U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

52–395 PDF 2009

REMITTANCES: REGULATION AND DISCLOSURE 

IN A NEW ECONOMIC ENVIRONMENT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JUNE 3, 2009 

Printed for the use of the Committee on Financial Services 

Serial No. 111–39 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

LUIS V. GUTIERREZ, Illinois, Chairman 

CAROLYN B. MALONEY, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

DENNIS MOORE, Kansas 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

AL GREEN, Texas 

WM. LACY CLAY, Missouri 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

GREGORY W. MEEKS, New York 

BILL FOSTER, Illinois 

ED PERLMUTTER, Colorado 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JEB HENSARLING, Texas 

J. GRESHAM BARRETT, South Carolina 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

WALTER B. JONES, JR., North Carolina 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

KEVIN McCARTHY, California 

KENNY MARCHANT, Texas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

June 3, 2009 ...................................................................................................... 1 

Appendix: 

June 3, 2009 ...................................................................................................... 39 

WITNESSES 

WEDNESDAY, JUNE 3, 2009 

LoVoi, Annette, Field Director, Appleseed ............................................................ 8 

McClain, Scott K., Deputy General Counsel, Financial Service Centers of 

America (FISCA) .................................................................................................. 11 

Orozco, Manuel, Senior Associate and Director of Remittances and Development, Inter-American Dialogue .......................................................................... 6 

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

APPENDIX 

Prepared statements: 

Waters, Hon. Maxine ........................................................................................ 40 

LoVoi, Annette .................................................................................................. 43 

McClain, Scott K. .............................................................................................. 53 

Orozco, Manuel ................................................................................................. 57 

Thompson, Mark A. .......................................................................................... 64 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Maloney, Hon. Carolyn: 

Written statement of the World Council of Credit Unions (WOCCU) and 

the Credit Union National Association (CUNA) ......................................... 69 

Written statement of the National Association of Federal Credit Unions 

(NAFCU) ........................................................................................................ 74 

(1) 

REMITTANCES: REGULATION AND 

DISCLOSURE IN A NEW 

ECONOMIC ENVIRONMENT 

Wednesday, June 3, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:05 a.m., in room 

2128, Rayburn House Office Building, Hon. Luis Gutierrez [chairman of the subcommittee] presiding. 

Members present: Representatives Gutierrez, Maloney, Watt, 

Sherman, Moore of Kansas, Hinojosa, McCarthy, Baca, Green, 

Clay, Scott, Cleaver, Klein, Meeks, Foster, Perlmutter; Hensarling, 

Castle, Lee, and Paulsen. 

Chairman GUTIERREZ. This hearing of the Subcommittee on Financial Institutions and Consumer Credit will come to order. Good 

morning, and thanks to all the witnesses for agreeing to appear before the subcommittee today. Today’s hearing is focused on the current state of the remittance industry in today’s changing economy. 

We will examine consumer access to remittance transfer outlets, 

the cost and current levels of transparency involved with sending 

remittances, and the need for further regulation of the industry. 

We will be limiting opening statements to 10 minutes per side, 

but without objection, the record will be held open for all members’ 

opening statements to be made prior to the public record. I yield 

myself 5 minutes. 

The volume of remittances has grown so dramatically over the 

past decade that these cash flows consistently rival combined foreign aid and direct investment in many countries. For 2008, the 

World Bank estimates that migrants sent $305 billion to developing countries. This is more than twice the amount of all foreign 

aid distributed during the same year. Truly, the remittance industry knows no borders. In 2007, Indians living abroad transferred an estimated $27 bil- lion back to India. China and Mexico are close behind at $25.7 billion and $25 billion, respectively. 

In nominal dollar terms, more remittances are sent to Latin 

America and the Caribbean than any other region. In 2008 alone, 

more than $69 billion in remittances were sent to Latin America. 

This is more than the combined total of official development assistance and foreign direct investment in the region. And 66 percent— 

2 

that’s almost $46 billion of the remittances—sent to Latin America 

originated right here in the United States. 

