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[Federal Register Volume 79, Number 80 (Friday, April 25, 2014)]
[Proposed Rules]
[Pages 23233-23258]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09036]

[[Page 23233]]

Vol. 79

Friday,

No. 80

April 25, 2014

Part VI

 Bureau of Consumer Financial Protection

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12 CFR Part 1005

Electronic Fund Transfers (Regulation E); Proposed Rule

Federal Register / Vol. 79 , No. 80 / Friday, April 25, 2014 / 
Proposed Rules

[[Page 23234]]

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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1005

[Docket No. CFPB-2014-0008]
RIN 3170-AA45

Electronic Fund Transfers (Regulation E)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule; request for public comment.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
proposing to amend subpart B of Regulation E, which implements the 
Electronic Fund Transfers Act, and the official interpretation to the 
regulation. The proposal would extend a temporary provision that 
permits insured institutions to estimate certain pricing disclosures 
pursuant to section 1073 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act. Absent further action by the Bureau, that 
exception expires on July 21, 2015. Based on a preliminary 
determination that the termination of the exception would negatively 
affect the ability of insured institutions to send remittance 
transfers, the Bureau is proposing to extend the temporary exception by 
five years from July 21, 2015, to July 21, 2020. The Bureau is also 
proposing several clarifying amendments and technical corrections to 
the final rule and commentary.

DATES: Comments must be received on or before May 27, 2014.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2014-
0008 or RIN 3170-AA45, by any of the following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail/Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1700 G 
Street NW., Washington, DC 20552.
    Instructions: All submissions should include the agency name and 
docket number or Regulatory Information Number (RIN) for this 
rulemaking. Because paper mail in the Washington, DC area and at the 
Bureau is subject to delay, commenters are encouraged to submit 
comments electronically. In general, all comments received will be 
posted without change to http://www.regulations.gov. In addition, 
comments will be available for public inspection and copying at 1700 G 
Street NW., Washington, DC 20552, on official business days between the 
hours of 10 a.m. and 5 p.m. Eastern Time. You can make an appointment 
to inspect the documents by telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments generally will not 
be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Jane G. Raso, Jennifer Kozma, and 
Shiri Wolf, Counsels; Eric Goldberg, Senior Counsel, Office of 
Regulations, at (202) 435-7700 or CFPB_RemittanceRule@consumerfinance.gov (please do not submit comments on 
the proposal to this email address). Please also visit the following 
Web site for additional information about the remittance rule: http://www.consumerfinance.gov/remittances-transfer-rule-amendment-to-regulation-e/.

SUPPLEMENTARY INFORMATION:

I. Summary of the Proposed Rule

    Section 1073 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act), Public Law 111-203, 124 Stat. 1376 
(2010), amended the Electronic Fund Transfers Act (EFTA) by 
establishing a new and comprehensive consumer protection regime for 
remittance transfers sent by consumers in the United States to 
individuals and businesses in foreign countries. The statute defines 
``remittance transfer'' to include most electronic transfers of funds 
sent by consumers in the United States to recipients in other 
countries. Between February 2012 and August 2013, the Bureau issued 
several final rules concerning remittance transfers pursuant to the 
Dodd-Frank Act (collectively, the 2013 Final Rule or the Remittance 
Rule). The 2013 Final Rule took effect on October 28, 2013.
    This document proposes several amendments to the provisions adopted 
by the 2013 Final Rule to refine, clarify, or revise regulatory 
provisions and official interpretations previously adopted by the 
Bureau.

A. Temporary Exception

    EFTA section 919(a)(4) creates a temporary exception that allows 
covered remittance transfer providers to estimate fees and exchange 
rates in certain circumstances; the exception expires five years after 
the enactment of the Dodd-Frank Act, or July 21, 2015.\1\ However, if 
the Bureau determines that expiration of the temporary exception would 
negatively affect the ability of insured institutions to send 
remittances to locations in foreign countries, the statute permits the 
Bureau to extend the temporary exception for up to ten years after 
enactment of the Dodd-Frank Act (i.e., to July 21, 2020). See EFTA 
section 919(a)(4)(B).
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    \1\ Public Law 111-203 was signed into law on July 21, 2010.
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    The Bureau is proposing to extend the Regulation E estimation 
provision that implements this statutory provision, Sec.  1005.32(a) in 
the 2013 Final Rule. Section 1005.32(a) allows remittance transfer 
providers to estimate certain third-party fees and exchange rates 
associated with a remittance transfer if certain conditions are met, 
namely, that: (1) The provider is an insured depository institution or 
credit union; (2) the remittance transfer is sent from the sender's 
account with the provider; and (3) the provider cannot determine the 
exact amounts for reasons outside of its control.
    To assist the Bureau in determining the appropriateness of 
extending the temporary exception, Bureau staff conducted outreach, 
including interviewing approximately 35 industry and consumer group 
stakeholders after the 2013 Final Rule took effect to gather 
information on the remittance transfer market; industry practices, 
including the extent of reliance on the temporary exception; and the 
impact of the exception and its potential expiration on providers and 
consumers.
    Based on this outreach and other research and analysis, the Bureau 
has preliminarily determined that the termination of the temporary 
exception would negatively affect the ability of insured institutions 
to send remittance transfers. Thus, the Bureau is proposing to amend 
Sec.  1005.32(a)(2) by extending the temporary exception by five years 
from July 21, 2015, to July 21, 2020.

B. Additional Clarifications

    Additionally, the Bureau is proposing several clarificatory 
amendments and technical corrections to the Remittance Rule. First, the 
Bureau seeks comment on whether (and if so, how) it should clarify how 
U.S. military installations abroad are treated for purposes of the 
Remittance Rule. The Bureau believes there is a potential for confusion 
in their treatment because the Remittance Rule does not expressly 
address their status. Second, the Bureau proposes to clarify that 
whether a transfer from an account is for personal, family, or 
household

[[Page 23235]]

purposes (and thus, whether the transfer could be a remittance 
transfer) is determined by ascertaining the purpose for which the 
account was created. Third, the Bureau proposes to clarify that faxes 
are considered writings for purposes of the Remittance Rule, and that, 
in certain circumstances, a remittance transfer provider may provide 
oral disclosures after receiving a remittance inquiry from a consumer 
in writing. Finally, the Bureau is proposing to clarify two of the 
rule's error resolution provisions. More specifically, the Bureau is 
proposing to clarify what constitutes an ``error'' caused by delays 
related to fraud and related screening, and to clarify the remedies for 
certain errors.

II. Background

A. Types of Remittance Transfers

    As discussed in more detail in the 2013 Final Rule, consumers can 
choose among several methods of transferring money to foreign 
countries. 77 FR 6193 (Feb. 7, 2012). These methods generally involve 
either closed network or open network systems, although hybrids between 
open and closed networks also exist. Consistent with EFTA section 919, 
the 2013 Final Rule applies to remittance transfers sent through any 
electronic mechanism, including closed network and open network 
systems, or some hybrid of the two. As detailed below, in practice, the 
situations in which the temporary exception applies frequently involve 
transfers remitted through open networks.
Closed Networks and Money Transmitters
    In a closed network, a remittance transfer provider uses either its 
own operations or a network of agents or other partners to collect 
funds from senders in the United States and disburse those funds to 
designated recipients abroad. Through the provider's contractual 
arrangements with those agents or other partners, the provider can 
exercise some control over the remittance transfer from end to end, 
including to set, limit, and/or learn of fees, exchange rates, and 
other terms of service. Accordingly, the Bureau expects that a provider 
that is sending remittance transfers using some version of a closed 
network is likely able to leverage its control and knowledge of the 
transfer terms in order to be able to disclose the exact exchange rates 
and third-party fees that apply to remittance transfers.
    Non-depository institutions, known generally as money transmitters, 
are the type of remittance transfer providers that most frequently use 
closed networks to send remittance transfers. Remittance transfers sent 
through money transmitters can be funded by the sender and received 
abroad using a variety of payments devices. However, the Bureau 
believes that most remittance transfers sent by money transmitters are 
currently sent and received abroad in cash, rather than as, for 
example, debits from and/or direct deposits to accounts held by 
depository institutions or credit unions.
Open Networks and Wire Transfers
    As the data discussed below indicates, the most common form of open 
network remittance transfer is a wire transfer, an electronically 
transmitted order that directs a receiving institution to deposit funds 
into an identified beneficiary's account. Unlike closed network 
transactions, which generally can only be sent to entities that have 
signed on to work with the specific provider in question, wire 
transfers can reach most banks (or other similar institutions) 
worldwide through national payment systems that are connected through 
correspondent and other intermediary bank relationships. Unlike closed 
networks, open networks are typically used to send funds from and to 
accounts at depository institutions, credit unions, or similar 
financial institutions. The Bureau believes that the great majority of 
open network transfers are provided by insured institutions (including 
credit unions) and that, in turn, open network transfers are the most 
common type of remittance transfer provided by insured institutions and 
broker-dealers. However, some money transmitters may also use open 
networks to send some or all of their remittance transfers.
    In an open network, the remittance transfer provider with which the 
consumer interfaces, i.e., the originating entity, typically does not 
have control over, or a relationship with, all of the participants in 
the remittance transfer. The provider may communicate indirectly with 
the receiving institution by sending funds and payment instructions to 
a correspondent institution, which will then transmit the instructions 
and funds to the recipient institution directly, such as in the form of 
a book transfer, or indirectly through other intermediary institutions 
(a serial payment). Alternatively, under certain circumstances, the 
sending institution may send payment instructions directly to the 
recipient institution, but it will nevertheless rely on a network of 
intermediary bank relationships to send funds for settlement (a cover 
payment). In some cases, depending on how the transfer is sent, any one 
of the intermediary institutions through which the remittance transfer 
passes may deduct a fee from the principal amount (sometimes referred 
to as a lifting fee). Likewise, if the originating institution does not 
conduct any necessary currency exchange, any institution through which 
the funds pass potentially could perform the currency exchange before 
deposit into the designated recipient's account.
    Institutions involved in open network transfers may learn about 
each other's practices regarding fees or other matters through 
contractual or other relationships, through experience in sending such 
transfers over time, through reference materials, through information 
provided by the consumer, or through surveying other institutions. 
However, at least until the implementation of the 2013 Final Rule, 
intermediary and recipient institutions did not, as a matter of uniform 
practice, communicate with originating entities regarding the fees and 
exchange rates that institutions might apply to transfers. Further, as 
the Bureau has previously noted, the communication systems used to send 
these transfers typically do not facilitate two-way, real-time 
transmission of information about the exchange rate and fees associated 
with the transfers sent through them. See 78 FR 30662, 30663 (May 23, 
2013) (May 2013 Final Rule). As is explained in more detail below, the 
Bureau believes that this is largely due to these characteristics of 
open network systems and that insured institutions using those networks 
are sometimes relying on the temporary exception to estimate exchange 
rates and/or intermediary fees (known as covered third-party fees in 
the Remittance Rule).
International ACH
    In recent years, some depository institutions and credit unions 
have begun to send remittance transfers through the automated clearing 
house (ACH) system. In the February 2012 Final Rule, the Bureau 
explained that it considered international ACH transfers to be open 
network transactions, because, like wire transfers, international ACH 
transfers can involve payment systems in which a large number of 
sending and receiving institutions may participate, such that the 
sending institution and the receiving institution may have no direct 
relationship. The Bureau acknowledged, however, that international ACH 
transfers also share some characteristics of closed network transfers, 
in that the agreements among gateway ACH operators and the United 
States and

[[Page 23236]]

foreign entities involved may be used to control the amount and type of 
fees that are charged and/or exchange rates that are applied in 
connection with a remittance transfer. To maintain consistency with the 
February 2012 Final Rule, international ACH transfers are discussed 
herein as open network transactions.
Available Remittance Transfer Market Share Data
    Based on available information and as discussed in greater detail 
below, the Bureau believes that closed network transactions make up the 
great majority of the remittance transfers sent. Relatedly, the Bureau 
believes that, collectively, money transmitters send far more 
remittance transfers each year than depository institutions and credit 
unions. The Bureau recently estimated that money transmitters annually 
send about 150 million international money transfers, most of which the 
Bureau believes would likely qualify as remittance transfers pursuant 
to Sec.  1005.30(e) and, thus, be covered by the Remittance Rule. See 
79 FR 5302, 5306. (Jan. 31, 2014). By comparison, information reported 
by credit unions to the National Credit Union Administration (NCUA) 
suggests that credit unions may have collectively sent less than 1% of 
this total in 2013 (in fact, less than 1 million remittance transfers 
combined). The Bureau estimates that depository institutions send many 
more remittance transfers than credit unions, due to the relative 
collective size of depository institutions and credit unions, but still 
far fewer than money transmitters. For example, based on its interviews 
of some depository institutions, the Bureau roughly estimates that 
depository institutions collectively may send only 10 percent or less 
of the estimated 150 million remittance transfers sent by money 
transmitters. On the other hand, the Bureau believes that the average 
size of the transfers sent by depository institutions and credit unions 
is larger than the average size of a remittance transfer sent by a 
money transmitter; a transfer sent by a depository institution or 
credit union may be in the thousands of dollars, while the Bureau 
estimates that the average size of remittance transfers sent by money 
transmitters average in the hundreds of dollars. See 79 FR at 5306.\2\
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    \2\ We lack data on the volume of remittance transfers sent by 
broker-dealers.
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B. Section 1073 of the Dodd-Frank Act

    Section 1073 of the Dodd-Frank Act amended the EFTA by establishing 
a new consumer protection regime for remittance transfers sent by 
consumers in the United States to individuals and businesses in foreign 
countries. For covered transactions sent by remittance transfer 
providers, section 1073 created a new EFTA section 919 and generally 
requires: (i) The disclosure of the actual exchange rate and remitted 
amount to be received prior to and at the time of payment by the 
consumer; (ii) cancelation and refund rights; (iii) the investigation 
and remedy of errors by providers; and (iv) liability standards for 
providers for the acts of their agents. 15 U.S.C. 1693o-1.
    EFTA section 919 provides two exceptions to the requirement that 
providers disclose actual amounts.\3\ The first, the temporary 
exception, is an accommodation for insured depository institutions and 
credit unions, in apparent recognition of the fact that these 
institutions might need additional time to develop the necessary 
systems or protocols to disclose the exchange rates and/or covered 
third-party fees that might be imposed on a remittance transfer. The 
temporary exception permits an insured institution that is sending a 
remittance transfer from the sender's account to provide reasonably 
accurate estimates of the amount of currency to be received where that 
institution is ``unable to know [the amount], for reasons beyond its 
control'' at the time that the sender requests a transfer through an 
account held with the institution. EFTA section 919(a)(4)(A). The 
temporary exception sunsets five years from the date of enactment of 
the Dodd-Frank Act (i.e., July 21, 2015), but permits the Bureau to 
extend that date for no more than five years (i.e., July 21, 2020) if 
it determines that termination of the temporary exception would 
negatively affect the ability of depository institutions and credit 
unions to send remittance transfers. EFTA section 919(a)(4)(B).
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    \3\ Two additional permanent exceptions, in Sec.  1005.32(b)(2) 
and (b)(3) are discussed below.
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    The second statutory exception is permanent; it provides that if 
the Bureau determines that a recipient country does not legally allow, 
or that the method by which the transactions are made in the recipient 
country do not allow, a remittance transfer provider to know the amount 
of currency that will be received by the designated recipient, the 
Bureau may prescribe rules addressing the issue. EFTA section 919(c).

C. Remittance Rulemakings Under the Dodd-Frank Act

    The Bureau published three final rules in 2012 and two final rules 
in 2013 to implement section 1073 of the Dodd-Frank Act. These five 
final rules are summarized below.
The 2012 Final Rules
    The Board of Governors of the Federal Reserve System (the Board) 
first proposed in May 2011 to amend Regulation E to implement the 
remittance transfer provisions in section 1073 of the Dodd-Frank Act. 
76 FR 29902 (May 23, 2011). On February 7, 2012, the Bureau finalized 
the Board's proposal in the February 2012 Final Rule as authority to 
implement the new Dodd-Frank Act provisions amending the EFTA had 
transferred from the Board to the Bureau on July 21, 2011. See 12 
U.S.C. 5581(bb)(1); 12 U.S.C. 5481(12) (defining ``enumerated consumer 
laws'' to include the EFTA).
    The February 2012 Final Rule includes provisions that generally 
require a remittance transfer provider to provide to a sender a written 
pre-payment disclosure containing detailed information about the 
transfer requested by the sender, including, among other things, the 
exchange rate, certain fees and taxes, and the amount to be received by 
the designated recipient. In addition to the pre-payment disclosure, 
the provider also must furnish to a sender a written receipt when 
payment is made for the transfer. The receipt must include the 
information provided on the pre-payment disclosure, as well as 
additional information, such as the date of availability of the funds, 
the designated recipient's name and, if provided, contact information, 
and information regarding the sender's error resolution and 
cancellation rights. In some cases, providers may provide these 
disclosures orally or via text message. Sec.  1005.31(a)(3)-(5). As is 
noted below, the Bureau subsequently modified provisions regarding the 
disclosure of foreign taxes and certain recipient institution fees in 
its May 2013 Final Rule.
    The February 2012 Final Rule generally requires that disclosures 
state the actual exchange rate, if any, that will apply to the transfer 
and the actual amount that will be received by the designated recipient 
of a remittance transfer, unless an exception applies. Section 
1005.32(a) implements the temporary exception and the provision that is 
now Sec.  1005.32(b)(1) implements the permanent statutory exception. 
As adopted, this permanent exception permits a remittance transfer 
provider to

