that 

we need to make now that we have learned a little bit more about, 

how to keep money away from people whom we do not want to get 

it? Do you understand? 

Mr. HAIDER. Absolutely. 

Mr. ELLISON. Okay. Can you speak to that? 

Mr. HAIDER. Certainly, Congressman. 

19

I think the number one change was what I alluded to a moment 

ago, and that would be a uniform Federal regulation of this industry. 

Today—I believe it was one of our prior witnesses who referred 

to the patchwork of regulation that exists for the industry today. 

It makes compliance an extremely burdensome process. I think the 

uniformity we would get from a Federal regulator would greatly enhance the efforts that our Federal Government is attempting to implement post-9/11. 

Chairman GUTIERREZ. Thank you. 

Mr. ELLISON. Thank you very much. 

Chairman GUTIERREZ. Congressman Marchant, please. 

Mr. MARCHANT. Thank you, Mr. Chairman. 

Back in my days in the State legislature, 10 or 12 years ago, we 

dealt with the whole issue on the Texas border of the casa de 

cambio, and we spent—now Congressman Cuellar and I spent several months working on that issue with the Federal Government. 

So it is a subject that I am vaguely familiar with. 

But many of you today have testified that there are gaps between the State and Federal regulators in your business and that 

leaves you kind of exposed. Would you expand on that a little bit 

and tell me what could be done to plug those gaps up? 

Ms. LOVOI. Yes, sir. Thank you very much for the question. 

I am from Texas, and so I am familiar with the phenomenon that 

you are describing on the Texas border and the work done by many 

of your colleagues in both the Texas House and the Texas Senate 

on the subject, and I appreciate your efforts on this subject as well. 

We conducted a survey of 16 States to study State regulation. We 

did this in concert with two of our law firm partners. Appleseed accomplishes a good deal of its work in partnership with pro bono 

work from law firms; WilmerHale and Cravath, and Swaine & 

Moore LLP have both helped us with this project. What we found 

is wide variation. We looked—and we will make our report available to subcommittee staff so that you can have a little bit more 

detail on this subject. 

But, in essence, we looked at the regulation across about six or 

eight factors, and we found a patchwork. That word has been used 

earlier today, but, without going into a great deal of detail, that is 

what we found. 

We found great variation—there was not much attention to disclosure, which was the topic of my testimony today. We had hoped 

to find consumer disclosure prior to the transaction and emphasis 

on posting, and we found neither of those. And, as you and I know, 

the casa de cambio and the various outlets that operate on the 

Texas border and in other communities around the country do have 

an emphasis on posting and prior transaction disclosure, and I 

would just summarize our research by saying that was something 

that we had hoped to find and did not find widely in State regulation. 

Thank you. 

Mr. MARCHANT. Thank you. 

Anyone else? 

Okay, it seems a number of you believe that the pressure put on 

banks to self-regulate and be the compliance officers was the incorVerDate 0ct 09 2002 11:42 Sep 14, 2007 Jkt 037210 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\37210.TXT HFIN PsN: TERRIE
20

rect approach and has resulted in a number of closures. From your 

perspective, please outline the framework of Federal regulatory action that would ensure safety and soundness of the transaction and 

stop the crooks, while not being too burdensome to drive the industry underground. 

Mr. GRACE. Credit unions, as I mentioned in my testimony, a 

limited number do provide services today to money service businesses and essentially provide banking services to them so that 

they have a way to enter into the payment system and clear their 

funds. We have seen— 

In fact, I understand from the National Money Transmitter Association that, in fact, credit unions in New York are the only entity 

right now in a big banking State that are providing new banking 

accounts to these money transmitters, and we think this is an opportunity for credit unions to do that if they could expand their 

services to small businesses. Many of the competitors in the money 

transfer industry and where the price competition has come from 

is from small entities getting into the market and competing. It 

was referenced earlier that technology can keep them out. So we 

see that if new entrants can go ahead and provide services to some 

of these small businesses that there is an opportunity there for 

that. 

Mr. MARCHANT. Thank you. 

Yes, sir. 

Mr. ORR. Mr. Marchant, I alluded in another question to a hearing held in this committee room 10 days ago with the regulators 

and mostly commercial banks. Commercial banks did a lot of whining about how hard it was to comply with all the regulations, and 

the regulators made a lot of self-serving comments about how hard 

they were working at this. But, you know, if you sort of step back 

and say, you know, what kind of system would give government the 

information they need to prevent the kinds of financing that we all 

want to see stopped—money laundering, terrorist financing, drug 

financing—it would be to have the government mine the data from 

the entire industry, from credit unions, commercial banks, money 

transfer companies and everybody else in a systematic way and 

find the patterns of suspicious activity and go after the wrongdoers. 