To put this in a perspective globally, the United States distrib- uted $26 billion in official foreign aid in 2008. This is $20 billion 

less than migrants sent back to their families in Latin America. 

Even with the current reports of a decline in the money transfer 

to Mexico over the first 4 months of 2009, migrants still sent $1.8 

billion to Mexico in April, alone. 

From a consumer standpoint, one of the major issues of remittances has always been transaction costs. But the remittance industry has come a long way since the last decade in reducing transaction fees. For example, in the mid-1990’s, the cost of sending 

$200 to Latin America averaged $30, or 15 percent. But by 2009, 

the cost of the same transaction was down to about $6.30, or 3 percent. 

The recent decline in fees can largely be attributed to increased 

competition in the remittance industry, especially among money 

transfer operators. For example, today there are more than 100 

money transfer operators serving Mexico, alone. A dozen years ago, 

there were only five. Technology has also accelerated competition. 

Directo a Mexico, an automatic clearinghouse, charges U.S. banks 

only $.67 per transaction to transfer money to Mexican banks. 

Other companies are expanding the use of card-based services, 

ATMs, debit, and prepaid cards as a method for low-cost money 

transfers. In addition, some companies are experimenting with the 

use of cell phones to make remittance transfers. 

And more can still be done to reduce costs and improve price 

transparency to assist consumers in comparison shopping. Many 

consumer groups support basic pre-transaction disclosures regarding exchange rates and fees with a more detailed summary of the 

fees and costs provided in a post-transaction receipt. However, the 

money remitters contend that more disclosure requirements will 

add to their operation cost, and make further reduced fees unlikely. 

There is also the issue of who would regulate this industry. Currently, most States regulate money transfer companies in some capacity, but few States require consumer-oriented disclosure. Additionally, State regulations for money transfer companies do not 

apply to financial institutions. 

Finally, the State regulatory regime provides a patchwork of regulation that increases compliant costs, and has to be absorbed by 

the industry or passed on to the consumer. Today we will explore 

all of these issues, focusing on whether additional consumer disclosures should be required by Federal law. The subcommittee will 

also examine whether a Federal regulator is needed to oversee the 

remittance industry. And, if so, which entity is best suited to take 

on the task. 

This hearing is very timely, and this committee will soon take up 

legislation overhauling the Nation’s financial regulatory structure. 

It seems logical to me that we extend the Federal regulatory regime to the remittances industry. We should do so as part of a larger context of regulatory reform. 

To that end, later this month I plan to introduce legislation to 

address some of the disclosure issues surrounding remittance 

transfers and possibly create a Federal regulatory regime. I look 

3 

forward to hearing from our witnesses, and yield back the balance 

of my time. 

The gentleman from Delaware, Mr. Castle, is recognized for 5 

minutes. 

Mr. CASTLE. Thank you, Mr. Chairman. And let me thank all of 

the witnesses for being here today, and sharing their good thoughts 

with us. 

Much of our focus today will be on the challenges facing licensed 

money remitters and the impact of the global economic crisis. 

Money remittance businesses play a key role in our economy, as 

well as the economies of many developing nations. And I applaud 

the financial institutions subcommittee for holding this important 

hearing. 

I would also like to address some of the risks posed by unlicensed 

remitters, and the impact of new methods for transferring money 

when it comes to our national security. Since the terrorist attacks 

of 2001, this Congress has taken significant steps to combat the 

international financing of terrorism. However, recent reports indicate that post-9/11 terrorist financing has become more decentralized, and that those involved are using less sophisticated means to 

move money, and avoid official banking systems. 

These reports also note that terrorist financiers are exploiting 

new technology like Internet message boards, stored value cards, 

and M-payments to transfer money electronically. 

With at least 10 different government departments and agencies 

involved in the effort to combat terrorist financing, I believe it is 

vital that Congress remain vigilant when it comes to keeping pace 

with these evolving trends in terrorist financing. Hopefully we will 

learn more today about the effectiveness of our current regulations 

when it comes to addressing these evolving terror financing and 

money laundering trends. 