[[Page 23237]]

rely on a list of countries published by the Bureau to determine 
whether estimates may be provided.\4\
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    \4\ See http://files.consumerfinance.gov/f/201209_CFPB_Remittance-Rule-Safe-Harbor-Countries-List.pdf. The Bureau 
republished the list on November 3, 2013. 78 FR 66251 (Nov. 5, 
2013). The list contains countries whose laws the Bureau believes 
prevent providers from determining, at the time the required 
disclosures must be provided, the exact exchange rate for a transfer 
involving a currency exchange. However, if the provider has 
information that a country's laws or the method by which 
transactions are conducted in that country permit a determination of 
the exact disclosure amount, the provider may not rely on the 
Bureau's list. When the Bureau first issued the list of such 
countries on September 26, 2012, the Bureau stated that the list is 
subject to change, and invited the public to suggest additional 
countries to add to the list. The Bureau continues to accept comment 
on potential changes to this list.
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    The February 2012 Final Rule also implements EFTA sections 919(d) 
and (f), which direct the Bureau to promulgate error resolution 
standards and rules regarding appropriate cancellation and refund 
policies, as well as standards of liability for remittance transfer 
providers.
    The Bureau published an amendment to the February 2012 Final Rule 
on August 20, 2012.\5\ The amendments adopted in the August 2012 Final 
Rule include a safe harbor defining which persons are not remittance 
transfer providers for purposes of the Remittance Rule because they do 
not provide remittance transfers in the normal course of their 
business. The August 2012 Final Rule also modified several aspects of 
the February 2012 Final Rule by adding provisions governing remittance 
transfers that are scheduled before the date of transfer, including a 
provision allowing estimation for transfers scheduled before the date 
of transfer. See Sec.  1005.32(b)(2). The 2012 Final Rule originally 
had an effective date of February 7, 2013, but on January 29, 2013, the 
Bureau temporarily delayed the February 7, 2013 effective date. See 78 
FR 6025 (Jan. 29, 2013).
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    \5\ On July 10, 2012, the Bureau also published a technical 
correction to the February 2012 Final Rule. See 77 FR 40459 (July 
10, 2012).
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The 2013 Final Rule
    Following the publication of the February 2012 Final Rule, the 
Bureau engaged in dialogue with both industry and consumer groups 
regarding implementation efforts and compliance concerns. As an 
outgrowth of those conversations, the Bureau decided to propose 
amendments to specific aspects of the 2012 Final Rule in a notice of 
proposed rulemaking published on December 31, 2012. See 77 FR 77188 
(Dec. 31, 2012).
    The Bureau finalized these proposed amendments in the May 2013 
Final Rule. The May 2013 Final Rule modifies the 2012 Final Rule to 
make optional, in certain circumstances, the requirement to disclose 
fees imposed by a designated recipient's institution (referred to as 
non-covered third-party fees) and the requirement to disclose taxes 
collected by a person other than the remittance transfer provider. In 
place of these two former requirements, the May 2013 Final Rule 
requires, where applicable, disclaimers to be added to the rule's 
disclosures indicating that the recipient may receive less than the 
disclosed total due to the fees and taxes for which disclosure is now 
optional. The May 2013 Final Rule also created an additional permanent 
exception that allows providers to estimate, if they choose to, non-
covered third-party fees and taxes collected by a person other than the 
provider. See Sec.  1005.32(b)(3). Finally, the May 2013 Final Rule 
revised the error resolution provisions that apply when a remittance 
transfer is not delivered to a designated recipient because the sender 
provided incorrect or insufficient information. On August 14, 2013, the 
Bureau adopted a clarificatory amendment and a technical correction to 
the May 2013 Final Rule. 78 FR 49365 (Aug. 14, 2013). The 2013 Final 
Rule became effective on October 28, 2013.
Notice of Proposed Rulemaking Regarding Larger Participants
    Section 1024 of the Dodd-Frank Act establishes that the Bureau may 
supervise certain nonbank covered persons that are ``larger 
participants'' in consumer financial markets as defined by rule. 12 
U.S.C. 5514(a)(1)(B). Pursuant to this authority, the Bureau published 
a proposal on January 31, 2014, to identify a nonbank market for 
international money transfers and define ``larger participants'' of 
this market that would be subject to the Bureau's supervisory program. 
79 FR 5302. Specifically, the proposal would extend Bureau supervisory 
authority to any nonbank international money transfer provider that has 
at least one million aggregate annual international money transfers to 
determine compliance with, among other things, the Remittance Rule. The 
comment period on this proposal ended on April 1, 2014.\6\
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    \6\ The comments submitted regarding this proposed rule are 
available at https://federalregister.gov/a/2014-01606.
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D. Implementation Initiatives for the 2013 Final Rule and Related 
Activities

    The Bureau has been actively engaged in an initiative to support 
implementation of the 2013 Final Rule. For example, the Bureau has 
established a Web page that contains links to various industry and 
consumer resources.\7\ These resources include a small entity 
compliance guide that provides a plain-language summary of the 2013 
Final Rule and highlights issues that businesses, in particular small 
businesses, may want to consider when implementing the 2013 Final Rule. 
A video overview of the rule and its requirements is also available. 
Consumer resources the Bureau has created include answers to frequently 
asked questions regarding international money transfers and materials 
that consumer groups and other stakeholders can use to educate 
consumers about the new rights provided to them by the Remittance 
Rule.\8\ Some of these resources are available in languages other than 
English. The Bureau has also conducted media interviews in English and 
Spanish and participated in other public engagements to publicize the 
new consumer rights available under the Remittance Rule. Further, the 
Bureau provides ongoing guidance support to assist industry and others 
with interpreting the 2013 Final Rule and has spoken at conferences and 
other fora where it both provided additional guidance on the Remittance 
Rule and learned from providers and others about efforts to comply with 
the Rule.
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    \7\ Available at http://www.consumerfinance.gov/remittances-transfer-rule-amendment-to-regulation-e/.
    \8\ Available at http://www.consumerfinance.gov/blog/category/remittances/.
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III. Efforts To Reach a Preliminary Determination Regarding the 
Temporary Exception

    As noted, EFTA section 919(a)(4)(B) permits the Bureau to issue a 
rule to extend the temporary exception if it determines that the 
termination of the exception on July 21, 2015, would negatively affect 
the ability of insured institutions to send remittance transfers. In 
the February 2012 Final Rule, the Bureau noted that industry commenters 
urged the Bureau at that time to make the temporary exception 
permanent, or in the alternative, extend the exception to July 21, 
2020. The Bureau declined to extend the exception in the 2012 February 
Final Rule because it believed then that it would be premature to make 
a determination on the extension prior to the rule's release and 
implementation

[[Page 23238]]

and three years in advance of the July 2015 sunset date. See 77 FR 
6193, 6202.
    Since the Bureau issued the February 2012 Final Rule, the Bureau 
has supplemented its understanding of the remittance transfer market 
through information received in the course of subsequent rulemakings, 
additional research and monitoring of the market, and initiatives 
related to the implementation of the 2013 Final Rule. The additional 
research and monitoring have included series of in-depth conversations 
with several institutions about how they have implemented the 
requirements of the 2013 Final Rule, participation in industry 
conferences and related meetings, as well as related monitoring 
efforts. In addition and as noted above, Bureau staff conducted 
interviews with approximately 35 industry stakeholders and consumer 
groups after the Remittance Rule took effect.\9\ Through these 
interviews, the Bureau gathered information regarding remittance 
transfer providers' reliance on the temporary exception for certain 
remittance transfers and whether viable alternatives currently exist 
for those transfers. The Bureau conducted the interviews in order to 
build on the Bureau's existing knowledge and assist it in making a 
determination as to whether expiration of the temporary exception on 
July 21, 2015, would negatively affect the ability of insured 
institutions to send remittance transfers.\10\
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    \9\ The Office of Management and Budget (OMB) control number for 
this information collection is 3170-0032.
    \10\ See Consumer Finance Protection Bureau Request for Approval 
Under the Generic Clearance: Compliance Costs and Other Effects of 
Regulation, available at http://www.reginfo.gov/public/do/PRAViewIC?ref_nbr=201205-3170-003&icID=209232.
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    The remittance transfer providers and service providers that the 
Bureau contacted included community banks, nonbank money transmitters, 
regional banks, credit unions, nonbank service providers, correspondent 
banks, broker-dealers, and very large banks that send consumer 
remittance transfers on behalf of their retail customers and on behalf 
of other providers. For example, the Bureau contacted providers, such 
as broker-dealers, that the Bureau believed send transfers via open 
networks, similar to those used by many insured institutions.\11\ 
Although the temporary exception only applies to insured institutions, 
the Bureau believed that interviewing certain nonbank money 
transmitters that send open network transfers without the advantage of 
the temporary exception would help the Bureau better understand what 
methods exist for providing exact disclosures for open network 
transfers because nonbank money transmitters cannot rely on the 
temporary exception. The correspondent banks and other service 
providers the Bureau contacted include corporate credit unions, 
bankers' banks and foreign banks that offer correspondent banking 
services to U.S. providers, or act as intermediaries in the payment 
clearing and settlement chain. Insofar as the conversations were 
voluntary, the Bureau did not ultimately speak with every institution 
it contacted.
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    \11\ Staff of the Securities and Exchange Commission (SEC) wrote 
a no-action letter on December 14, 2012 that concludes it will not 
recommend enforcement actions to the SEC under Regulation E if a 
broker-dealer provides disclosures as though the broker-dealer were 
an insured institution for purposes of the temporary exception. The 
letter is available at http://www.sec.gov/divisions/marketreg/mr-noaction/2012/financial-information-forum-121412-rege.pdf.
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    As noted above, the Bureau has also reviewed data collected by the 
NCUA regarding remittance transfers through its Call Report and Credit 
Union Profile forms.\12\ These data regard the number and types of 
remittances sent by credit unions, the methods by which credit unions 
send remittance transfers, and the payment systems credit unions 
utilize to send remittance transfers. In addition, the Bureau expects 
to be able to review data about remittance transfer practices collected 
from depository institutions through the Federal Financial Institutions 
Examination Council (FFIEC)'s Consolidated Reports of Conditions and 
Income (FFIEC Call Report), starting with the reports regarding the 
quarter ending on March 31, 2014.\13\ Starting with the report for the 
quarter ending March 31, 2014, the FFIEC Call Report form will require 
reporting depository institutions to provide select information 
regarding remittance transfers including, as relevant here, information 
on the types of remittance transfers provided and, for institutions 
that provide more than 100 transfers per year, the number and dollar 
value of remittance transfers sent by the reporting institutions in 
their capacity as remittance transfer providers. The report will also 
include information on the frequency with which a reporting institution 
uses the temporary exception in its role as a provider.\14\
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    \12\ See generally http://www.ncua.gov/dataapps/qcallrptdata/Pages/default.aspx.
    \13\ See FDIC Fin. Inst. Letter 4-2014 (Jan. 24, 2014) (``FIL 4-
2014'').
    \14\ See 79 FR 2509 (Jan. 14, 2014); FIL 4-2014.
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    The Bureau notes that the NCUA and FFIEC call report data do not 
cover every practice or type of remittance transfer provider and 
service provider that the Bureau has researched through its market 
monitoring and research efforts. However, because some call report data 
regarding remittance transfers will be available for every depository 
institution and credit union reporting to the NCUA and FFIEC, 
respectively, the call reports will provide a valuable, if limited, set 
of comprehensive quantitative data about two categories of remittance 
transfer providers (depository institutions and credit unions) that 
complement the more in-depth qualitative information about certain 
providers and service providers that the Bureau has been able to gather 
through interviews and other sources. Furthermore, the Bureau notes 
that the extent of utilization of the temporary exception is not the 
only, nor necessarily the primary factor that it will consider in 
determining whether to extend the temporary exception under EFTA 
section 919(a)(4)(B).
    Finally, the Bureau also notes that its conversations included 
consultations with a number of consumer groups to attempt to identify 
the effect, if any, that estimating covered third-party fees and 
exchange rates has on consumers as well as the potential effect on 
consumers of the expiration of the temporary exception.

IV. Legal Authority

    Section 1073 of the Dodd-Frank Act created a new section 919 of the 
EFTA and requires remittance transfer providers to provide disclosures 
to senders of remittance transfers, pursuant to rules prescribed by the 
Bureau. As discussed above, the Dodd-Frank Act established a temporary 
exception in amending the EFTA such that, subject to rules prescribed 
by the Bureau, insured depository institutions and credit unions may 
provide estimates of the amount to be received where the remittance 
transfer provider is ``unable to know [the amount], for reasons beyond 
its control'' at the time that the sender requests a transfer to be 
conducted through an account held with the provider. EFTA section 
919(a)(4)(A). The Dodd-Frank Act further establishes that the exception 
shall terminate five years from the date of enactment of the Dodd-Frank 
Act (i.e., July 21, 2015), unless the Bureau determines that the 
termination of the exception would negatively affect the ability of 
depository institutions and credit unions to send remittance transfers, 
in which case the Bureau may extend the application of the exception to 
not longer than ten years after the enactment of the Dodd-Frank Act 
(i.e.,

[[Page 23239]]

July 21, 2020). EFTA section 919(a)(4)(B).
    In addition, EFTA section 919(d) provides for specific error 
resolution procedures and directs the Bureau to promulgate rules 
regarding appropriate cancellation and refund policies. Finally, EFTA 
section 919(f) requires the Bureau to establish standards of liability 
for remittance transfer providers, including those providers that act 
through agents. Except as described below, the proposed rule is 
proposed under the authority provided to the Bureau in EFTA section 
919, and as more specifically described in this Supplementary 
Information.

V. Section-by-Section Analysis

Section 1005.30 Remittance Transfer Definitions

1005.30(c) Designated Recipient & 1005.30(g) Sender
Application of the Remittance Rule to U.S. Military Installations 
Abroad
    The 2013 Final Rule only applies when a sender located in a 
``State'' sends funds to a designated recipient at a location in a 
``foreign country.'' \15\ See Sec.  1005.30(c) and (g). The commentary 
to the definition of designated recipient further explains that receipt 
of money at a location in a foreign country depends on whether the 
funds are received at a location physically outside of any State. See 
comment 30(c)-2.i. In the case of remittance transfers to or from an 
account, however, the 2013 Final Rule and commentary look to the 
location of the account rather than the account owner's physical 
location at the time of transfer. See comment 30(c)-2.ii (whether 
location is in a foreign country); comment 30(g) (whether consumer is 
located in a State). The Bureau understands that there is a potential 
for confusion about how these concepts in the 2013 Final Rule apply to 
transfers of funds to and from U.S. military installations that are 
within foreign countries because the 2013 Final Rule does not expressly 
address such transfers.
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    \15\ Under the 2013 Final Rule, a ``designated recipient'' is 
any person specified by the sender as the authorized recipient of a 
remittance transfer to be received at a location in a foreign 
country (Sec.  1005.30(c)) and a ``sender'' is a consumer in a State 
who primarily for personal, family, or household purposes requests a 
remittance transfer provider to send a remittance transfer to a 
designated recipient (Sec.  1005.30(g)).
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    According to a 2010 Department of Defense report, the United States 
had 662 military installations in 90 foreign countries.\16\ Many of 
these installations, particularly larger installations and those in 
more remote locations, host financial institutions that provide 
services for the electronic transfer of funds. These financial 
institutions may include depository institutions, credit unions, and 
agents of nonbank money transmission businesses. The Bureau understands 
that, typically, these depository institutions or credit unions are 
branches of U.S. institutions operating under U.S. banking and other 
laws, and that servicemembers (and others) may establish accounts at 
such institutions in the United States. The Bureau does not know, 
however, whether any particular institution might be subject to a host 
country's banking laws and believes that this may vary depending on the 
host country and the agreement that allows the U.S. military 
installation to operate in that country. The Bureau understands that 
these institutions may offer account-to-account transfers to or from 
accounts that may be located in the United States or abroad, as well as 
cash-based transfers.
---------------------------------------------------------------------------

    \16\ Available at http://www.acq.osd.mil/ie/download/bsr/bsr2010baseline.pdf.
---------------------------------------------------------------------------

    The Bureau understands that further guidance or clarity regarding 
the treatment of U.S. military installations abroad may be useful, 
particularly when cash transfers are sent to and from U.S. military 
bases abroad. For example, there could be confusion as to whether the 
Remittance Rule applies when a consumer in the United States sends a 
cash transfer to be picked up by a recipient at a financial institution 
on a foreign military base. Depending on whether the financial 
institution is deemed to be at a location in a ``foreign country'' or a 
``State,'' the 2013 Final Rule may or may not apply. There might also 
be confusion about whether a cash transfer from a consumer on a foreign 
military installation to a recipient in the surrounding country would 
be subject to the rule, again depending on whether the foreign military 
installation is deemed to be in a ``State.''
    The Bureau notes, however, that the application of the Remittance 
Rule could be different for transfers from accounts of persons 
stationed at U.S. military installations abroad. When a transfer is 
made from such an account, whether the sender is located in a State is 
determined by the location of the sender's account rather than the 
physical location of the sender at the time of the transaction. See 
comment 30(g)-1. Similarly, whether or not the Remittance Rule applies 
to transfers from the United States to accounts of different persons 
stationed at U.S. military installations abroad could differ, depending 
on the locations of those recipients' accounts. Thus, there may also be 
confusion as to whether the Remittance Rule applies when a transfer is 
sent from an account in the United States to an account located at a 
U.S. military installation abroad, to the extent such accounts exist. 
The Bureau lacks data regarding the number of servicemembers and other 
individuals who have accounts that are considered to be located on a 
U.S. military installation abroad.
    As the Remittance Rule does not directly address transfers to and 
from foreign military installations and in light of the uniqueness of 
U.S. military installations, the Bureau seeks comment on whether and 
how it should clarify the application of the Remittance Rule to 
transfers to and from individuals and/or accounts located on U.S. 
military installations abroad.
    The Bureau recognizes that each alternative (either considering the 
military installations to be in a State, or not) may entail providing 
the rule's consumer protections to some transfers instead of others. 
For example, if locations on these installations are treated as being 
located in a State for purposes of the rule, those sending remittance 
transfers from the United States to locations on the installation would 
not receive the consumer protections of the rule. On the other hand, 
those sending funds from locations on the installations to the 
surrounding foreign country would receive these protections. Of course, 
if locations on military installations are treated as being located 
within a foreign country, the reverse would be true: Transfers from the 
United States would be covered, but transfers to the surrounding 
foreign country would not be.
    As a result, the Bureau seeks comment on whether or not it is 
appropriate or advisable to treat locations on U.S. military 
installations abroad as being located within a State or a foreign 
country for the purposes of subpart B of Regulation E. The Bureau also 
seeks data on the relative number of transfers sent to and from 
individuals and/or accounts located on U.S. military installations 
abroad so it can better understand the relative consumer protections of 
each approach. In addition, the Bureau seeks comment on the 
appropriateness of extending any clarification regarding U.S. military 
installations to apply to other U.S. government installations abroad, 
such as U.S. diplomatic missions.
Non-Consumer Accounts
    The 2013 Final Rule applies only when the remittance transfer is 
requested by a consumer primarily for