The system that has evolved has each one of those individual institutions searching its own files for this sort of information in a 

fairly inefficient way, frankly. I mean, we are mostly financial professionals or, in some cases, grocery store clerks and that sort of 

thing with no background in identifying the kinds of activity that 

the intelligence community and others are professionals at. So if 

you could somehow shift that back into the role of the government. 

Of course, the industry, the industry I speak for, would love to 

be rid of the obstacle. But the advantage of being rid of it would 

be we could lower our prices to our clients. That would be a salutary effect. 

Mr. MARCHANT. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. CLAY. [presiding] I thank the gentleman from Texas for that 

line of questioning. 

Ms. Ibarra and Ms. LoVoi, both of you stressed the importance 

of a promised date of delivery in your testimony. But Mr. ThompVerDate 0ct 09 2002 11:42 Sep 14, 2007 Jkt 037210 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\37210.TXT HFIN PsN: TERRIE
21

son testified that in transfers to certain countries it is difficult or 

even impossible to promise an exact date of delivery due to restrictions in the recipient countries. This is beyond the control of remitters. So how should we handle those instances where a promised 

date is just not possible? And we will start with Ms. Ibarra. 

Ms. IBARRA. Thank you for the question. 

I think that we need to form a task force or a commission where 

we bring people together, industry and consumer advocates and 

civil rights organizations, to talk about what these challenges are 

and to come up with some uniform processes. How do we conduct 

oversight and how do we create these uniform disclosures? And we 

can look at this issue as well and see what the challenges are and 

how we can improve the system for consumers, particularly with 

issues that they care about, such as date of delivery, guaranteed 

location spots, and other issues. 

But I think, you know, your question is technical. I would like 

to hear how the industry would respond to that. But, from our perspective, it is important to consumers, and that we need to come 

together to look at the challenges and try to come up with some 

good solutions. 

Mr. CLAY. How about you, Ms. LoVoi? 

Ms. LOVOI. Thank you very much for the question. 

We conducted focus groups with senders in 4 States to try to determine what factors are most important to the senders, and what 

we learned is that predictability of transfer is of paramount importance. The senders want to know how much money will be received 

in a foreign country. But almost equally important, they want to 

know what is the date and time of delivery. 

So we learned from the testimony earlier this morning that some 

of the companies are able to provide immediate transmission where 

there are good pickup points in the foreign countries, and there are 

many of these in Mexico. So, in those instances, the sender can let 

the receiver know that they will receive their money immediately. 

In more difficult countries, such as the one that Congressman 

Ellison described, Somalia, there may be difficulties in that environment. 

So I would suggest that what the sender and receiver both are 

looking for is predictability. If it is going to take a week, if it is 

going to take 4 days, if it is going to take 21⁄2 days, let us just tell 

both parties and have an advance disclosure so that there are no 

surprises on either end. 

And thank you for your question. 

Mr. CLAY. Thank you so much. 

Mr. Grace, I agree with all of your testimony regarding the role 

of multinational development banks and USAID in leveraging remittances in developing countries. 

One of the items you mentioned is expanding our voice in vote 

language from H.R. 928 to include all of the development banks, 

not just the Inter-American Bank. I agree wholeheartedly, but I 

would like to hear your thoughts on what specifically we should include in our voice and vote requirements for the development 

banks. 

Mr. GRACE. Certainly. Thank you very much for the question. 

Absolutely. 

22

The Inter-American Development Bank has brought an awful lot 

of attention to this issue. But many of the other development 

banks—the Asian Development Bank, the African Development 

Bank—simply haven’t been engaged in the issue. About 3 weeks 

ago, Mr. Chairman, I was in China with the Asian Development 

Bank and the leaders in that agency on microfinance, and nowhere 

in the discussion did it come up on the radar. 

I think it is an issue that needs to be recognized as important 

not only for Latin America but important for Asia and Africa as 

well. So I think you could include simply adding those other multilateral development banks into the bill, as well as encouraging 

them, and ensuring that the United States Agency for International Development, USAID, is not limited in any future bill to 

working just in Latin America. But USAID’s remit is global, and 

any language in the bill should be global in nature. 

Mr. CLAY. Thank you for that response. 

We are about to have a series of votes on the Floor. I want to 

thank all of the witnesses for their testimony and their answers to 

the questions today. 

We will keep the record open for 30 days, and we will conclude 

this hearing. Thank you all for being here. The hearing is adjourned. 

[Whereupon, at 11:10 a.m., the hearing was adjourned.] 

(23)

A P P E N D I X

May 17, 2007

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