I also have some concerns that the current hodgepodge of State 

and Federal regulations of money service businesses (MSBs) does 

a poor job of preventing abuse of the remittance system. Some 

States do essentially no regulation, and the IRS, which is charged 

with examining MSBs for compliance with the Bank Secrecy Act, 

could not possibly examine the tens of thousands of MSBs known 

to exist. Many MSBs are not even registered, nearly a decade after 

the passage of the Patriot Act. This haphazard regulation hurts 

MSBs and the senders of money, too, because few banks want the 

liability of offering accounts to MSBs. 

This committee has made an effort to address that issue with 

legislation championed by Mr. Gutierrez, Mrs. Maloney, and Ranking Member Bachus. But I believe much more needs to be done in 

this area. 

Moving forward, it is my opinion that the Financial Services 

Committee should hold a comprehensive hearing on the status of 

our post-9/11 efforts to combat terrorist financing. I recently sent 

a letter to our committee’s leadership requesting just such a hearing. 

Thank you, Mr. Chairman, and I yield back the balance of my 

time. 

Chairman GUTIERREZ. Congressman Hinojosa is recognized for 3 

minutes. 

4 

Mr. HINOJOSA. Thank you, Mr. Chairman. Thank you for holding 

this hearing on an issue important to me and my constituents, and 

our Nation’s economy. 

Remittances fill an important community need for many of my 

low- and moderate-income constituents who maintain strong ties to 

their families in Latin America and other regions of the world, and 

who have befitted significantly from reduced cost and increased disclosure of and from increased competition and disclosure of remittances. 

Chairman Gutierrez, I was a proud co-sponsor of your legislation, 

the International Remittances Consumer Protection Act of 2005, in 

the 109th Congress. And I would be honored to be an original cosponsor of similar legislation you plan to introduce this Congress. 

I also laud you for your renewed interest in financial literacy. 

Mr. Orozco, I am very pleased that you acknowledge in your testimony the importance of financial literacy. I have dedicated a considerable part of my time here in Congress to finding ways to move 

my constituents, especially the unbanked, away from predatory 

lenders, payday lenders, and check cashers, and into the financial 

services institutions. 

One of the ways I am seeking to accomplish this goal is by increasing the financial literacy rates of all those residing in the 

United States during all stages of their lives. To reach this goal, 

I co-founded and co-chair The Financial and Economic Literacy 

Caucus with my good friend and colleague, Congresswoman Judy 

Biggert of Illinois. 

I am pleased, Mr. Orozco, that you and an ever increasing number of people across the United States are adopting the term ‘‘financial literacy,’’ and are striving to improve financial literacy 

rates. I am also pleased that Congress and the public have incorporated that phrase in resolutions, legislation, and events held here 

on Capitol Hill and in Members’ districts throughout the United 

States. 

I believe that the financial literacy cause that Congresswoman 

Biggert and I have been working on since 2002, as well as the 

founding of the Caucus in 2005, have let the financial literacy 

genie out of the bottle. 

The Caucus has done much to advance financial literacy, but we 

have much more to do to educate our constituents about the financial fundamentals of checking accounts, savings accounts, budgeting, and preparing for economic decline. I am pleased that you 

and the members of this subcommittee and the full committee have 

embraced the financial literacy cause. Chairman Gutierrez, I commend you for including financial literacy provisions in your legislation. And with that, I yield back. 

Chairman GUTIERREZ. The gentleman yields back. Congressman 

Scott, you are recognized for 2 minutes. 

Mr. SCOTT. Thank you, Mr. Chairman. I want to thank you for 

having this important hearing, because we are indeed in a global 

economy. 

After almost a decade of sustained growth, most developing 

economies are stalling, as a result of the global economic crisis, and 

especially that of Africa. And I would like to dwell on Africa, because of the urgency of that situation there. Dwindling trade, failVerDate Nov 24 2008 13:43 Oct 20, 2009 Jkt 052395 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\52395.TXT TERRIE
5 

ing commodity prices, lagging foreign investment, and dropping remittances are all contributing to the overall deterioration of strides 

made by many developing countries, especially in Africa. 