[[Page 23240]]

personal, family, or household purposes. See Sec.  1005.30(e) 
(definition of ``remittance transfer'') and (g) (definition of 
``sender''). This qualification is similar to that of subpart A of 
Regulation E, which applies with respect to accounts only when they are 
established primarily for personal, family, or household purposes. See 
Sec.  1005.2(b)(1) (definition of ``account''); Sec.  1005.3 (coverage 
and definition of ``electronic fund transfer'').
    The term account as defined in Regulation E does not include 
accounts held by a financial institution under a bona fide trust 
agreement, and the commentary to subpart A of Regulation E explains 
that certain types of accounts, including profit-sharing and pension 
accounts established under a trust agreement, escrow accounts, and 
accounts for accumulating funds to purchase U.S. savings bonds are also 
not accounts under Regulation E. Sec.  1005.2(b)(3); comment 2(b)-3. 
Furthermore, EFTA, and thus subpart A of Regulation E, applies only to 
personal accounts, not business accounts. See Sec.  1005.2(b)(1); 15 
U.S.C. 1693a(2) (the term `` `[a]ccount' means a demand deposit 
(checking), savings deposit, or other consumer asset account . . . 
established primarily for personal, family, or household 
purposes[]'').\17\
---------------------------------------------------------------------------

    \17\ See also Shames-Yeakel v. Citizens Fin. Bank, 677 F. Supp. 
2d 994, 1006-07 (N.D. Ill. 2009) (distinguishing two types of 
accounts under the EFTA); Ironforge.com v. Paychex, Inc., 747 F. 
Supp. 2d 384, 402 (W.D.N.Y. 2010) (same).
---------------------------------------------------------------------------

    When developing the Remittance Rule, the Board had initially 
proposed defining a sender to be a consumer in a State who requests a 
remittance transfer provider to send a remittance transfer to a 
designated recipient. 76 FR 29902, 29939 (proposed 12 CFR 205.30(f)). 
In response, several commenters suggested that the Bureau limit 
remittance transfers to those sent for personal, family, or household 
purposes. Although subpart A of Regulation E's applicability is 
generally limited to transactions to or from consumer asset accounts, 
that limitation is contained in the definition of ``account'' in Sec.  
1005.2(b), while the Remittance Rule applies to more than just account-
based transfers (e.g., cash transfers sent by a money transmitter). As 
a result, these commenters stated that an individual who requests a 
non-account based transfer for business purposes could arguably be a 
``sender'' under the proposed rule.
    To address these concerns, the Bureau adopted in the February 2012 
Final Rule the present definition of ``sender'' in Sec.  1005.30(g) to 
clarify that a sender is a consumer in a State who primarily for 
personal, family, or household purposes requests a remittance transfer 
provider to send a remittance transfer to a designated recipient. The 
Bureau had noted that this revision was consistent with Sec.  1005.2(b) 
and therefore the 2012 February Final Rule would not apply to business-
to-consumer or business-to-business transactions or to transactions 
that are not for personal, family or household purposes. The Bureau 
noted that, for example, a transfer requested by a sole proprietor on 
behalf of his or her company would not be covered by the rule. 77 FR at 
6214.
    Despite this clarification, the Bureau believes that additional 
clarification may still be needed regarding treatment of transfers from 
accounts, as defined in Regulation E. Specifically, the Bureau 
understands that there may be some confusion regarding whether the 
purpose of a transfer from an account is determined by the purpose for 
which the account was established or the purpose of the particular 
transfer. The Bureau believes that, for purposes of Regulation E, 
financial institutions often code accounts as being consumer accounts 
(generally subject to Regulation E) as opposed to business accounts 
(not subject to Regulation E). Therefore, it could be confusing if 
providers were required to treat some transfers from business accounts 
as consumer transactions subject to subpart B of Regulation E but not 
to subpart A of Regulation E. It might be similarly confusing if some 
transfers from consumer accounts were treated as business transactions 
not subject to Regulation E. At the same time, the Bureau believes that 
judged on a transaction-by-transaction basis some transfers from 
business accounts might be understood to be sent for personal, family, 
or household purposes, and that some transfers from consumer accounts 
may be understood to be sent for business purposes.
    The Bureau thus believes it is appropriate to clarify that the 2013 
Final Rule applies to transfers from accounts primarily used for 
personal, family, or household purposes, but not to transfers from non-
consumer accounts. The Bureau believes that, at least since the 2013 
Final Rule went into effect, remittance transfer providers have 
considered all transfers from business accounts to be outside the scope 
of the Rule. In addition, Bureau staff has provided similar informal 
guidance on this issue. The Bureau believes that the additional, 
proposed commentary will clarify that, like subpart A, subpart B of 
Regulation E does not apply to non-consumer accounts.
    To clarify this in the commentary to the Remittance Rule, the 
Bureau is proposing to add comment 30(g)-2, which would explain that 
under Sec.  1005.30(g), a consumer is a ``sender'' only where he or she 
requests a transfer primarily for personal, family, or household 
purposes. A consumer who requests a transfer primarily for other 
purposes, such as business or commercial purposes, is not a sender 
under Sec.  1005.30(g). For remittance transfers from an account, the 
primary purpose for which the account was established determines 
whether a transfer from that account is requested for personal, family, 
or household purposes. A transfer that is sent from an account that was 
not established primarily for personal, family, or household purposes, 
such as an account that was established as a business or commercial 
account or an account owned by a business entity such as a corporation, 
not-for-profit corporation, professional corporation, limited liability 
company, partnership, or sole proprietorship, is not requested 
primarily for personal, family, or household purposes. A consumer 
requesting a transfer from such an account therefore is not a sender 
under Sec.  1005.30(g).

Section 1005.31 Disclosures

31(a) General Form of Disclosures
31(a)(2) Written and Electronic Disclosures
    Although the 2013 Final Rule requires that disclosures required by 
subpart B generally be provided to the sender in writing, Sec.  
1005.31(a)(2), it does not specify what qualifies as a writing (except 
to state that written disclosures may be provided on any size of paper, 
as long as the disclosures are clear and conspicuous, see comment 
31(a)(2)-2)). During its implementation and market monitoring efforts, 
the Bureau has come to understand that some senders request remittance 
transfers by sending a fax to a remittance transfer provider 
instructing the provider to process the transfer. Similarly, in some 
cases, the provider may send the required disclosures back to the 
sender via fax as well.
    Although the Remittance Rule does not specifically address 
disclosures provided pursuant to Sec.  1005.31 or .36 by fax, Bureau 
staff has noted in informal guidance that disclosures made by fax 
should be considered to be in writing under the Remittance Rule since 
such disclosures are generally received on paper in a form the sender 
can retain. The Bureau proposes to adopt this interpretation in the 
Remittance Rule.

[[Page 23241]]

Thus, the Bureau is proposing a new comment 31(a)-5, which would 
explain that, for purposes of disclosures required to be provided 
pursuant to Sec.  1005.31 or Sec.  1005.36, disclosures provided by 
facsimile transmission (i.e., fax) are considered to be provided in 
writing and not subject to the additional requirements for electronic 
disclosures set forth in Sec.  1005.31(a)(2).
    The Bureau does not believe that treating faxes as writings will 
have any significant negative impact on the benefits consumers derive 
from the Remittance Rule both because many consumers have long 
communicated with remittance transfer providers via fax and those 
consumers accept faxes as a legitimate and efficient method of 
communication. Thus, the Bureau believes it appropriate to treat faxes 
as a writing for purposes of providing the disclosures required by 
subpart B of Regulation E.
31(a)(3) Disclosures for Oral Telephone Transactions
    Section 1005.31(a)(3) permits providers to make pre-payment 
disclosures orally if the ``transaction is conducted orally and 
entirely by telephone'' and if certain other language and disclosure 
requirements are met. The Bureau recognizes that senders make requests 
to remittance transfer providers to send a remittance transfer in many 
different forms. For example, the Bureau understands that senders may 
send a provider a fax, email, or mailed letter requesting a remittance 
transfer, often because a telephone request or a visit to a branch or 
agent location is impractical (e.g., because the sender is abroad and 
the provider requires a signature to authorize the transfer). In some 
circumstances, depending on the nature of the request and the location 
of the sender, providers have explained that it may be impractical for 
them to communicate back to the sender via that same means of 
communication because the sender is far away. For example, if a 
provider receives a mailed request to send a remittance transfer, a 
provider might find it impractical to send the pre-payment disclosure 
or combined disclosure to a sender via the mail and then wait for an 
acknowledgement from the sender, particularly when the disclosure of an 
exchange rate is involved.
    Under the 2013 Final Rule, a remittance transfer provider may be 
uncertain as how to provide meaningful and compliant pre-payment 
disclosures to a sender that is neither physically present nor in 
``real time'' communication with a provider's staff. Section 
1005.31(e)(1) states that a provider must provide the pre-payment 
disclosure when the sender requests the remittance transfer, but prior 
to payment for the transfer. As a result, in such circumstances, 
senders seeking to initiate a remittance transfer by email, fax, or 
mailed letter may benefit from receiving pre-payment disclosures from 
the provider sooner via a telephone call rather than waiting for 
written or electronic disclosures to be sent. Additionally, providers 
may frequently need to call senders who send remote and/or time-delayed 
requests for remittance transfers to confirm various details such that 
the telephone call would occur in the ordinary course.
    In response to inquiries concerning the application of the rule in 
these circumstances, Bureau staff has explained in informal guidance 
that it believes that the Remittance Rule's provisions allowing 
disclosure orally by telephone can, in some cases, be applied to 
remittance transfers that senders first initiate by fax, mail, or email 
if the requirements for disclosures for oral transactions are met. See 
Sec.  1005.31(a)(3). Consistent with that informal staff guidance, the 
Bureau is now proposing to revise comment 31(a)(3)-2 to clarify further 
when a transaction is conducted orally and entirely by telephone under 
Sec.  1005.31(a)(3). Comment 31(a)(3)-2 currently explains that Sec.  
1005.31(a)(3) applies to transactions conducted orally and entirely by 
telephone, such as transactions conducted orally on a landline or 
mobile telephone.
    The Bureau is proposing to add to comment 31(a)(3)-2 that a 
remittance transfer provider may treat a written or electronic 
communication as an inquiry when it believes that treating the 
communication as a request would be impractical. For example, if a 
sender physically located abroad contacts a U.S. branch of the sender's 
financial institution and attempts to initiate a remittance transfer by 
first sending a mailed letter, further communication with the sender by 
letter may be may be judged impractical due to the physical distance 
and likely mail delays. In such circumstances, a provider may conduct 
the transaction orally and entirely by telephone pursuant to Sec.  
1005.31(a)(3) when the provider treats that initial communication as an 
inquiry and subsequently responds to the consumer's inquiry by calling 
the consumer on a telephone and orally gathering or confirming the 
information needed to identify and understand a request for a 
remittance transfer and otherwise conducts the transaction orally and 
entirely by telephone.
    To accommodate this change, the Bureau is also proposing conforming 
edits to comments 31(a)(3)-1 and 31(e)-1. Comment 31(a)(3)-1 explains 
when a transaction is conducted partially by telephone and currently 
explains that a transaction cannot be started in person and then 
completed by telephone. The proposed change would make clear that 
comment 31(a)(3)-2 states an alternate situation. Unlike a transaction 
started in person and completed on the telephone, a transaction that a 
sender attempts to initiate with a method of communication that the 
provider believes would be impractical to use to complete the 
transaction, has not actually started, insofar as the provider treats 
that initial communication as an inquiry and otherwise conducts the 
transaction orally and entirely by telephone as contemplated in 
proposed comment 31(a)(3)-2.
    As finalized in the May 2013 Final Rule, comment 31(e)-1 explains 
when a remittance transfer provider is required to provide pre-payment 
and combined disclosures to the sender. To accommodate the proposed 
revision to comment 31(a)(3)-2, the Bureau proposes to add to comment 
31(e)-1 the following: For example, a sender that has sent an email, 
fax, mailed letter, or similar written or electronic communication has 
not requested a remittance transfer if the provider believes that it is 
impractical to treat that communication as a request and if the 
provider treats the communication as an inquiry and subsequently 
responds to that inquiry by calling the consumer on a telephone and 
orally gathering or confirming the information needed to process a 
request for a remittance transfer. See comment 31(a)(3)-2.
    The Bureau recognizes that allowing oral disclosures in the cases 
contemplated by the proposed comments could result in senders sometimes 
not receiving written disclosures prior to authorizing a remittance 
transfer. The Bureau seeks comment on the relative tradeoffs of the 
various potential approaches to remittance transfers requested in these 
and similar circumstances.
31(b) Disclosure Requirements
31(b)(2) Receipt
    In the February 2012 Final Rule, the Bureau stated that it was 
appropriate for remittance transfer providers to provide the Bureau's 
contact information on receipts required by the Remittance Rule, even 
in instances where the Bureau is not the provider's primary Federal 
regulator, as required by EFTA

[[Page 23242]]

section 919(a)(2)(B)(ii)(II)(bb). Therefore, Sec.  1005.31(b)(2)(vi) in 
the 2013 Final Rule required a provider to disclose the contact 
information for the Bureau, including the Bureau's Web site and its 
toll-free telephone number. Although the rule did not specify which 
Bureau Web site should be provided on receipts, the Model Forms 
published by the Bureau all listed the Bureau's Internet homepage--
www.consumerfinance.gov. See Model Forms A-31, A-32, A-34, A-35, A-39, 
and A-40 of appendix A.
    The Bureau is in the process of creating a single page that 
contains resources relevant to international money transfers at 
www.consumerfinance.gov/sending-money. The Bureau is also developing a 
Spanish language Web site that will have resources relevant to 
international money transfers at www.consumerfinance.gov/enviar-dinero.\18\ The Bureau believes that remittance transfer providers may 
want to use one of these Web sites, as appropriate, on receipts 
provided to senders so that senders can more easily find relevant 
Bureau resources or such resources in Spanish when the provider 
provides the receipt in Spanish. The Bureau seeks comment on whether it 
should create versions of this Web site in languages other than English 
and Spanish.
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    \18\ Although under development, the Bureau expects these pages 
to contain information regarding consumers' rights under the 
Remittance Rule, how consumers can use the receipts that they 
receive from providers, and how and when to lodge a complaint with 
the Bureau. The Bureau expects that the English and Spanish versions 
of this Web site will be available by the time that the Bureau 
finalizes this proposal.
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    Therefore, the Bureau proposes to add comment 31(b)(2)-4 to explain 
how remittance transfer providers may satisfy the requirement to 
disclose the Bureau's Web site. The proposed comment would state that 
Sec.  1005.31(b)(2)(vi) requires a provider to disclose the name, toll-
free telephone number(s), and Web site of the Consumer Financial 
Protection Bureau. Providers may satisfy this requirement by disclosing 
the Web site of the Consumer Financial Protection Bureau's homepage 
shown on Model Forms A-31, A-32, A-34, A-35, A-39, and A-40 of appendix 
A. Alternatively, providers may, but are not required to, disclose the 
Bureau's Web site as the address of a page on the Bureau's Web site 
that provides information for consumers about remittance transfers, 
currently, www.consumerfinance.gov/sending-money. In addition, 
providers making disclosures in a language other than English pursuant 
to Sec.  1005.31(g) may, but are not required to, disclose a Bureau Web 
site that provides information for consumers about remittance transfers 
that is in the relevant language, if such Web site exists. For example, 
a provider that is making disclosures in Spanish under Sec.  1005.31(g) 
may, but is not required to, disclose the Bureau's Web site on Spanish-
language disclosures as the page on the Bureau's Web site that provides 
information about remittance transfers in Spanish, currently, 
www.consumerfinance.gov/enviar-dinero.
    While disclosure of a Bureau Web site remains a requirement of the 
Remittance Rule, adoption of this proposed comment would not require 
remittance transfer providers to change existing receipts that mirror 
the Bureau's current model forms and link to www.consumerfinance.gov if 
the provider did not choose to make this change. Nevertheless, if this 
proposed comment is adopted, the Bureau would urge providers to 
consider adjusting their receipts to refer to these other Web sites, as 
appropriate, in the future and may eventually consider requiring 
providers to do so if, for instance, the Bureau were to conclude that 
other changes to the receipts were necessary.
    To accommodate new proposed comment 31(b)(2)-4, the Bureau proposes 
to renumber current comments 31(b)(2)-4, -5, and -6 as comments 
31(b)(2)-5, -6, and -7, respectively, without any other changes.

Section 1005.32 Estimates

32(a) Temporary Exception for Insured Institutions
    As noted above, the EFTA, as amended by the Dodd-Frank Act, 
generally establishes that disclosures provided to senders by 
remittance transfer providers must state, among other things, the 
actual exchange rate and amount to be received by the designated 
recipient. EFTA section 919 provides two exceptions to the requirement, 
one of which is the temporary exception in EFTA section 919(a)(4), 
which expires on July 21, 2015. EFTA section 919(a)(4)(B), in turn, 
permits the Bureau to issue a rule to extend the temporary exception up 
to five more years, to July 21, 2020, if it determines that the 
termination of the temporary exception on July 21, 2015, would 
negatively affect the ability of insured institutions to send 
remittance transfers.
    To implement EFTA section 919(a)(4), the Bureau adopted Sec.  
1005.32(a) in the February 2012 Final Rule. Section 1005.32(a)(1), as 
amended by the May 2013 Final Rule, provides that, when three 
conditions are met, the remittance transfer provider may provide 
estimates instead of actual amounts for the following: (1) The exchange 
rate used by the provider; (2) the total amount, in the currency in 
which the funds will be received, that will be transferred to the 
designated recipient inclusive of covered third-party fees imposed on 
the transfer amount, if any; (3) any covered third-party fees, in the 
currency in which the funds will be received by the designated 
recipient; and (4) the amount that will be received by the designated 
recipient, in the currency in which the funds will be received (i.e., 
the amount received after deducting covered third-party fees).
    Consistent with the statute, the three conditions that must be met 
before a remittance transfer provider can provide an estimate pursuant 
to the temporary exception are: (1) The remittance transfer provider 
cannot determine the exact amounts for reasons beyond its control; (2) 
the provider is an insured institution; and (3) the remittance transfer 
is sent from the sender's account with the institution. Sec.  
1005.32(a)(1). The Remittance Rule explains that insured depository 
institutions, insured credit unions, and uninsured U.S. branches and 
agencies of foreign depository institutions are considered ``insured 
institutions'' for purposes of the temporary exception.\19\ Sec.  
1005.32(a)(3). Comment 32(a)(1)-1 explains that an insured institution 
cannot determine exact amounts ``for reasons beyond its control'' when 
a person other than the insured institution, or a person with which the 
insured institution has no correspondent relationship, sets the 
exchange rate or imposes a covered third-party fee. Comments 32(a)(1)-2 
and -3 provide, respectively, examples of scenarios that qualify and 
fail to qualify for the temporary exception.
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    \19\ Accordingly, for purposes of the discussion of the 
temporary exception, remittance transfer providers eligible to rely 
on the temporary exception are generally referred to herein as 
``insured institutions.''
---------------------------------------------------------------------------

    Related to Sec.  1005.32(a), the Bureau adopted Sec.  1005.32(c), 
enumerating the list of approaches remittance transfer providers can 
use to estimate exchange rates and fees pursuant to the temporary 
exception and the permanent exception. See Sec.  1005.32(a) and (b)(1). 
Section 1005.32(c)(1) provides that with respect to the disclosure of 
exchange rates, the estimation methods are: (1) For certain remittance 
transfers sent via international ACH, the most recent exchange rate set 
by the recipient

[[Page 23243]]

country's central bank or other governmental authority and reported by 
a Federal Reserve Bank; (2) the most recent publicly available 
wholesale exchange rate and, if applicable, any spread that the 
provider or its correspondent typically applies to such a wholesale 
rate for remittance transfers for that currency; and (3) the most 
recent exchange rate offered or used by the person making funds 
available directly to the designated recipient or by the person setting 
the exchange rate. Section 1005.32(c)(3)(ii) provides the following 
estimation methods with respect to covered third-party fees imposed by 
intermediary institutions or the designated recipient's institution: 
(1) The provider's most recent remittance transfer to the designated 
recipient's institution; or (2) a representative transmittal route 
identified by the provider. Under Sec.  1005.32(c), providers also have 
the option to use an alternative approach to estimate exchange rates 
and covered third-party fees so long as the designated recipient 
receives the same, or greater, amount of funds as compared to the 
amount disclosed to the sender pursuant to the Remittance Rule (catch-
all method).\20\
---------------------------------------------------------------------------

    \20\ As amended by the May 2013 Final Rule, providers are not 
required to use the estimation methods in Sec.  1005.32(c)(3)(ii) or 
the catch-all method to estimate non-covered third-party fees and 
taxes collected on the remittance transfer by a person other than 
the provider when a provider chooses to disclose these amounts. 
Instead, pursuant to Sec.  1005.32(b)(3), such estimates simply have 
to be based on ``reasonable sources of information.'' For a list of 
such information, see comment 32(b)(3)-1.
---------------------------------------------------------------------------

General Findings From Interviews and Other Outreach Initiatives
    To determine if the statutory predicate to extending the temporary 
exception exists, namely, that sunset of the exception would negatively 
affect insured institutions' ability to send remittance transfers, the 
Bureau endeavored to understand how insured institutions are providing 
remittance transfers from accounts, how, whether, when, and why they 
are using the temporary exception, and, to the extent insured 
institutions are using the exception, whether its expiration would 
negatively affect these institutions' ability to continue sending those 
remittance transfers for which they now use the temporary exception. 
The Bureau also sought to understand the impact on consumers of the 
temporary exception and its potential expiration.
    As is explained above, the Bureau used information from a variety 
of sources to enhance its understanding of the above issues. These 
included interviews with banks and credit unions of various sizes, 
including community banks, nonbank money transmitters, nonbank service 
providers, correspondent banks, broker-dealers, and very large banks 
that send consumer remittance transfers on behalf of their retail 
customers and on behalf of other providers. The Bureau has not, 
however, spoken with all or a majority of entities involved in sending 
remittance transfers. The Bureau believes that despite the relatively 
small sample size of its informal interviews, the process undertaken 
provides significant insights. This is in part because the Bureau 
believes it spoke with entities responsible for sending or providing 
information to those entities sending a large portion of remittance 
transfers that could qualify for the temporary exception.
    Nonetheless, the Bureau recognizes that this summary of market 
practice may not accurately represent all details of either how insured 
institutions send remittance transfers from accounts, or how other 
institutions send open network transfers. Thus, the Bureau seeks 
comments on the accuracy of its findings about how these providers send 
these remittance transfers as well as any insights or data on 
remittance transfers not reflected here. The Bureau also seeks comment 
regarding the consumer impact of providing estimated disclosures, 
including whether and the extent to which consumers have received 
estimates that are different from actual exchange rates and amounts 
received by the designated recipient, and other potential harm or 
hardships caused by the disclosure of estimates pursuant to the 
temporary exception.
Industry Implementation of the Remittance Rule
    As noted earlier, the Bureau believes that the great majority of 
remittance transfers sent by insured institutions from accounts are 
wire transfers, which are typically considered to be open network 
transfers. The Bureau believes that ACH transfers are used by a limited 
number of insured institutions sending remittance transfers to a 
limited number of foreign countries, and that only a few insured 
institutions use closed networks for remittance transfers from 
accounts. These institutions typically send international wires as 
well.
    With regard to wire transfers, the Bureau believes that the 
majority of insured institutions providing remittance transfers from 
accounts get the necessary information about exchange rates and covered 
third-party fees (hereinafter, the covered information) from service 
providers (including correspondent banks and nonbank service providers 
offering specialized international transfer services); those 
intermediary service providers, in turn, may rely on other entities to 
generate the information about covered third-party fees and, often, 
exchange rates.\21\ Indeed, many insured institutions, and small 
institutions in particular, rely almost entirely on intermediary 
service providers to provide a complete solution for complying with the 
requirements of the Remittance Rule that integrates with the 
institutions' existing system.
---------------------------------------------------------------------------

    \21\ For purposes of this discussion and unless otherwise noted, 
the term service provider refers to the entity that is generating 
the information and/or sending the remittance transfer.
---------------------------------------------------------------------------

    The Bureau believes that the market for covered information has 
developed in such a way that much of the information EFTA section 919 
and the 2013 Final Rule require providers to disclose is originally 
generated by a limited number of entities acting as information 
aggregators for providers that are sending wire transfers. The 
information generated by these information aggregators may be exact fee 
and exchange rate figures or it may be estimates of these amounts 
(presumably determined pursuant to one of the methods of estimation 
permitted by the Remittance Rule). In the remittance transfer market, 
these information aggregators may act as remittance transfer providers 
themselves (i.e., they may originate remittance transfers for their own 
consumer clients), or may exclusively act as service providers.
    Based on its outreach efforts, the Bureau understands that insured 
institutions that are remittance transfer providers have, for the most 
part, already invested significant time and energy in compliance with 
the requirements of the Remittance Rule whether they are providing 
exact disclosures or using the temporary exception. Moreover, most 
institutions reported that, where possible, they provided exact 
disclosures and only rely on the temporary exception where they deemed 
it necessary to do so. Indeed, the Bureau's understanding of the market 
indicates that insured institutions are typically disclosing exact 
amounts where they believe they are able to do so, even though they 
might have additional flexibility pursuant to the temporary exception 
to estimate some disclosed amounts in certain cases had they developed 
different compliance solutions. This is a significant change from what 
those same insured institutions generally did before the effective date 
of the 2013 Final Rule,

[[Page 23244]]

when Federal law did not generally require price disclosures for 
remittance transfers. To the extent that insured institutions provided 
disclosures before October 28, 2013, we believe these institutions 
generally did not disclose, or have access to, all of the information 
required to be disclosed by the 2013 Final Rule.
    Thus, to prepare for the Remittance Rule's effective date, many 
insured institutions (and/or the service providers on which they rely) 
had to engage in preparations including changes in operations and 
systems, to be able to provide the required disclosures. Such changes 
might have included, for example, changing their correspondent banking 
relationships, establishing or expanding other relationships with new 
foreign and domestic institutions, and enhancing their information 
gathering capabilities. Furthermore, the Bureau understands that 
because the temporary exception is set to expire less than two years 
after the effective date of the 2013 Final Rule absent Bureau action, 
some insured institutions (and/or service providers) have been 
investing in the development of long-term solutions that would allow 
them to provide senders with exact fee and exchange rate amounts for an 
increasing percentage of their remittance transfers. In sum, although 
significant work remains, the Bureau believes that the majority of the 
insured institutions the Bureau spoke with that are using the exception 
have been working and are continuing to work to provide accurate 
disclosures in as many cases as possible.
    Notwithstanding the significant progress these institutions have 
made, insured institutions and their service providers report that they 
continue to face formidable challenges in attempting to expand their 
access to covered information. As a result and as explained in greater 
detail below, the Bureau believes that both small and large insured 
institutions continue to rely on the temporary exception for transfers 
from accounts when they believe fee and exchange rate information is 
not readily available. These institutions have indicated to the Bureau 
that they are unlikely to find an alternative to their reliance on the 
temporary exception by July 21, 2015, for at least some portion of the 
remittance transfers for which they currently use the temporary 
exception. The Bureau has preliminarily determined, therefore, that 
these institutions' ability to send remittance transfers would be 
negatively impacted if the temporary exception is not extended.
Current Industry Practice--Exchange Rates
    As noted, the Bureau conducted outreach on how insured institutions 
disclose exchange rates where necessary and whether these insured 
institutions are using the temporary exception to do so. The Bureau 
understands that use of the temporary exception for estimating the 
foreign exchange rate is quite limited--most insured institutions and 
service providers told the Bureau that they are not using it, or that 
they are using it less frequently to estimate exchange rates than they 
do to estimate covered third-party fees. Most companies with which the 
Bureau spoke stated that when the 2013 Final Rule requires disclosure 
of an exchange rate, they are able to disclose an exact exchange rate 
in most cases and for most currencies in which their customers seek to 
send remittance transfers.
    In addition, the Bureau has learned that, as a result of the 2013 
Final Rule's disclosure requirements, a possibly substantial portion of 
insured institutions have changed their business practices: prior to 
the rule, those institutions sent out wires denominated in U.S. 
dollars, even when they knew those wires might be sent to accounts 
denominated in a foreign currency (and, thus, that the currency would 
be exchanged before being deposited into the recipient's account). As a 
result of the 2013 Final Rule, the Bureau believes some of these 
institutions are now offering to send wires denominated in the 
appropriate foreign currency by obtaining an exchange rate from service 
providers.
    In general, remittance transfer providers either generate an 
exchange rate in-house or obtain one from a service provider (which may 
be one of the limited number of information aggregators described above 
or some other entity). Some insured institutions reported that service 
providers provide them with exchange rates that are fixed for a certain 
time (such as from a rate sheet provided at the start of each day). 
Other insured institutions stated that they receive exchange rates from 
the service provider at the time of each sender's request. In either of 
these cases, the insured institutions disclose to their customers an 
exact rate equal either to the rate provided by the service provider or 
that rate plus a spread applied by the insured institution. Thus, for 
these remittance transfers, providers cannot use (and do not need to 
use) the temporary exception to disclose an estimated exchange rate in 
most cases.
    Nonetheless, the Bureau believes that there are a number of 
currencies that, in the view of any particular institution, are either 
(1) so thinly traded that insured institutions or their service 
providers find that purchasing such currencies for consumer wire 
transfers is impossible, impracticable, or economically undesirable, or 
(2) otherwise impracticable to purchase for other reasons, such as 
foreign laws barring purchase of that currency in the United States. 
While these include currencies used in countries currently covered by 
the permanent exception under Sec.  1005.32(b)(1), they also include 
other currencies. The Bureau does not know all of these currencies, nor 
does it have information on whether and to what extent such currencies 
are viewed and treated differently by different providers.
    In conversations with the Bureau, insured institutions and service 
providers explained that they believe that they may not have a viable 
mechanism to provide exact exchange rate information for remittance 
transfers received in the currencies that fall into either of the two 
categories described above. These entities indicated to the Bureau that 
typically, the volume of remittance transfers that they provide in 
those currencies is low, leading them to believe that it is 
impracticable to expend significant resources to disclose exact 
exchange rates for those remittance transfers, even if such efforts 
were possible. Therefore, the Bureau believes that without the 
temporary exception, some insured institutions would cease or limit 
remittances denominated in those currencies for which they are unable 
to use a set exchange rate, negatively affecting their ability to send 
remittance transfers to certain foreign locations.
Current Industry Practice--Covered Third-Party Fees
    The Bureau also conducted outreach about how insured institutions 
sending wires via an open remittance transfer network disclose covered 
third-party fees and use the temporary exception to disclose estimates 
of covered third-party fees in some cases. Based on this outreach, the 
Bureau believes that a small number of insured institutions, mostly 
very large ones and including some institutions that act as information 
aggregators, are able to generate directly information about third-
party fees. Most other insured institutions, however, obtain covered 
third-party fee information directly or indirectly from the limited 
number of entities described above as information aggregators.

[[Page 23245]]

    For a particular institution, the information aggregator used to 
obtain fee information may be the same service provider used to obtain 
exchange rates, but this is not always the case. Nevertheless, we 
believe that information aggregator is generally only providing 
information for remittance transfers it sends, using specific methods 
and/or corridors; as such, in order for an insured institution to rely 
on the fee information provided by an information aggregator for a 
particular remittance transfer, the insured institution must also 
generally use the information aggregator to help process the remittance 
transfer.
    In most cases, both the large institutions that generate covered 
third-party information directly and the information aggregators that 
provide such information for their clients either limit the fees that 
will be charged for a particular remittance transfer or obtain exact 
fee information for the transfer such that reliance on the temporary 
exception is unnecessary. In the alternative, they use the temporary 
exception. In many cases, the information aggregators are able to 
leverage relationships in order to facilitate the gathering (or 
control) of relevant information. These relationships can take various 
forms, as detailed below, and each information aggregator may use a 
combination of these methods. The effectiveness and prevalence of each 
method varies, and may depend on the presence of established 
relationships between the insured institution (or its service provider) 
and the other institutions involved in effecting the remittance 
transfer.
    Overall, the Bureau understands that given the current methods 
insured institutions use to send remittance transfers, one reason they 
cannot disclose exact amounts in all cases is that they (or their 
service provider) cannot reliably control or know covered third-party 
fees in every case. The Bureau understands, however, that at least some 
of the parties involved in sending remittances from insured 
institutions are changing the methods they use to send such transfers, 
and in some cases, the payment systems themselves are evolving so that 
providers are increasingly able to disclose exact fees.
    Limiting covered third-party fees. Information aggregators 
explained that there are several ways of limiting or eliminating 
covered third-party fees. When fees can be limited to a known amount or 
eliminated altogether, an exact figure of covered third-party fees (or 
no figure) can be disclosed and reliance on the temporary exception is 
unnecessary, and in some cases, disallowed under the 2013 Final Rule. 
Generally, there are two ways (which may be combined) to limit or 
eliminate covered third-party fees: developing relationships with 
foreign institutions or coding transfers in a way that instructs 
intermediary institutions to not deduct fees from the transfer amount.
    One way in which information aggregators can limit the third-party 
fees charged in association with a particular remittance transfer is by 
entering into bilateral relationships with recipient institutions. One 
such relationship could exist between the insured institution (or its 
service provider) and a foreign institution hosting the institution's 
nostro account. Nostro accounts are accounts established by U.S. 
institutions with foreign banks; funds in the account are typically 
denominated in the currency of that country. An insured institution or 
its information aggregator can generally avoid covered third-party fees 
when depositing funds directly into its nostro account because it 
bypasses intermediary institutions. Thus, for situations in which the 
nostro accountholder is the designated recipient's bank, the provider 
or information aggregator could leverage its relationship to specify 
the fee terms that would apply to the transfer. As such, the provider 
would control the fee terms, and would thus not meet the conditions 
necessary to rely on the temporary exception. In cases where the 
recipient institution is not the nostro accountholder, the funds are 
transferred from the nostro account to the designated recipient's 
account using the recipient country's national payment system or the 
ultimate recipient bank may have a nostro account with the initial 
nostro accountholder. In some countries or areas, the national payments 
system may then limit or bar downstream covered third party fees.\22\
---------------------------------------------------------------------------

    \22\ The Bureau lacks data on which national payments systems 
allow institutions to know the fees that will be imposed (or to know 
that no fees will be imposed) for such transfers.
---------------------------------------------------------------------------

    A second method of controlling covered third-party fees is by 
sending cover payments, a method in which the originator of the wire 
transfer sends payment instructions directly to the designated 
recipient's institution and asks that institution to credit the 
designated recipient the transfer amount. Under this method, the 
designated recipient's institution may receive the payment instructions 
before receiving the funds, which are cleared and settled separately 
through intermediary banks. Accordingly, intermediary fees would not be 
deducted from the payment, and as such, there would be no covered 
third-party fees that the originating institution would have to 
disclose. The Bureau further understands that entities may use cover 
payments to send remittance transfers received in foreign currency and 
U.S. dollars.
    The cover payment method has certain limitations, however. One very 
large bank explained that it believes that it can only send cover 
payments to recipient entities with which it has a preexisting 
agreement or contractual relationship because absent this relationship, 
the bank cannot be sure that the cover payment instruction will be 
honored. Separately, several information aggregators referred to a 
``long tail problem'': in their experience, expanding their networks is 
often a time-consuming, resource-intensive process because 
relationships must be established on a country-by-country, or 
institution-by-institution basis. These aggregators further indicated 
to the Bureau that it is unlikely that they would be able to establish 
relationships to reach every recipient financial institution or country 
by July 21, 2015, if the temporary exception expired. However, the 
institutions indicated that they would endeavor to use the additional 
time afforded by any extension of the temporary exception to expand the 
networks of recipient institutions with which they have relationships 
or pursue other alternatives that would allow them to ascertain actual 
fees in cases where they cannot do so today.
    A third way in which the provider or information aggregator can 
attempt to exercise control over covered third-party fees is by coding 
its payment instructions in a way that prohibits other entities from 
deducting fees from the transfer. Such codes may be used in conjunction 
with other methods discussed herein. International wire transfers 
originating in the United States are generally processed between three 
types of payment and messaging systems. For transfers settled in U.S. 
dollars between United States and other financial institutions that are 
members of the relevant payment systems, entities can use one of two 
wire systems: either the Clearing House Interbank Payments System 
(CHIPS), operated by the Clearing House Association,\23\ or the Fedwire 
Funds System (Fedwire), operated by the

[[Page 23246]]