The International Monetary Fund estimates that the continent of 

Africa is forecast to slip from 5.5 percent last year to 1.3 percent, 

according to the latest numbers. Tens of millions of Africans will 

fall back into poverty. It is important that we continue to encourage groups to continue their work to ensure African countries continue on the path to growth and development, while ensuring respect for the environment and natural resources. 

As money sent home by migrants accounts for the second largest 

financial inflow, even over international aid to many developing 

countries, remittances are playing an increasingly large role in the 

economies of many countries. 

Now, Mr. Chairman, when an additional 55 to 90 million people 

will be pushed into extreme poverty in 2009, and the number of 

hungry people is expected to climb past 1 billion, we must ensure 

that programs that deliver adequate resources are preserved. And 

nowhere is this crisis more dramatic than in Africa, with hunger 

and famine and drought rampaging the continent, not to mention 

the incessant and continuous and unnecessary civil wars. 

For the first time in over 20 years, a decade or so, remittances 

to Sub-Saharan Africa are set to fall in 2009, according to the 

World Bank. Remittances income is set to decline by 1 percent from 

2008 to 2009. I am aware of the impact remittances have made on 

many African countries and the impressive progress that has been 

made over the years. 

But I worry, Mr. Chairman, with the global economic crisis, that 

we will lose decades of development and growth. I am interested 

to hear from our distinguished panel on these and other issues. I 

am pleased that the chairman has chosen to hold this hearing, and 

I look forward to the testimony. 

Chairman GUTIERREZ. Thank you very much. First, we have Dr. 

Manuel Orozco, a senior associate and director of remittances and 

development at the Inter-American Dialogue. He has conducted extensive research policy analysis and advocacy on issues relating to 

the global remittances and migration and development worldwide. 

Dr. Orozco is chair of the Central America and Caribbean at the 

U.S. Foreign Service Institute, and is also adjunct professor at 

Georgetown University, where he is a senior researcher at the Institute for the Study of International Migration. 

Next we have Annette LoVoi, who has been with Appleseed since 

1997, first serving as founding director of Texas Appleseed, and 

now as national field director, a position she has held since 2003. 

She has a master’s degree in public affairs from the Lyndon Baines 

Johnson School of Public Affairs, and has held positions in various 

State agencies in Texas. 

Mark Thompson is an associate general counsel for the Western 

Union Company. Mr. Thompson manages the legal department for 

the Americas regions, and advises the company on State and Federal regulatory matters, including compliance with the Bank Secrecy Act, the USA. Patriot Act, and individual State regulatory 

statutes. 

6 

Scott McClain is a partner at the law firm of—is this Winne, 

Banta? Yes. This is a—wow, and Kahn. Serves as general—you 

know, I get everybody’s name, I practice everybody’s name, because 

everything else is usually easy. This time they got me on the law 

firm. I am a little embarrassed here, but it is a big law firm. We 

will put it in the record. I’m sorry. I didn’t practice the law firm’s 

name. 

As deputy general counsel for Financial Service Centers of America, he is a graduate of Seton Hall Law School, and practices in the 

fields of anti-money laundering and financial services regulatory 

compliance. You are welcome, also. Please, we are happy to have 

you, Mr. Scott McClain, here. 

We will begin with Dr. Manuel Orozco, and hear from each of 

you for 5 minutes. 

STATEMENT OF MANUEL OROZCO, SENIOR ASSOCIATE AND 

DIRECTOR OF REMITTANCES AND DEVELOPMENT, INTERAMERICAN DIALOGUE 

Mr. OROZCO. Good morning, and thank you very much for inviting me to testify. This hearing is a welcome opportunity to focus 

on remittance transfer-related issues, particularly in light of the 

proposed legislation that seeks to address many of the areas and 

policy initiatives. 

I will focus my remarks on three particular issues: the current 

pattern of remittances during the recession period; the state of the 

money transfer market and industry; and the disclosure on financial literacy. These two latter solutions, I think, present important 

opportunities for the future. 