Federal Reserve Banks.\24\ For transfers between other entities or 
transfers settled in currencies other than U.S. dollars, SWIFT is the 
dominant international payments messaging system; the Bureau believes 
that the majority of international interbank messages use the SWIFT 
network.\25\ When SWIFT is used, funds are generally settled through 
chains of bilateral correspondent relationships and/or national payment 
systems.
---------------------------------------------------------------------------

    \23\ See generally https://www.chips.org/about/pages/033738.php.
    \24\ See generally http://www.federalreserve.gov/paymentsystems/fedfunds_about.htm.
    \25\ See Swift Payments Market Practice Group and the Clearing 
House Ass'n, White Paper on Dodd Frank Section 1073--Cross-border 
Remittance Transfers, v.3 (``SWIFT White Paper'') (Sept. 2013), 
available at http://www.swift.com/resources/documents/PMPG_Dodd_Frank_1073_Whitepaper_v2.0.pdf.
---------------------------------------------------------------------------

    All three payment or messaging systems support a charge code that 
institutions may use to provide specific instructions about the way 
downstream entities handle the fees associated with a remittance 
transfer. For transfers sent via SWIFT, members have long been able to 
use the OUR charge code.\26\ When the OUR charge code is used, the 
SWIFT member coding the transfer is instructing downstream institutions 
that receive the SWIFT message not to deduct a fee, but rather to bill 
all fees back to the sending institution after delivery of the 
transfer. Fees charged back to the originating institution are not 
required to be disclosed under the Remittance Rule because they are not 
deducted from the transfer amount.
---------------------------------------------------------------------------

    \26\ SWIFT White Paper. Other methods include BEN and SHAR. A 
transfer coded BEN means that the beneficiary will pay all fees 
while a transfer coded SHAR means that the fees will be shared by 
the sender and the beneficiary.
---------------------------------------------------------------------------

    The two U.S. wire systems, CHIPS and Fedwire, do not support the 
OUR charge code used by SWIFT. However, in reaction to the Remittance 
Rule, the Clearing House Association and the Federal Reserve Banks 
developed a charge code, CTO, that is intended to be the functional 
equivalent of the OUR charge code that can be used for institutions 
using Fedwire and CHIPS but only if the institution sending the 
transfer has a preexisting relationship with the entity receiving the 
transfer.\27\
---------------------------------------------------------------------------

    \27\ Federal Reserve Bank Services, Press Release (announcing 
that effective February 7, 2013, financial institutions that have 
agreements requiring special handling for remittance transfers sent 
using Fedwire should use the charge code CTO to identify a 
remittance transfer in which the originator pays all transaction 
charges) (Sept. 5, 2012), available at https://www.frbservices.org/files/communications/pdf/fedwire/090512_dodd_frank.pdf. See also 
SWIFT White Paper (``The use of OUR charge code instructions is 
fairly limited in US Dollar clearing between US financial 
institutions since CHIPS and Fedwire cannot carry a full OUR 
code.'').
---------------------------------------------------------------------------

    Certain insured institutions with which the Bureau spoke indicated 
that they use the OUR code for most of their remittance transfers 
because they believe that doing so enables them to provide certainty 
for their customers insofar as use of the code is intended to prevent 
imposition of covered third-party fees. Some of the entities with which 
the Bureau spoke that use OUR for remittance transfers are passing on 
to their customers in the form of higher upfront prices the cost of the 
fees that are charged back to providers by intermediary institutions. 
Others are absorbing the extra expense without changing their prices 
but reported that they are continuing to analyze the impact of using 
the OUR charge code message on their pricing. Other institutions, 
however, indicated that they decided not to use OUR for most 
transactions due to the increased cost and that they either do not want 
to take on the additional costs or do not want to pass the costs on to 
their customers.
    In addition to cost considerations, the Bureau understands that 
there may be additional challenges with using the OUR or CTO charge 
code instructions to avoid covered third-party fees. First, the Bureau 
understands that, though OUR can and is used in transfers to most 
destination countries and to most recipient institutions that are SWIFT 
members, some remittance transfer intermediaries may disregard the OUR 
or CTO charge codes and deduct a fee from the transfer amount despite 
the instruction. In the case of the OUR code, disregarding the 
instruction is a violation of SWIFT rules; however, SWIFT does not 
enforce violations and there is limited ability to seek redress if an 
institution violates an OUR instruction in a particular instance. As 
such, certain interview participants indicated that, while a bilateral 
agreement is not required when using the OUR charge code, the OUR 
instruction may be more effective where such a relationship, formalized 
through a Relationship Management Agreement, or RMA, is in place among 
the participating institutions.\28\ The CTO code, in turn, is 
understood as a market convention; it is currently only honored if the 
sending and receiving institution have entered into a bilateral 
agreement.\29\
---------------------------------------------------------------------------

    \28\ A RMA is an agreement established between SWIFT members. 
See http://www.swift.com/products_services/relationship_management_application_overview.
    \29\ See http://www.frbservices.org/files/communications/pdf/fedwire/090512_dodd_frank.pdf.
---------------------------------------------------------------------------

    A third challenge is the difficulty of ensuring that the charge 
code instructions reach all the banks involved in the remittance 
transfer. For example, the Bureau understands that there are several 
countries in which the national financial messaging or payment system 
does not support the OUR charge code for transfers that are sent to 
institutions that are not SWIFT members. Additionally, the OUR charge 
codes may not be passed on to the next bank in the transmittal route if 
that bank is not a SWIFT member institution. Finally, certain smaller 
institutions that originate remittance transfers may not have the 
accounting systems in place necessary to account for OUR transactions 
when the charges are billed back to them from the intermediary 
institutions after the transfer is sent. Similar concerns exist in 
connection with the CTO charge code.
    The Bureau asked interview participants whether they expected use 
of the OUR and CTO codes to expand in response to the new remittance 
rule disclosure requirements. Although the Bureau understands that the 
OUR code has long been used for some commercial wire payments, a number 
of providers and information aggregators were skeptical that the 
reliability of the OUR payment instruction will improve in the near 
future and some actually expected its reliability to decline as its use 
expanded. Indeed, these institutions reported that based on their 
analyses, they determined that use of the OUR code for all remittance 
transfers sent as wires was not feasible as a reliable method to reduce 
the use of the temporary exception. These institutions speculated that 
if use of the OUR charge code became widespread its effectiveness could 
lessen as more foreign banks would either ignore it or bill exorbitant 
amounts back to the originating institutions. Further, some remittance 
transfer providers indicated that, in their opinion, sending OUR 
payments is not in the best interest of the consumer. They asserted 
that entities originating the wire transfer will increase fees on some 
or all of their wire services to recoup the fees that intermediaries 
charged back to them and that generally consumers may overpay when the 
provider uses this method. At least one provider, however, surmised 
that a growth in the use of the OUR code method could normalize 
behavior and expectation in the international remittance transfer 
industry such that institutions will be more likely to honor the code 
as its use expanded.
    Neither SWIFT nor providers or aggregators using the OUR code 
method provided the Bureau with concrete data on the prevalence or 
efficacy of the

[[Page 23247]]

method as a way of controlling remittance transfer fees. As such, it is 
not clear at this point how expanded use of the OUR code would affect 
its usefulness as a possible tool for controlling, and therefore 
predicting, third-party fees associated with remittance transfers. 
Likewise, as the CTO charge code has only recently been introduced, 
interview participants were reluctant to speculate about using it to 
control covered third-party fees and whether and how necessary 
relationships have been established. Some suggested that a change in 
the CHIPS rules obligating members to honor the code (similar to the 
SWIFT member rules) would be necessary to ensure compliance with the 
CTO code without obligating entities to enter into numerous bilateral 
agreements. We seek comment on the efficacy of these charge codes and 
whether and when they are reliable methods of controlling the 
imposition of covered third party fees (and thus providing a remittance 
transfer disclosure without reliance on the temporary exception).
    A small number of insured institutions with which the Bureau spoke 
use international ACH for some portion of their remittance transfers. 
International ACH products, such as the Federal Reserve's FedGlobal ACH 
Payments Service or services developed by individual financial 
institutions or service providers, may provide additional mechanisms to 
limit the fees that can be charged on a remittance transfer. Unlike 
institutions that receive wire transfers, institutions that receive 
FedGlobal ACH transfers are generally restricted, by the terms of the 
service, from deducting a fee from the transfer amount. FedGlobal and 
other ACH services may not currently be widely used by remittance 
transfer providers, however: According to a report of the Board of 
Governors of the Federal Reserve, at the end of 2012, 446 depository 
institutions offered FedGlobal services, representing about 5% of the 
institutions that originate ACH services.\30\
---------------------------------------------------------------------------

    \30\ The Bd. of Governors of the Fed. Reserve Sys., Report to 
the Congress on the Use of the ACH System and Other Payment 
Mechanisms for Remittance Transfers to Foreign Countries, Apr. 2013.
---------------------------------------------------------------------------

    Institutions with which the Bureau spoke indicated continued 
reluctance to develop international ACH systems for a variety of 
reasons, including the following. First, international ACH services 
generally are developed on a country-by-country or region-by-region 
basis because they require agreements on protocol with foreign gateway 
providers and/or other foreign entities. As a result, the currently 
available international ACH services generally have a much more limited 
reach than wire services (even though those ACH services generally 
focus on popular destination countries). Second, insured institutions 
with which the Bureau spoke indicated that, unlike wire services, 
international ACH services are not a set of services that they already 
offered to consumers prior to the Remittance Rule. These institutions 
worried that developing an international ACH service, or signing onto 
someone else's ACH service, would involve start-up costs and/or changes 
in risk management protocol that at present outweigh the potential 
long-term cost savings (as well as any additional value of facilitating 
compliance with the Remittance Rule).
    Finally, a small number of the biggest institutions with which the 
Bureau spoke have independently developed closed network remittance 
transfer products that resemble those closed-network solutions offered 
by money transmitters. Often designed with a focus on modest-sized 
transfers, these products include account-to-account, account-to-cash, 
and cash-to-account products. The institutions that have developed 
these products operate them independently or in partnership with other 
institutions, and can therefore know the exact fees and exchange rate 
that will be applied to specific remittance transfers. However, the 
closed networks currently in existence and used by insured institutions 
limit the dollar amount of most transfers, provide services to a 
limited number of countries and within those countries, to a limited 
number of pickup locations or recipient institutions, and as such 
cannot currently provide a complete solution for all of the locations 
to which insured institutions send remittance transfers. Further, 
setting up such a network takes significant time and resources. 
Accordingly, most of the institutions with which the Bureau spoke did 
not have such a system and have not planned to develop one prior to the 
planned July 21, 2015, expiration of the temporary exception as a 
method of resolving their reliance on the temporary exception.
    In speaking to remittance transfer providers using various 
combinations of these methods, the Bureau understands that the methods 
vary in effectiveness and scope, and that entities' views of the 
feasibility or effectiveness of any particular method also vary. 
Interview participants indicated to the Bureau that many factors--
including the efficacy of using the OUR charge code for transfers to a 
particular location or particular institution, concerns about lack of 
controls at a particular foreign bank, concerns about prudential 
regulators' reactions to relationships with foreign banks, sheer volume 
of institutions in the world and limited resources to reach them all, 
and the business case for investing in new protocols or payment 
systems--can affect the actual feasibility or effectiveness of a 
particular method, or an entity's view of such feasibility or 
effectiveness. Some institutions reported that they are attempting to 
address these issues by developing an increasing number of 
relationships with intermediary and recipient institutions; however, 
these institutions also stated that at present, it is very difficult 
and often impractical to establish such relationships with all banks in 
the world to which a U.S. consumer might seek to send a remittance 
transfer. Some institutions also indicated that the limited volume of 
international wire transfers they currently send to those corridors for 
which they cannot disclose exact fee amounts does not justify the 
expense of reaching these corridors using methods currently available 
for disclosing exact fees.
    Obtaining covered third-party fee information. A number of 
information aggregators that are banks indicated to the Bureau that 
they have been able to obtain actual covered third-party fee 
information through the banks to which they offer correspondent banking 
services, as well as the banks that offer them correspondent services, 
and other efforts (such as independent research), but also reported 
that this information is not available for all institutions involved in 
all of the remittance transfers they or their partners send. Although 
some entities with which the Bureau spoke reported conducting internet 
research regarding intermediary bank fees, some aggregators also 
indicated that information available on the internet takes time and 
resources to find, may not be complete, and may be subject to change.
    Entities with which the Bureau spoke stated that it is difficult to 
get fee information from other banks absent a correspondent 
relationship or assistance from a correspondent or to get information 
from another institution that might be deemed as a competitor. 
Specifically, insured institutions and others indicated to the Bureau 
that many United States and foreign banks treat such information as 
proprietary, and therefore, rarely make the information available to 
others upon request (let alone publish it on the Internet). See May 
2013 Final Rule (78 FR at 30671). On the other hand, some consumer 
groups maintain that insured

[[Page 23248]]

institutions have had sufficient time since the 2013 Final Rule was 
first finalized to develop methods to determine actual fees in all 
cases, and that institutions could better utilize existing trade 
associations and other networks to complete this work.
    Additionally, entities stated that even banks that have 
correspondent relationships with each other are unlikely to share fee 
information with each another because they may, in other circumstances, 
be competitors and typically do not share pricing information. In 
particular, it appears that some U.S. institutions are concerned that 
sharing fee information would raise antitrust concerns. Accordingly, 
participants indicated that these and similar forms of research have 
been difficult to complete on any comprehensive basis. See May 2013 
Final Rule (78 FR at 30671).
    Another method of learning fee information is to trace individual 
payments or to send test payments to gather transfer-specific data. Few 
information aggregators reported that they have tried this on a large 
scale. They reported that this is also a slow process that incurs some 
transaction fees. Additionally, some aggregators expressed doubts that 
gathered information will remain accurate for future transfers because 
of unknown variables or because different amounts of fees could be 
assessed on wire transfers sent to the same designated recipient 
institution, even though the transfers appear to have similar 
characteristics (e.g., same transfer amount).
    Relying on the temporary exception. A number of the insured 
institutions that spoke to the Bureau, but not all, indicated to the 
Bureau that they use the temporary exception when sending at least some 
of their wire transfers. As noted above, these remittance transfer 
providers stated generally that they strive to provide actual fee 
information and only use estimates in cases they deem such disclosure 
infeasible, such as when the transfer involves an entity with whom the 
U.S. bank has no direct relationship and the bank does not believe that 
the OUR charge code is a viable solution for that transfer.
    Finally, the Bureau does note that some insured institutions 
reported (or their service provider reported to us about them) that 
they did not use the temporary exception for any of their transfers. 
Reasons for this varied. For example, some service providers used the 
OUR method with increased confidence that it could provide a 
comprehensive solution or that they did not send to those areas where 
OUR did not work. Notably, even these service providers doubted that 
the OUR method could provide a comprehensive solution for all 
remittance transfers sent by consumers in the United States. Other 
service providers reported that they could leverage nostro accounts 
around the world established primarily for the benefit of their 
corporate customers to send funds directly into the recipient country. 
The Bureau believes that it may be too early in the use of these 
methods to know if they are truly comprehensive or able to allow 
disclosure of exact amounts for all remittance transfers.
    The frequency of reliance on the temporary exception for disclosure 
of intermediary fees varied greatly amongst those using the exception. 
Some did not use it at all while those that did reported that they used 
the exception for a varying range of their transfers: From 5 percent to 
as much as 50 to 60 percent of remittance transfers although, to the 
extent data was reported to the Bureau during its interviews, most 
insured institutions with which the Bureau spoke reported using the 
exception for far fewer than half of their remittance transfers. The 
Bureau lacks data at this time as to the overall industry practice 
although it anticipates that the soon-to-be-available FFIEC Call Report 
data will provide helpful detail on this point. The Bureau believes 
that one factor that could explain the substantial variance among 
institutions is the destination countries to which particular 
providers' customers send transfers and the size of the providers' 
correspondent networks. Even when an institution's reliance on the 
temporary exception is for a relatively small portion of its (or its 
customers') remittance transfers, the Bureau understands that the 
institution may use estimates for remittance transfers sent to a number 
of countries. These institutions indicated that they did not believe 
that it was feasible either to get actual fee information or to send 
wires in a way that controls for covered third-party fees by July 21, 
2015, for remittance transfers to those beneficiary banks for which 
they are today using the temporary exception.
    As noted above, the Bureau recognizes that this summary of market 
practice and consumer impact may not accurately represent all details 
of how remittance transfer providers send remittance transfers from 
accounts and, thus, the Bureau seeks comments on whether there are 
other methods of complying with the requirement to disclose covered 
third-party fees when sending such remittance transfers or whether 
other methods of sending transfers altogether might allow providers to 
comply with the Remittance Rule without reliance on the temporary 
exception. For example, the Bureau seeks comment on whether 
international ACH products could grow beyond their current, limited 
use, and develop into comprehensive solutions enabling insured 
institutions to provide exact disclosures for transfers from accounts. 
The Bureau also seeks comment on whether various types of closed 
networks might also play a role in the development of a solution to the 
issues outlined above. Finally, the Bureau seeks comment on whether, 
over time, additional competition amongst service providers will 
further motivate service providers to develop solutions that would 
eliminate a need to rely on the temporary exception in more cases.
The Temporary Exception's Impact on Consumers
    Although EFTA section 919(a)(4) provides that the Bureau's 
determination to extend the temporary exception should hinge on the 
exception's effect on the ability of remittance transfer providers to 
send transfers without the exception, the Bureau has also considered 
the impact of the temporary exception and its potential expiration on 
consumers. Specifically, the Bureau solicited input from several 
consumer groups whose constituents send remittance transfers. Many of 
these groups asserted that financial institutions have had sufficient 
time, and currently hold sufficient resources, to disclose exact 
figures in all cases. Citing a dearth of specific data on the effect of 
estimates on consumer experience, these representatives expressed 
concern that estimates could be wide-ranging and/or inaccurate. At 
least one of the groups also urged the Bureau to narrowly tailor the 
temporary exception, perhaps to allow it to be used only for remittance 
transfers to certain countries not already subject to the permanent 
exception.
    At this point, there is little information that has been developed 
about the way in which estimation of certain fees and exchange rates 
associated with a remittance transfer impacts consumers. For example, 
the Bureau does not have data on the relative accuracy of the estimates 
provided, nor on whether such estimates are on average higher or lower 
than the actual fees and rates associated with transactions. Although 
the Bureau did speak with several consumer groups, the Bureau also does 
not know the extent to which receipt of an estimate impairs a 
consumer's ability to rely on disclosures provided. The Bureau seeks 
comment on the impact of

[[Page 23249]]

the use of estimates on consumers as well as the potential impact of an 
extension of the temporary exception, including whether consumers find 
estimates to be relatively accurate and the impact of estimates versus 
actual amounts.
The Bureau's Proposal
    Based on information the Bureau has gathered regarding the 
Remittance Rule in general, including through outreach to industry and 
consumer groups, review of prior comment letters and other efforts, and 
from its recent interviews with remittance transfer providers, service 
providers, and consumer groups regarding the temporary exception, the 
Bureau has reached a preliminary determination that the expiration of 
the temporary exception would negatively impact the ability of insured 
institutions to send remittance transfers.
    As discussed above, it appears that a number of insured 
institutions are relying on the temporary exception to comply with the 
2013 Final Rule for some portion of their remittance transfers either 
to disclose covered third-party fees, exchange rates, or both. When, as 
remittance transfer providers, they send wire transfers from accounts, 
these institutions (and/or their service providers) rely (in varying 
degrees) on action by entities that they do not control and that may 
not always provide any or accurate information regarding the fees and/
or exchange rates that they apply. Thus, in at least some cases, the 
insured institutions are unable to determine, with accuracy, the actual 
amounts of the fees and/or exchange rates for the remittance transfers 
that they provide. Further, it appears that the insured institutions 
that are in the best position to ascertain exact fee information (i.e., 
the information aggregators that are insured institutions) do not 
believe that they could continue sending wire transfers and find an 
alternative to relying on the temporary exception for all of those 
corridors for which they are using the exception by July 21, 2015.
    Accordingly, the Bureau believes that if the temporary exception 
terminates on July 21, 2015, it could cause some of these institutions 
to stop offering remittance transfers to at least some of the foreign 
destinations to which they currently send remittance transfers using 
estimated disclosures. The Bureau further believes that a decision by 
service providers to stop offering remittance transfers to certain 
foreign destinations may also negatively impact the ability of a number 
of insured institutions that rely on those service providers to send 
remittance transfers and disclose covered third-party fees.\31\
---------------------------------------------------------------------------

    \31\ The Bureau learned from many smaller institutions that they 
preferred to utilize compliance solutions that interfaced directly 
with other existing systems. Switching providers could require 
systems changes that impact other parts of the institution.
---------------------------------------------------------------------------

    With respect to the extension of the temporary exception for 
disclosure of exchange rates, the Bureau believes that some insured 
institutions are using the temporary exception for some portion of 
their remittance transfers. Additionally, similar to the disclosure of 
intermediary fees, it appears that a number of smaller institutions are 
relying on either service providers or larger institutions acting as 
information aggregators to provide their senders with exchange rate 
information. It also appears that for the remittance transfers for 
which providers are currently using the temporary exception, a number 
of institutions may not find a way to provide actual exchange rates for 
certain currencies by July 21, 2015. The Bureau believes that some 
portion of these institutions may stop offering remittance transfers to 
either all or some number of foreign destinations where they are 
currently disclosing estimated exchange rates.
    For the reasons given above, the Bureau makes a preliminary 
determination that the expiration of the temporary exception on July 
21, 2015, would negatively affect the ability of insured institutions 
to send remittance transfers. Accordingly, the Bureau believes that it 
is necessary and proper to additionally exercise its authority under 
EFTA section 919(a)(4)(B) to amend Sec.  1005.32(a)(2) to propose to 
extend the sunset of the temporary exception to July 21, 2020.
    Notwithstanding this preliminary determination, the Bureau will 
continue to dialogue with key stakeholders regarding possible long-term 
solutions to facilitate increased accuracy in remittance transfer 
disclosures while preserving a broad market for remittance transfers 
sent from accounts at insured institutions. The Bureau expects 
providers to continue to work towards providing exact disclosures of 
exchange rates and covered third-party fees in all cases where 
disclosure is required. If the Bureau finalizes this proposal and the 
expiration of the temporary exception is extended to July 2020, the 
Bureau expects that reliance on the temporary exception will decrease 
going forward as the industry continues to work towards improving 
solutions that allow for exact disclosures. The Bureau also expects to 
continue to review Call Report data each quarter to understand how use 
of the temporary exception changes over time, as well as to continue to 
engage with insured institutions and service providers to learn more 
about how key players are working towards the eventual expiration of 
the exception and to confirm that the providers are not abusing the 
exception. Furthermore, as the Bureau noted in the May 2013 Final Rule 
(in the context of its decision to eliminate the requirement to 
disclosed foreign taxes and certain recipient institution fees), it 
intends to monitor whether the development and availability of covered 
third-party fee and exchange rate information becomes more feasible in 
the future. 2013 Final Rule (78 FR at 30677).
    The Bureau solicits comment on the proposed extension of the 
temporary exception. Additionally, the Bureau solicits comment on its 
proposed determination that the expiration of the temporary exception 
would have a negative impact on the ability of insured institutions to 
send remittance transfers, as well as the magnitude of the impact. The 
Bureau also seeks comment on whether it should extend the exception for 
a period less than five years and/or whether it should place other 
limits on the use of the temporary exception, such as to allow only 
those institutions at or below a certain asset size to take advantage 
of the exception.
    As stated above, FFIEC Call Report data relevant to various aspects 
of remittance transfer services offered by certain reporting financial 
institutions will become available after May 15, 2014. The Bureau notes 
that this information will include data on the frequency with which 
insured institutions use the temporary exception.\32\ The Bureau may 
use the data to supplement its understanding of how institutions are 
using the temporary exception.
---------------------------------------------------------------------------

    \32\ Data can be accessed at https://cdr.ffiec.gov/public/.
---------------------------------------------------------------------------

    The Bureau also recognizes that that more information exists 
regarding the potential consumer impact of either the expiration or the 
extension of the temporary exception. The Bureau thus invites comment 
on the potential consumer impact of either the expiration of the 
temporary exception on July 21, 2015, or the proposed extension of the 
exception to July 21, 2020.

[[Page 23250]]

Section 1005.33 Procedures for Resolving Errors

1005.33(a) Definition of Error
1005.33(a)(1) Types of Transfers or Inquiries Covered.
    Section 1005.33(a) defines what subpart B of Regulation E considers 
to be an error in connection with a remittance transfer. One of these 
errors is the failure to make funds available to a designated recipient 
by the date of availability stated in the disclosure provided to the 
sender under Sec.  1005.31(b)(2) or (3) for the remittance transfer, 
unless the failure occurs due to certain listed reasons. See Sec.  
1005.33(a)(1)(iv). One of the reasons listed is for delays related to 
the remittance transfer provider's fraud screening procedures or in 
accordance with the Bank Secrecy Act, 31 U.S.C. 5311, et seq., Office 
of Foreign Assets Control requirements, or similar laws or 
requirements. Sec.  1005.33(a)(1)(iv)(B). As the Bureau explained in 
the 2012 February Final Rule, it did not intend for this provision to 
apply to delays that occur in the ordinary course, such as delays 
related to routine fraud screening procedures. 77 FR at 6252.
    To clarify the application of this provision, the Bureau is 
proposing to revise Sec.  1005.33(a)(1)(iv)(B) so that it would 
expressly apply only to delays related to individualized investigation 
or other special action by the remittance transfer provider or a third-
party as required by the provider's or other entity's fraud screening 
procedures or in accordance with the Bank Secrecy Act, 31 U.S.C. 5311 
et seq., Office of Foreign Assets Control requirements, or similar laws 
or requirements. The Bureau believes that this proposed change is in 
accordance with the original intent of this provision but proposes this 
clarification to remove any ambiguity. As the Bureau noted in the 2012 
February Final Rule, it believes that individualized investigation or 
other special action could include a need to go back to the original 
sender for additional information related to the remittance transfer.
    To further clarify which delays would fall under this exception, 
the Bureau is proposing to add comment 33(a)-7, which would explain 
that under Sec.  1005.33(a)(1)(iv)(B), a remittance transfer provider's 
failure to deliver a remittance transfer by the disclosed date of 
availability is not an error if such failure was caused by a delay 
related to a necessary investigation or other special action necessary 
to address potentially suspicious, blocked or prohibited activity in 
accordance with the BSA, OFAC requirements, or similar laws or 
requirements. For example, no error occurs if delivery of funds is 
delayed because the provider's fraud screening system flags a 
remittance transfer to a designated recipient whose name is similar to 
the name of a blocked person under a sanctions program, and further 
investigation is needed to determine that the designated recipient is 
not actually a blocked person. Similarly, no error occurs if delivery 
of funds is delayed because the correspondent bank to which the 
provider forwards the remittance transfer identifies the transfer as 
similar to previous fraudulent activity and action by a correspondent 
or the provider is necessary to proceed. However, if a delay is caused 
by ordinary fraud screening or other screening procedures, where no 
potentially fraudulent, suspicious, blocked or prohibited activity is 
identified and no further investigation or action is required, the 
exception in Sec.  1005.33(a)(1)(iv)(B) would not apply. The Bureau is 
seeking comment on whether the proposed examples and description 
accurately reflect industry practice and/or provide sufficient guidance 
on the types of permissible delays.
    Finally, to reflect the insertion of new comment 33(a)-7, the 
Bureau proposes to renumber existing comments 33(a)-7 through -10 as 
comments 33(a)-8 through -11, respectively.
1005.33(c) Time Limits and Extent of Investigation
    Section 1005.33(c)(2) implements EFTA section 919(d)(1)(B) and 
establishes procedures and remedies for correcting an error under the 
Remittance Rule. In particular, where there has been an error under 
Sec.  1005.33(a)(1)(iv) for failure to make funds available to a 
designated recipient by the disclosed date of availability, Sec.  
1005.33(c)(2)(ii) generally permits a sender to choose either: (1) To 
obtain a refund of the amount tendered in connection with the 
remittance transfer that was not properly transmitted, or an amount 
appropriate to resolve the error, or (2) to have the remittance 
transfer provider resend to the designated recipient the amount 
appropriate to resolve the error, at no additional cost to the sender 
or designated recipient. However, if the error resulted from the sender 
providing incorrect or insufficient information, Sec.  
1005.33(c)(2)(iii) requires a provider to refund or, at the consumer's 
request, reapply to a new transfer, the total amount that the sender 
paid to the provider and it permits the provider to deduct from this 
amount fees actually imposed and, where not otherwise prohibited by 
law, taxes actually collected as part of the first unsuccessful 
remittance transfer attempt.
    As drafted, the Bureau believes that the 2013 Final Rule may be 
ambiguous with respect to whether, in instances in which the sender 
provided incorrect or insufficient information the remittance transfer 
provider must always refund its own fee or whether it has the option of 
not doing so. See Sec.  1005.33(c)(2)(iii). While comment 33(c)-12 
explains that in such circumstances, the provider is required to refund 
its own fees but not the fee imposed by a correspondent (unless that 
fee will be refunded to the provider by the correspondent), the Bureau 
believes it appropriate to remove any ambiguity that might exist in the 
corresponding text of Sec.  1005.33(c)(2)(iii).
    The Bureau also proposes to clarify what should happen when an 
error occurs (for any reason) pursuant to Sec.  1005.33(a)(1)(iv), but 
the funds are ultimately delivered to the designated recipient before 
the remedy is determined. If the remittance transfer is delivered late 
but before the remedy is determined, the provider should be not be 
required to refund the amount delivered to the designated recipient or 
apply those funds towards a new transfer (as those funds have already 
been delivered). For example, consider a situation in which a sender 
sends $100 to a designated recipient and the provider charges a $10 fee 
and there are no other non-covered third-party fees or foreign taxes 
deducted from the transfer amount (the sender pays a total of $110 to 
the provider and $100 is delivered to the designated recipient after 
the disclosed date of availability). If $100 is deposited into the 
designated recipient's account after the date of availability, the 
Bureau proposes to clarify that the only remedy required would be a 
refund of the $10 fee to the sender. In this situation, it is not 
practical to refund the $100 to the sender so that he or she can resend 
the transfer since it was already delivered. Instead, Sec.  
1005.33(c)(2)(iii) (if the error occurred because the sender provided 
incorrect or insufficient information in connection with the remittance 
transfer) or (c)(2)(ii) (if the error occurred for another reason), 
require the provider to refund its $10 fee; after that the amount 
appropriate to resolve the error should be zero. To require a refund of 
the $100 would, in essence, result in a windfall (insofar as the $100 
was received by the designated recipient).
    To clarify these two issues, the Bureau first proposes to revise

[[Page 23251]]

Sec.  1005.33(c)(2)(iii) to state that in the case of an error under 
Sec.  1005.33(a)(1)(iv) that occurred because the sender provided 
incorrect or insufficient information in connection with the remittance 
transfer, the remittance transfer provider shall provide the remedies 
required by Sec.  1005.33(c)(2)(ii)(A)(1) and (c)(2)(ii)(B) within 
three business days of providing the report required by Sec.  
1005.33(c)(1) or (d)(1) except that the provider may agree to the 
sender's request, upon receiving the results of the error 
investigation, that the funds be applied towards a new remittance 
transfer, rather than be refunded, if the provider has not yet 
processed a refund. The provider may deduct from the amount refunded or 
applied towards a new transfer any fees actually imposed on or, to the 
extent not prohibited by law, taxes actually collected on the 
remittance transfer as part of the first unsuccessful remittance 
transfer attempts except that the provider shall not deduct its own 
fee.
    To further clarify what remedies must be provided for all errors 
that occur pursuant to Sec.  1005.33(a)(1)(iv), the Bureau also 
proposes to modify comment 33(c)-5, to add language explaining that 
when the amount that was disclosed pursuant to Sec.  1005.31(b)(1)(vii) 
was received by the designated recipient before the provider must 
determine the appropriate remedy for an error under Sec.  
1005.33(a)(1)(iv), no additional amounts are required to resolve the 
error after the remittance transfer provider refunds the appropriate 
fees and taxes paid by the sender pursuant to Sec.  
1005.33(c)(2)(ii)(B) or (c)(2)(iii), as applicable.

VI. Proposed Effective Date

    The Bureau proposes that all of the changes proposed herein take 
effect thirty days after publication of a final rule in the Federal 
Register. The proposed change to the temporary exception does not have 
a practical effect until after July 21, 2015, so an effective date 
before the expiration would provide for continuity. The other proposed 
changes generally reinforce current Bureau guidance on interpretation 
of the 2013 Final Rule. Thus, the Bureau believes that remittance 
transfer providers should not need to adjust their practices to align 
them with those proposed herein. The Bureau seeks comment on whether 
these changes to the 2013 Final Rule should take effect in thirty days 
after publication of a final rule in the Federal Register or if a later 
effective date is more appropriate.

VII. Section 1022(b)(2) Analysis

A. Overview

    In developing the proposed rule, the Bureau has considered 
potential benefits, costs, and impacts \33\ and has consulted or 
offered to consult with the prudential regulators and the Federal Trade 
Commission, including regarding the consistency of the proposed rule 
with prudential, market, or systemic objectives administered by such 
agencies.\34\
---------------------------------------------------------------------------

    \33\ Section 1022(b)(2)(A) of the Dodd-Frank Act directs the 
Bureau, when prescribing a rule under the Federal consumer financial 
laws, to consider the potential benefits and costs of a regulation 
to consumers and covered persons, including the potential reduction 
of access by consumers to consumer financial products or services; 
the impact on depository institutions and credit unions with $10 
billion or less in total assets as described in section 1026 of the 
Dodd-Frank Act; and the impact on consumers in rural areas.
    \34\ The Bureau also solicited feedback from other agencies with 
supervisory and enforcement authority regarding Regulation E and the 
proposed rule.
---------------------------------------------------------------------------

    The proposal would amend the 2013 Final Rule (or, the Remittance 
Rule) that took effect on October 28, 2013 and which implements section 
1073 of the Dodd-Frank Act regarding remittance transfers. First, the 
Bureau proposes to extend a temporary exception in the 2013 Final Rule 
that permits insured depository institutions and insured credit unions 
to estimate the exchange rate and covered third-party fees under 
specified circumstances. Second, the Bureau proposes several 
clarificatory amendments and technical corrections to the Remittance 
Rule. These provisions regard: The application of the Remittance Rule 
to transfers to and from locations on U.S. military installations 
abroad; the treatment of transfers from non-consumer accounts; the 
treatment of faxes; when a provider may treat a communication regarding 
a potential remittance transfer as an inquiry; the Web site addresses 
to be disclosed on consumer receipts; and error resolution provisions 
related to delays and remedies.
    The analysis below considers the benefits, costs, and impacts of 
the provisions described above against the baseline provided by the 
2013 Final Rule. With respect to such provisions, the analysis 
considers the benefits and costs to senders (consumers) as well as 
remittance transfer providers (covered persons). The Bureau has 
discretion in any rulemaking to choose an appropriate scope of analysis 
with respect to benefits, costs, and impacts and an appropriate 
baseline.
    The Bureau notes at the outset that the analysis below generally 
provides a qualitative discussion of the benefits, costs, and impacts 
of the proposed rule. The Bureau believes that quantification of the 
potential benefits, costs, and impacts of the proposed provisions is 
not possible. There are limited data on consumer behavior, which would 
be essential for quantifying the benefits or costs to consumers. For 
instance, information about the accuracy of estimates for exchange 
rates and covered third-party fees could help inform the Bureau of the 
potential cost to consumers of extending the temporary exception to 
July 21, 2020, in terms of the benefit foregone of receiving accurate 
information. There is still limited data about the remittance transfer 
market such that the Bureau cannot presently quantify the potential 
benefits, costs, and impacts of the proposed provisions. Nonetheless, 
the Bureau recognizes that available data about the remittance transfer 
market has increased significantly since the initial issuance of the 
Remittance Rule. As discussed above, the data collected by the NCUA 
regarding remittance transfers through its Call Report and Credit Union 
Profile Forms provide a valuable set of responses about credit unions. 
For example, credit union respondents are required to indicate their 
international remittance transfer volume. As discussed in the Section-
by-Section Analysis, the Bureau used the responses and estimated that 
credit unions sent less than 1% the number of international money 
transfers in 2013 as did money transmitters.
    The FFIEC Call Report data the Bureau expects to be made available 
during the comment period is expected to contain responses about the 
temporary exception utilization rate by insured depository 
institutions. Although the Bureau does not believe that the utilization 
rate should be determinative of the Bureau's ultimate decision with 
respect to whether to extend the temporary exception, utilization rate 
data may affect the Bureau's assessment of the impact on depository 
institutions with respect to the extension of the temporary exception.