When we look at the current market for money transfers in light 

of the current recession, we see that there is a significant decline 

in the amount of money that immigrants are sending. We expect 

a 7 percent decline from $69 billion to Latin America to $64 billion. 

And the decline is going to be extensive, also, to other parts of the 

world, including Africa and Asia. 

The main impact to countries will be those that are more heavily 

dependent, countries like Haiti, Honduras, El Salvador, and Nicaragua, where at least 50,000 households are still receiving remittances. The effect is going to be—it’s not going to be negligible, and 

requires some attention with regards to the effects on how to mitigate this reality. 

When we look at the issue of the money transfer industry, we see 

that there is continued competition, despite the difficulties that the 

industry is facing today. We actually see a decline in the number 

of money transfer operators in the market, partly related to the 

current recessionary period, but also related to problems in the account closing by banks because of the issues relating to regulatory 

elements. 

The industry continues to be competitive also with regards to the 

cost of remitting. The prices have declined significantly from 15 

percent 10 years ago to about 5 percent this year. The decline has 

remained, however, relatively stable over the past 3 years. 

One of the strategies that some people at the industry have proposed is to establish a Federal licensing mechanism. And I think 

7 

that’s a very welcome and important idea, especially that it will 

promote competition at the national level. 

However, social strategy needs to be accompanied with very 

strict criteria on how to operate nationwide and how to prevent financial losses, especially for companies that may overstretch themselves in the context of increased competition and increased volume 

of money transfers. 

The third issue that I think is important to look at is the proposed discussion on disclosure. The proposed International Remittance Disclosure and Expansion Act offers an opportunity for a holistic approach to tackle the challenges facing the remittance market, including poor financial access for migrants and their families, 

and mechanisms on consumer protection and disclosure. 

The provision of disclosures is definitely a most welcome strategy, and a most welcome policy change. However, I think there 

must be correspondence between the objectives of disclosure and 

the use of appropriate instruments that make disclosure successful 

and commensurable to what is feasible. 

Demanding disclosure on foreign exchange is important, yet cumbersome. Given the nature of the significantly variable nature of 

the foreign currency market, it is very difficult, if not impractical 

and sometimes impossible, to post signs on the foreign exchange 

rate on a regular basis, because the exchange rate changes, basically, sometimes by the second. 

There are other difficulties with regards to the signing—posting 

the foreign exchange, because of the different competitors on the 

pay-out locations in the developing countries. So, I think the key 

issue is how to identify effective mechanisms to develop a good disclosure proposition. 

And in that light, I think, in addition to disclosure, one needs to 

look at the other side of the equation, which is that disclosure in 

itself is not enough to motivate immigrants to understand how the 

system works. And that is where financial literacy plays a very important role. It is—it allows for people to achieve financial independence. You know the significance of financial literacy, in terms 

of enabling people to understand how to budget their money, how 

to save it, and how to invest it and obtain credit. 

The critical issue with regards to financial literacy is not only in 

the role that it informs people, but also in the way in which it provides as a mechanism for financial counseling, but also as a mechanism to motivate people to better invest and manage their money. 

We have learned in developing countries and in the United 

States that when you establish a strategy on financial literacy, 

there is at least a 25 conversion rate of people, immigrants or families of migrants, who mobilize their savings into a financial institution. 

Therefore, I find this issue of financial literacy essential to any 

strategy that links up to the reality of remittance transfers. 

And I will stop my remarks here. Thank you very much. 

[The prepared statement of Dr. Orozco can be found on page 57 

of the appendix.] 

Chairman GUTIERREZ. Thank you very much. 

Ms. LoVoi? 

8 

STATEMENT OF ANNETTE LoVOI, FIELD DIRECTOR, 

APPLESEED 

Ms. LOVOI. Thank you, Mr. Chairman. My name is Annette 

LoVoi, and I serve as field director for Appleseed, a national legal 

advocacy organization with 16 public interest law centers across 

North America. On behalf of our board of directors and our staff, 

I thank you for your invitation to testify this morning. 