B. Potential Benefits and Costs to Consumers and Covered Persons

1. Extension of the Temporary Exception to July 21, 2020
    The proposed rule would provide that remittance transfer providers 
may estimate exchange rates and covered third-party fees until July 21, 
2020 if (1) the provider is an insured depository institution or credit 
union; (2) the remittance transfer is sent from the sender's account 
with the provider; and

[[Page 23252]]

(3) the provider cannot determine the exact amounts for reasons outside 
of its control.\35\ To implement the Dodd-Frank Act, the 2013 Final 
Rule provides that the exception sunsets on July 21, 2015. But the 
Dodd-Frank Act also authorizes the Bureau to extend the exception up to 
July 21, 2020 if the Bureau determines that the termination of the 
exception would negatively affect the ability of insured depository 
institutions and credit unions to send remittance transfers to 
locations in foreign countries. EFTA section 919(a)(4)(B). This 
analysis considers the benefits, costs, and impacts of extending the 
exception against a baseline of allowing the exception to expire on 
July 21, 2015.
---------------------------------------------------------------------------

    \35\ As noted above in the Section-by-Section Analysis, the 
temporary exception does not apply to broker-dealers. However, SEC 
staff has issued a no-action letter stating that it will not 
recommend an enforcement action under Regulation E against broker-
dealers that provide disclosures consistent with the requirements of 
the temporary exception. See http://www.sec.gov/divisions/marketreg/mr-noaction/2012/financial-information-forum-121412-rege.pdf.
---------------------------------------------------------------------------

    To determine if the statutory predicate to extending the exception 
exists, namely, a negative effect on remittance transfers caused by a 
baseline of allowing the exception to expire on July 21, 2015, the 
Bureau endeavored to understand how insured depository institutions and 
credit unions are providing remittance transfers without using the 
temporary exception and when they are using the temporary exception. 
The Bureau understands that many insured institutions have already 
taken significant steps toward disclosing actual exchange rates and 
covered third-party fees when they believe they are able to do so, even 
though they might have additional flexibility pursuant to the temporary 
exception to provide estimates instead. But it appears that both small 
and large insured institutions rely on the temporary exception for 
remittance transfers from accounts in which they believe covered third-
party fee and/or exchange rate information are not readily available 
and for which they can otherwise satisfy the criteria for using the 
temporary exception. Further, these institutions have generally 
indicated to the Bureau that they are unlikely to find an alternative 
to their reliance on the temporary exception by July 21, 2015, for at 
least some portion of the remittance transfers for which they currently 
use the temporary exception. To the extent that institutions believe 
that finding an alternative by July 21, 2015 is possible, the Bureau 
believes that a number of institutions view the associated cost as a 
significant burden, even if such cost falls short of being prohibitive 
in all cases.
    The information the Bureau has gathered thus far with respect to 
how insured depository institutions and credit unions are or are not 
using the temporary exception, along with the Bureau's other efforts to 
understand industry's compliance with the requirements of the 
Remittance Rule, have provided the Bureau with a basis to make a 
preliminary determination that if the exception sunsets on July 21, 
2015, its expiration would negatively impact the ability of insured 
institutions to send remittance transfers. The Bureau recognizes that 
its description of market practices may not be accurate in all 
respects, and invites comments to further its understanding of such 
practices.

a. Benefits and Costs to Consumers

    As the Bureau stated in its original impact analysis related to the 
adoption of the temporary exception, relative to accurate disclosures, 
estimated disclosures strike a different balance between accuracy and 
access, offering less accuracy but potentially preserving greater 
access. 77 FR at 6274. The Bureau believes that extending the temporary 
exception would benefit those consumers who use insured institutions to 
send remittance transfers to countries or institutions to which some 
insured institutions would cease providing remittance transfer 
services, if the exception were to sunset on July 21, 2015. To the 
extent an insured institution would curtail certain services because it 
would no longer be able to rely on the temporary exception, and the 
ability to rely on the temporary exception is instrumental in that 
institution's decision to continue to offer those services, extending 
the temporary exception would benefit a consumer using that institution 
to send remittances to a destination that could be potentially 
impacted. In that case, the extension would preserve the consumer's 
ability to continue using that particular institution as the consumer's 
remittance transfer provider.
    Extending the temporary exception would also provide benefits to 
consumers in the form of avoiding increased prices if providing the 
actual information (as opposed to estimates) would require insured 
institutions or their service providers to take costly steps to provide 
that information and those institutions decide to pass those costs to 
the consumers. In other words, although the consumers would receive 
actual information, they may have to pay more to send a remittance 
transfer in some cases.
    Providing estimates instead of actual information has costs for 
consumers as well. Disclosures that accurately reflect actual covered 
third-party fees and exchange rates would make it easier for a consumer 
to know whether a designated recipient is going to receive an intended 
sum of money, or how much the consumer must send to deliver a specific 
amount of foreign currency to a designated recipient. Accurate 
disclosures would also make it easier for consumers to compare prices 
across providers, via, for example, prepayment disclosures. Extending 
the temporary exception would impose a cost on consumers in the form of 
these foregone benefits because they would continue to receive 
estimated disclosures in some cases. Such cost could be significant if 
the estimated disclosures they receive from insured depository 
institutions and credit unions tend to be inaccurate. However, the 
Bureau lacks data on how often estimates of exchange rates and covered 
third-party fees that insured institutions disclose to consumers 
pursuant to the temporary exception tend to be inaccurate, and the 
degree of the inaccuracy, if any. Additionally, the Bureau believes 
there would be a cost associated with an extension of the temporary 
exception in that if consumers believe that they cannot rely on 
estimated disclosures and thus do not rely on them to, for example, 
compare prices across providers. However, the Bureau also lacks data on 
whether consumers that receive estimated disclosures perceive such 
information to be unreliable.
b. Benefits and Costs to Covered Persons
    As noted above, the Bureau believes that many insured institutions 
have made significant progress toward disclosing exact amounts. But at 
the same time, it appears that both some small and some large insured 
institutions rely on the temporary exception for some portion of their 
transfers. For these institutions, with respect to the segment of their 
business for which they rely on the temporary exception and for which 
they are unable to find a practical or cost-effective alternative to 
the temporary exception, the Bureau believes that a potential benefit 
associated with extending the temporary exception would be that it 
would allow them to avoid the cost associated with losing that segment 
of their business. The Bureau acknowledges that the magnitude of this 
benefit may be related to how big that segment of the business is for 
an insured

[[Page 23253]]

institution. Based on the Bureau's outreach efforts, the Bureau has 
made a preliminary finding that it varies greatly with respect to 
covered third-party fees. The Bureau also acknowledges that the 
magnitude of this benefit may only be marginal with respect to the 
disclosure of exchange rates. As noted above, the Bureau's current 
understanding is that use of the temporary exception for estimating the 
applicable foreign exchange rate is quite limited. An additional 
benefit of extending the temporary exception may be that it could 
provide additional time for insured institutions to search for 
efficient and cost-effective ways to disclose actual exchange rates and 
covered third-party fees.
    The Bureau believes that in some circumstances, the additional 
costs that insured institutions may have to incur to provide exact 
disclosures may not be so prohibitive such that an insured institution 
would curtail sending remittance transfers to certain destinations 
altogether, although this might be possible in some cases. The Bureau 
notes that entities that currently rely on the temporary exception 
generally told the Bureau that they believe that the expiration of the 
temporary exception on July 21, 2015 would create significant costs for 
them, but that they have not evaluated such costs such that they could 
provide the Bureau with actual or estimated numbers. The Bureau 
believes that there would not be a cost to insured institutions of 
extending the exemption because it would not require them to alter 
current practices. To the extent that letting the temporary exception 
expire on July 21, 2015 would raise transaction costs for insured 
institutions such that it would lead to some insured institutions to no 
longer offer remittance transfer services to certain destinations, 
money transmitters that offer services to those destinations could 
benefit from less competition.
2. Technical Corrections and Clarifications
    In addition to the proposed extension of the temporary exception, 
the Bureau also considers potential benefits and costs to consumers and 
remittance transfer providers of the several technical corrections and 
clarifications proposed by the Bureau. Generally, except for the 
clarification regarding the application of the Remittance Rule to 
transfers to and from locations on U.S. military installations abroad, 
the Bureau believes that none of the proposed technical corrections or 
clarifications will materially alter the benefits and costs to 
consumers and covered persons of the Remittance Rule. Further, because 
the technical corrections and clarifications proposed by the Bureau are 
intended to remove ambiguity, the Bureau believes that they may 
actually provide some benefit to both consumers and covered persons in 
that they could increase the clarity and precision of the Remittance 
Rule and help to reduce compliance costs.
    As discussed above, the Remittance Rule does not expressly address 
transfers to and from U.S. military installations within foreign 
countries and because the Bureau believes that there is a potential for 
confusion, the Bureau is considering clarifying the application of the 
Remittance Rule to transfers to and from locations on these 
installations. If the Bureau were to treat such locations as being in a 
State, transfers sent from the United States to those locations would 
not be subject to the Remittance Rule, and there would be benefits to 
covered persons of not having to comply with the requirements of the 
rule, while there would be costs to consumers of not receiving the 
consumer protections of the rule. The costs and benefits would be 
reversed if the Bureau decides to treat locations on U.S. military 
installations as not being in a State.
    The Bureau lacks data on current practices, particularly 
information about the volume and size of transfers sent by consumers in 
the United States to recipients located on U.S. military installations 
within foreign countries, and the volume and size of transfers being 
sent from locations on such installations to the surrounding foreign 
country or other foreign countries. As the Bureau lacks such data, it 
cannot evaluate the relative benefits and costs of clarifying the 
application of the Remittance Rule to locations on U.S. military 
installations within foreign countries on covered persons and 
consumers. The Bureau seeks comment generally on the relative costs and 
benefits of the proposed clarification on consumers and covered 
persons.
    The Bureau is also proposing a clarification to the commentary 
related to the definition of ``sender'' to clarify the application of 
the Remittance Rule to transfers sent from non-consumer accounts. The 
proposed clarification would provide that if a transfer is sent from an 
account that is not used primarily for personal, family, or household 
purposes, such as an account that was established as a business or 
commercial account or an account owned by a business entity, the 
Remittance Rule would not apply. The proposed clarification would also 
make clear that transfers from consumer accounts are deemed to be sent 
for a personal, family, or household purpose. The Bureau believes that 
remittance transfer providers are currently treating transfers from 
non-consumer accounts as being outside of the scope of the Remittance 
Rule, and transfers from consumer accounts as being within the scope of 
the rule. Thus, the Bureau does not foresee any material impact on the 
cost or benefits from this proposed clarification.
    The Bureau further proposes to clarify that for purposes of 
disclosures required to be provided pursuant to Sec.  1005.31 or .36, 
such disclosures provided by remittance transfer providers via fax are 
considered to be written disclosures for purposes subpart B of 
Regulation E, and are not subject to the additional requirements for 
electronic disclosures set forth in Sec.  1005.31(a)(2). The Bureau 
believes that this proposed clarification would have no material impact 
on covered persons or consumers because the Bureau believes that to the 
extent remittance transfer providers already send fax disclosures, they 
treat those faxes as a ``writing.'' Similarly, the Bureau believes its 
proposed modification to comment 31(a)(3)-2 would conform the rule to 
providers' current practice and thus would have minimal impact on 
covered persons and consumers. As discussed above, proposed comment 
31(a)(3)-2 would clarify that: (1) A provider may treat a written or 
electronic communication as an inquiry when it believes that treating 
the communication as a request would be impractical, and (2) that in 
such circumstances, a provider may conduct the transaction orally and 
entirely by telephone pursuant to Sec.  1005.31(a)(3) when the provider 
treats that initial communication as an inquiry and responds to the 
inquiry by telephone and orally gathers or confirms the information 
needed to identify and understand a request for a remittance transfer 
and otherwise conducts the transaction orally and entirely by 
telephone.
    The Bureau is additionally proposing that remittance transfer 
providers may satisfy the requirement in Sec.  1005.31(b)(2)(vi) to 
disclose the Bureau's Web site on the receipts they provide to 
consumers by listing the Web site that is the address of a page on the 
Bureau's Web site that provides information about remittance transfers, 
and that providers making foreign language disclosures pursuant to 
Sec.  1005 31(g) may disclose the Web site of the Bureaus homepage that 
is in the relevant language, if that Web site exists. Although the 
Remittance Rule does not specify which Bureau Web site

[[Page 23254]]

would be provided on receipts, the Model Forms published by the Bureau 
all listed the Bureau's internet homepage. Insofar as this proposed 
change would expand providers' options with respect to meeting the 
requirement in Sec.  1005.31(b)(2)(vi) to disclose the Web site of the 
Bureau, but not require them to alter their current receipts, the 
Bureau does not believe that the proposed change would impose costs on 
providers, unless providers voluntarily choose to adjust their 
receipts. If some consumers would receive disclosures with these more 
specific Bureau Web sites if the Bureau adopts this proposed change, 
the Bureau believes that those consumers may benefit from receiving 
more direct access to relevant Bureau resources about their rights 
under the Remittance Rule.
    Finally, the Bureau believes that the proposed changes to the error 
resolution provisions in Sec.  1005.33 would also not materially alter 
the costs or benefits of the rule to covered persons and consumers. The 
Bureau believes that the proposed clarification that Sec.  
1005.33(a)(1)(iv)(B) would only apply to individualized investigations 
or other special actions by the remittance transfer provider or a third 
party as required by the provider's fraud screening procedures or in 
accordance with the Bank Secrecy Act, Office of Foreign Assets Control 
requirements, or similar laws or requirements and the addition of 
comment 33(a)-7 would conform the rule to its intended scope, and is 
consistent with the current understanding of this exception.
    With respect to the proposed changes to Sec.  1005.33(c)(2)(iii) 
regarding how to provide remedies for errors under Sec.  
1005.33(a)(1)(iv) (failure to make funds available to the designated 
recipient by the disclosed date of availability) because the sender 
provided incorrect or insufficient information in connection with the 
remittance transfer, the Bureau believes that remittance providers are 
not deducting their own fees when remedying the error. Current comment 
33(c)-12 explains the types of fees that a provider may deduct, and 
they do not include the provider's own fees. Indeed, an illustration is 
provided in comment 33(c)-12.i. (a remittance transfer provider imposes 
a US$10 fee on a remittance transfer, and its correspondent imposes a 
US$15 fee, an error under Sec.  1005.33(a)(1)(iv) is determined to have 
occurred, the provider is required to refund its $10 fee). Accordingly, 
the Bureau does not believe that there would be a material impact from 
this provision.
    Lastly, the Bureau is proposing to add to comment 33(c)-5 with an 
example that would illustrate what is meant by the explanation set 
forth in the comment with respect to the amount appropriate to resolve 
the error for purposes of certain remedies set forth in rule. The 
Bureau does not believe that there will be a material impact, because 
the proposed addition would not alter the current explanation and 
impact the amount consumers would receive as the amount appropriate to 
resolve the error. The Bureau believes that the proposed addition may 
have a small beneficial impact because it would add clarity to the 
existing commentary.

C. Access to Consumer Financial Products and Services

    The Bureau expects that the proposal generally would not decrease 
consumers' access to consumer financial products and services. By 
extending the temporary exception, the proposal could preserve 
consumers' current set of options for sending remittance transfers to 
destinations for which insured institutions avail themselves of the 
temporary exception, compared to a market in which the temporary 
exception has expired, and some remittance transfer providers has 
stopped providing services to some destinations, particularly if many 
providers use the exception to send remittance transfers to the same 
destinations. Additionally, by facilitating insured institutions' 
continued participation in the segment of the market for which they 
avail themselves of the temporary exception, the proposal could 
preserve competition. As discussed above, the Bureau seeks comments in 
particular on the relative costs and benefits of the proposal to 
clarify the application of the Remittance Rule to transfers sent to and 
from locations on U.S. military installations abroad. The Bureau also 
invites comment on its potential impact on consumer access to consumer 
financial product and services.

D. Impact on Depository Institutions and Credit Unions With $10 Billion 
or Less in Total Assets

    As discussed above, the Bureau understands that with regard to 
remittance transfers sent from accounts, the majority of insured 
institutions that are remittance transfer providers obtain information 
about exchange rates and covered third-party fees from a limited number 
of service providers that are either very large insured institutions or 
large nonbank service providers. The Bureau believes that this would 
apply to depository institutions and credit unions with $10 billion or 
less in total assets. Given that reliance, the nature of the impacts on 
these institutions would likely be similar to the effects on larger 
depository institutions.
    The specific impacts of the proposed extension on depository 
institutions and credit unions would depend on a number of factors, 
including whether they are remittance transfer providers, the 
importance of remittance transfers for the institutions, the methods 
that the insured institutions use to send remittance transfers, and the 
number of institutions or countries to which they send remittance 
transfers. Information that the Bureau obtained during prior remittance 
rulemaking efforts and the NCUA Call Report data discussed above 
suggest that among depository institutions and credit unions that 
provide any remittance transfers, an institution's asset size and the 
number of remittance transfers sent by the institution are positively, 
though imperfectly, related. The Bureau therefore expects that among 
depository institutions and credit unions with $10 billion or less in 
total assets that provide any remittance transfers, compared to larger 
such institutions, a greater share will qualify for the safe harbor 
related to the definition of ``remittance transfer provider'' and 
therefore would be entirely unaffected by the proposed extension 
because they are not subject to the requirements of the 2013 Final 
Rule. See Sec.  1005.30(f)(2).

E. Impact of the Proposal on Consumers in Rural Areas

    Senders in rural areas may experience different impacts from the 
proposal than other senders. The Bureau does not have data with which 
to analyze these impacts in detail. However, to the extent that the 
proposal leads more remittance transfer providers to continue to 
provide remittance transfer services, the proposal may 
disproportionately benefit senders living in rural areas. Senders in 
rural areas may have fewer options for sending remittance transfers, 
and therefore may benefit more than other senders from a change that 
keeps more providers in the market. The Bureau does not expect that any 
of its other proposed changes would have a material impact on consumers 
in rural areas.

F. Request for Information

    The Bureau will further consider the benefits, costs and impacts of 
the proposal before finalizing this proposal. The Bureau asks 
interested parties to provide comment or data on various aspects of the 
proposed rule, as detailed above in the Section-by-Section

[[Page 23255]]

Analysis and this part. This includes comment or data regarding the 
number and characteristics of affected entities and consumers; 
providers' current practices and how this proposal might change their 
current practices or their planned practices under the 2013 Final Rule; 
and any other portions of this analysis.
    The Bureau requests commenters to submit data and to provide 
suggestions for additional data to assess the issues discussed above 
and other potential benefits, costs, and impacts of the proposed rule. 
Further, the Bureau seeks information or data on the proposed rule's 
potential impact on consumers in rural areas as compared to consumers 
in urban areas. The Bureau also seeks information or data on the 
potential impact of the proposed rule on depository institutions and 
credit unions with total assets of $10 billion or less as described in 
Dodd-Frank Act section 1026 as compared to depository institutions and 
credit unions with assets that exceed this threshold and their 
affiliates.

VIII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small not-for-profit organizations.\36\ The RFA defines a ``small 
business'' as a business that meets the size standard developed by the 
Small Business Administration pursuant to the Small Business Act.\37\
---------------------------------------------------------------------------

    \36\ 5 U.S.C. 601, et seq. The Bureau is not aware of any small 
governmental units or not-for-profit organizations to which the 
proposal would apply.
    \37\ 5 U.S.C. 601(3) (the Bureau may establish an alternative 
definition after consultation with the Small Business Administration 
and an opportunity for public comment).
---------------------------------------------------------------------------

    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and-comment 
rulemaking requirements, unless the agency certifies that the rule will 
not have a significant economic impact on a substantial number of small 
entities.\38\ The Bureau also is subject to certain additional 
procedures under the RFA involving the convening of a panel to consult 
with small entity representatives prior to proposing a rule for which 
an IRFA is required.\39\
---------------------------------------------------------------------------

    \38\ 5 U.S.C. 603-605.
    \39\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    An IRFA is not required for this proposal because the proposal, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. The Bureau believes that the extension of the 
temporary exception would not impose a cost on any insured 
institutions, because the extension would not require them to alter 
current practices but instead maintain the status quo. With regard to 
the proposed clarifications and technical corrections with respect the 
treatment of transfers sent from non-consumer accounts, the treatment 
of faxes, when a provider may treat a communication regarding a 
potential remittance transfer as an inquiry, the Web site addresses to 
be disclosed on consumer receipts, and error resolution provisions 
related to delays and remedies, the Bureau does not believe that any of 
the proposed provisions would have any material cost impact on any 
remittance providers for the reasons stated in the Section 1022(b)(2) 
Analysis.
    With respect to the proposal to clarify the treatment of U.S. 
military installations located in foreign countries, the Bureau 
believes that remittance transfer providers that are small entities 
would not be significantly impacted. As discussed above, there is a 
potential for confusion with respect to when the Remittance Rule 
applies to transfers to and from locations on U.S. military 
installations abroad. If locations on U.S. military installations 
abroad are treated as being in a State, the Remittance Rule would apply 
to transfers from locations on installations to locations in foreign 
countries, but would not apply to transfers from locations in a State 
to locations on installations. If, in the alternative, locations on 
U.S. military installations abroad are not treated as being in a State, 
the Remittance Rule would not apply to transfers from locations on 
installations to locations in foreign countries, but would apply to 
transfers from locations in a State to locations on installations.
    Depending on current practice, each approach could impose 
additional costs on some entities with respect to some transfers (i.e., 
by applying the Remittance Rule to transfers to which the rule is not 
currently being applied), and relieve burdens on some entities with 
respect to some other transfers (i.e., by clarifying that the 
Remittance Rule does not apply to transfers to which it is currently 
being applied).
    As noted above, the Bureau lacks data on the relative impacts of 
the approaches to clarifying the application of the Remittance Rule. 
However, the Bureau does not believe that the impacts would be large 
enough to cause a significant economic impact on a substantial number 
of small entities for at least three reasons. First, for transfers to 
and from the accounts of persons stationed on U.S. military bases 
abroad, the Remittance Rule provides that the determination of whether 
or not the rule applies depends on the location of the account, rather 
than the account owner's physical location at the time of transfer. See 
comment 30(c)-2.ii (whether location is in a foreign country); comment 
30(g) (whether consumer is located in a State). Based on the Bureau's 
outreach to date, the Bureau believes that many servicemembers and 
other consumers stationed at U.S. military bases abroad opened their 
accounts in the United States. Accordingly, the Bureau believes that 
the impact of a potential clarification on account-based transfers 
should be relatively limited.
    Second, the Bureau notes that either approach would likely have the 
burden-relieving effect of clarifying the application of the rule. 
Third, the Bureau does not believe that a substantial number of small 
entities send transfers to and from locations on U.S. military bases. 
For such transactions, the small entity would have to be located on the 
installation (for transfers from locations on the installation) or, for 
most such transactions that not are account-based, have an agent on the 
installation (for transfers to locations on the installation). The 
Bureau believes that remittance transfer providers that are small 
entities generally do not have such locations or agent networks.
    Accordingly, the undersigned certifies that this proposal, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. The Bureau requests comment on its analysis 
of the impact of the proposed rule on small entities and requests any 
relevant data.

IX. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq.) 
(PRA), the Bureau may not conduct or sponsor, and a person is not 
required to respond to, an information collection unless the 
information collection displays a valid OMB control number. Regulation 
E, 12 CFR 1005, currently contains collections of information approved 
by OMB. The Bureau's OMB control number for Regulation E is 3170-0014.
    With the exception of the proposal to clarify the application of 
the Remittance Rule to transfers sent from locations on U.S. military 
installations abroad, the Bureau does not believe that any of the 
proposed changes to Remittance Rule

[[Page 23256]]

set forth in this proposal would have a material impact on the Bureau's 
current collections of information pursuant to Regulation E approved by 
the Office of Management and Budget (OMB) under section 3507(d) of the 
PRA. With respect to the proposal to clarify the application of the 
Remittance Rule to transfers sent from locations on U.S. military 
installations abroad, the Bureau lacks data about current practice and 
thus is unable to determine the potential impact of the proposed 
modification on the Bureau's current collection of information pursuant 
to Regulation E. Other than this aspect of the proposal, there are no 
new collections of information in this proposal that are subject to the 
PRA that could potentially amend current collections of information 
pursuant to Regulation E that have been previously submitted to and 
approved by OMB.
    Comments are specifically requested concerning information that 
would assist the Bureau with making a determination on the impact of 
clarifying the application of the Remittance Rule to transfers sent 
from locations on U.S. military installations abroad on the Bureau's 
current collection of information pursuant to Regulation E, and whether 
the determination that the rest of the changes to the Remittance Rule 
in this proposal would not have a material impact on the Bureau's 
current collections of information pursuant to Regulation E approved by 
OMB is correct. Comments should be submitted as outlined in the 
ADDRESSES section above. All comments will become a matter of public 
record.

List of Subjects in 12 CFR Part 1005

    Banking, Banks, Consumer protection, Credit unions, Electronic fund 
transfers, National banks, Remittance transfers, Reporting and 
recordkeeping requirements, Savings associations.

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau proposes to 
amend 12 CFR part 1005 as follows:

PART 1005--ELECTRONIC FUND TRANSFERS (REGULATION E)

0
1. The authority citation for part 1005 continues to read as follows:

    Authority: 12 U.S.C. 5512, 5581; 15 U.S.C. 1693b. Subpart B is 
also issued under 12 U.S.C. 5601.

Subpart B--Requirements for Remittance Transfers

0
2. Amend Sec.  1005.32 by revising paragraph (a)(2) to read as follows:

Sec.  1005.32  Estimates.

    (a) * * *
    (2) Paragraph (a)(1) of this section expires on July 21, 2020.
* * * * *
0
3. Amend Sec.  1005.33 by revising paragraphs (a)(1)(iv)(B) and 
(c)(2)(iii) to read as follows:

Sec.  1005.33  Procedures for Resolving Errors.

    (a) * * *
    (1) * * *
    (iv) * * *
    (B) Delays related to individualized investigation or other special 
action by the remittance transfer provider or a third party as required 
by the provider's fraud screening procedures or in accordance with the 
Bank Secrecy Act, 31 U.S.C. 5311 et seq., Office of Foreign Assets 
Control requirements, or similar laws or requirements;
* * * * *
    (c) * * *
    (2) * * *
    (iii) In the case of an error under paragraph (a)(1)(iv) of this 
section that occurred because the sender provided incorrect or 
insufficient information in connection with the remittance transfer, 
the remittance transfer provider shall provide the remedies required by 
paragraphs (c)(2)(ii)(A)(1) and (c)(2)(ii)(B) of this section within 
three business days of providing the report required by paragraph 
(c)(1) or (d)(1) of this section except that the provider may agree to 
the sender's request, upon receiving the results of the error 
investigation, that the funds be applied towards a new remittance 
transfer, rather than be refunded, if the provider has not yet 
processed a refund. The provider may deduct from the amount refunded or 
applied towards a new transfer any fees actually imposed on or, to the 
extent not prohibited by law, taxes actually collected on the 
remittance transfer as part of the first unsuccessful remittance 
transfer attempt except that the provider shall not deduct its own fee.
0
4. In Supplement I to Part 1005:
0
a. Under Section 1005.30--Remittance Transfer Definitions:
0
i. Under Paragraph 30(g), paragraph 2 is added.
0
b. Under Section 1005.31--Disclosures:
0
i. Under Paragraph 31(a)(2), paragraph 5 is added.
0
ii. Under Paragraph 31(a)(3), paragraph 1 is revised.
0
iii. Under Paragraph 31(a)(3), paragraph 2 is revised.
0
iv. Under Paragraph 31(b)(2), paragraphs 4, 5, 6 are redesignated as 
paragraphs 5, 6, and 7.
0
v. Under Paragraph 31(b)(2), paragraph 4 is added.
0
vi. Under Paragraph 31(e)(2), paragraph 1 is revised.
0
c. Under Section 1005.33--Procedures for Resolving Errors:
0
i. Under Paragraph 33(a), paragraphs 7, 8, 9, 10 are redesignated as 
paragraphs 8, 9, 10, and 11.
0
ii. Under Paragraph 33(a), new paragraph 7 is added.
0
iii. Under Paragraph 33(c), paragraph 5 is added.
    The revisions and additions read as follows:

Supplement I to Part 1005--Official Interpretations

Section 1005.30--Remittance Transfer Definitions

* * * * *
30(g) Sender
    1. * * *
    2. Personal, family, or household purposes. Under Sec.  1005.30(g), 
a consumer is a ``sender'' only where he or she requests a transfer 
primarily for personal, family, or household purposes. A consumer who 
requests a transfer primarily for other purposes, such as business or 
commercial purposes, is not a sender under Sec.  1005.30(g). For 
transfers from an account, the primary purpose for which the account 
was established determines whether a transfer from that account is 
requested for personal, family, or household purposes. A transfer that 
is sent from an account that is not used primarily for personal, 
family, or household purposes, such as an account that was established 
as a business or commercial account or an account owned by a business 
entity such as a corporation, not-for-profit corporation, professional 
corporation, limited liability company, partnership, or sole 
proprietorship, is not requested primarily for personal, family, or 
household purposes. A consumer requesting a transfer from such an 
account therefore is not a sender under Sec.  1005.30(g).

Section 1005.31--Disclosures

31(a) General Form of Disclosures
31(a)(2) Written and Electronic Disclosures
* * * * *
0
5. Disclosures provided by fax. For purposes of disclosures required to 
be provided pursuant to Sec.  1005.31 or .36, disclosures provided by 
facsimile transmission (i.e., fax) are considered to be provided in 
writing for purposes of providing disclosures in writing pursuant to 
subpart B and are not

[[Page 23257]]

subject to the requirements for electronic disclosures set forth in 
Sec.  1005.31(a)(2).
* * * * *
31(a)(3) Disclosures for Oral Telephone Transactions
* * * * *
    1. Transactions conducted partially by telephone. Except as 
provided in comment 31(a)(3)-2, for transactions conducted partially by 
telephone, providing the information required by Sec.  1005.31(b)(1) to 
a sender orally does not fulfill the requirement to provide the 
disclosures required by Sec.  1005.31(b)(1). For example, a sender may 
begin a remittance transfer at a remittance transfer provider's 
dedicated telephone in a retail store, and then provide payment in 
person to a store clerk to complete the transaction. In such cases, all 
disclosures must be provided in writing. A provider complies with this 
requirement, for example, by providing the written pre-payment 
disclosure in person prior to the sender's payment for the transaction, 
and the written receipt when the sender pays for the transaction.
    2. Oral telephone transactions. Section 1005.31(a)(3) applies to 
transactions conducted orally and entirely by telephone, such as 
transactions conducted orally on a landline or mobile telephone. A 
remittance transfer provider may treat a written or electronic 
communication as an inquiry when it believes that treating the 
communication as a request would be impractical. For example, if a 
sender physically located abroad contacts a U.S. branch of the sender's 
financial institution and attempts to initiate a remittance transfer by 
first sending a mailed letter, further communication with the sender by 
letter may be impractical due to the physical distance and likely mail 
delays. In such circumstances, a provider may conduct the transaction 
orally and entirely by telephone pursuant to Sec.  1005.31(a)(3) when 
the provider treats that initial communication as an inquiry and 
subsequently responds to the consumer's inquiry by calling the consumer 
on a telephone and orally gathering or confirming the information 
needed to identify and understand a request for a remittance transfer 
and otherwise conducts the transaction orally and entirely by 
telephone.
* * * * *
31(b) Disclosure Requirements
31(b)(2) Receipt
* * * * *
    4. Web site of the Consumer Financial Protection Bureau. Section 
1005.31(b)(2)(vi) requires a remittance transfer provider to disclose 
the name, toll-free telephone number(s), and Web site of the Consumer 
Financial Protection Bureau. Providers may satisfy this requirement by 
disclosing the Web site of the Consumer Financial Protection Bureau's 
homepage, www.consumerfinance.gov, as shown on Model Forms A-31, A-32, 
A-34, A-35, A-39, and A-40 of appendix A. Alternatively, providers may, 
but are not required to, disclose the Bureau's Web site as the address 
of a page on the Bureau's Web site that provides information for 
consumers about remittance transfers, currently, 
www.consumerfinance.gov/sending-money. In addition, providers making 
disclosures in a language other than English pursuant to Sec.  
1005.31(g) may, but are not required to, disclose the Bureau's Web site 
as a page on the Bureau's Web site that provides information for 
consumers about remittance transfers in the relevant language, if such 
Web site exists. For example, a provider that is making disclosures in 
Spanish under Sec.  1005.31(g) may, but is not required to, disclose 
the Bureau's Web site on Spanish-language disclosures as the page on 
the Bureau's Web site that provides information regarding remittance 
transfers in Spanish, currently www.consumerfinance.gov/enviar-dinero.
* * * * *
    7. * * *
31(e) Timing
    1. Request to send a remittance transfer. Except as provided in 
Sec.  1005.36(a), pre-payment and combined disclosures are required to 
be provided to the sender when the sender requests the remittance 
transfer, but prior to payment for the transfer. Whether a consumer has 
requested a remittance transfer depends on the facts and circumstances. 
A sender that asks a provider to send a remittance transfer, and 
provides transaction-specific information to the provider in order to 
send funds to a designated recipient, has requested a remittance 
transfer. For example, a sender that has sent an email, fax, mailed 
letter, or similar written or electronic communication has not 
requested a remittance transfer if the provider believes that it is 
impractical for the provider to treat that communication as a request 
and if the provider treats the communication as an inquiry and 
subsequently responds to that inquiry by calling the consumer on a 
telephone and orally gathering or confirming the information needed to 
process a request for a remittance transfer. See comment 31(a)(3)-2. 
Likewise, a consumer who solely inquires about that day's rates and 
fees to send to Mexico has not requested the provider to send a 
remittance transfer. Conversely, a sender who asks the provider at an 
agent location to send money to a recipient in Mexico and provides the 
sender and recipient information to the provider has requested a 
remittance transfer.
* * * * *

Section 1005.33 Procedures for Resolving Errors

33(a) Definition of Error
* * * * *
    7. Failure to make funds available by disclosed date of 
availability--fraud and other screening procedures. Under Sec.  
1005.33(a)(1)(iv)(B), a remittance transfer provider's failure to 
deliver or transmit a remittance transfer by the disclosed date of 
availability is not an error if such failure was caused by a delay 
related to the provider's or any third party's necessary investigation 
or other special action necessary to address potentially suspicious, 
blocked or prohibited activity in accordance with the Bank Secrecy Act, 
31 U.S.C. 5311, et seq., Office of Foreign Assets Control requirements, 
or similar laws or requirements. For example, no error occurs if 
delivery of funds is delayed because the provider's fraud screening 
system flags a remittance transfer because the designated recipient has 
a name similar to the name of a blocked person under a sanctions 
program and further investigation is needed to determine that the 
designated recipient is not actually a blocked person. Similarly, no 
error occurs if delivery of funds is delayed because the correspondent 
bank to which the provider forwards the remittance transfer identifies 
the transfer as similar to previous fraudulent activity and action by a 
correspondent or the provider is necessary to proceed. However, if a 
delay is caused by ordinary fraud or other screening procedures, where 
no potentially fraudulent, suspicious, blocked or prohibited activity 
is identified and no further investigation or action is required, the 
exception in Sec.  1005.33(a)(1)(iv)(B) would not apply.
* * * * *
    11. * * *
33(c) Time Limits and Extent of Investigation
* * * * *

[[Page 23258]]

    5. Amount appropriate to resolve the error. For purposes of the 
remedies set forth in Sec.  1005.33(c)(2)(i)(A) and (B), 
(c)(2)(ii)(A)(1), and (2) the amount appropriate to resolve the error 
is the specific amount of transferred funds that should have been 
received if the remittance transfer had been effected without error. 
The amount appropriate to resolve the error does not include 
consequential damages. For example, when the amount that was disclosed 
pursuant to Sec.  1005.31(b)(1)(vii) was received by the designated 
recipient before the provider must determine the appropriate remedy for 
an error under Sec.  1005.33(a)(1)(iv), no additional amounts are 
required to resolve the error after the remittance transfer provider 
refunds the appropriate fees and taxes paid by the sender pursuant to 
Sec.  1005.33(c)(2)(ii)(B) or (c)(2)(iii), as applicable.
* * * * *

    Dated: April 14, 2014.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2014-09036 Filed 4-24-14; 8:45 am]
BILLING CODE 4810-AM-P
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