The Appleseed testimony will cover three topics: the importance 

of disclosures to remittance consumers; the level of disclosure that 

Appleseed finds desirable; and designating a Federal regulator to 

oversee the remittance industry. 

Many remittance customers live on the knife’s edge, literally one 

step removed from poverty. We find, through our research, that 

they rely on remittances for basic necessities: food; medicine; and 

emergencies. 

Appleseed conducted research in Chicago, Mr. Chairman. Our affiliate, the Chicago Appleseed Fund for Justice, partnered with the 

Mexican consulate to study the financial needs of Mexican immigrants coming to the consulate. We learned two important things 

for the purposes of this hearing this morning. Many consumers do 

not understand the price of remittances before making the transaction. They simply do not know how much the transaction is going 

to cost. And consumers value, above all, understanding the amount 

of money that will be delivered to their family member upon pickup. 

In completing our work in Chicago, we decided that it was important to look at the level of disclosure necessary. And we embarked 

on what we call the Appleseed Fair Exchange pilot. We worked 

with five industry partners and considered what sort of disclosure 

would be appropriate in the field. Our mission was to design and 

test a consumer disclosure template. You will see the fruits of our 

work to my right, and I will explain the template for you in just 

a moment. 

Our pilot provides compelling evidence that disclosure makes 

good business sense: 78 percent of those who checked the remittance found it helpful; and 84 percent want to see the remittance 

disclosure in all business locations. Based on consumer behavior, 

we believe that this sort of positive consumer reaction will only increase. 

We can look at the marketplace and see the implementation of 

food pricing scanners and nutrition labeling, and we believe that 

consumer behavior is such that once remittance customers become 

accustomed to this form of disclosure, the uptake will be even 

greater. 

Businesses also found the disclosures to be a good business move. 

Businesses reported to us that costs are manageable, that disclosures build trust among their clientele, and that they, in fact, save 

time at the front counter by reducing consumer questions. 

Let me now turn your attention to our proposed disclosure template. This is the template that we tested in the field, and it contains, Mr. Chairman and committee members, elements that we 

consider to be base-level and essential elements. 

The elements include a fee for sending, the current exchange 

rate, the day and the time available for pick-up of the remittance— 

9 

this is very important to customers who are traveling to pick up 

their remittances—the type of transaction, whether it is bank account to bank account, or whether it involves cash or cards, and 

then what sort of pick-up fee our consumers might expect on the 

back end. 

There is another element to our disclosure template that we believe is terribly important, and that is a sample of remittance cost, 

so that consumers can see the effect of seemingly small differences 

in fees and exchange rates, and what that means for the ultimate 

amount that could be picked up upon delivery. 

We think that this technique will address some of Dr. Orozco’s 

concerns, in that this would be suitable for downloading, and could 

be delivered to providers, such that they could insert their own financial and costing information and make the information readily 

available to their customer base. 

In addition to this template, we have five recommendations that 

are corollary to use of the document: 

We believe that disclosure should occur visually before the transaction. 

We believe that there should be a mechanism for error resolution 

in those cases when a transaction goes awry. 

We believe that foreign language disclosures are important, and 

that the three markets to which a provider sends most of the business should be covered with foreign language translation. 

And we recognize, as the chairman did in his opening remarks, 

that there are emerging technologies. We see more use of cell 

phones, Internet transfers, and prepaid cards as mechanisms used 

by this population. And so we recommend that those sorts of consumer disclosures that we’re talking about today extend to these 

new emerging technologies and techniques. 

Appleseed recommends that Federal regulators be granted rulemaking authority to delineate posting requirements. We, too, recognize the varying and inconsistent standards among States, and we 

believe that developing disclosures under regulators’ direction 

should be done in concert with community organizations, industry, 

and other regulatory agencies. 

We recommend that this regulator consider consumer protections 

in emerging technologies, study these for a year, and then report 

back to the public, and that the regulator also take in hand the importance of financial literacy, as Congressman Hinojosa referenced. 

We believe that the consumer base does not understand— 

Chairman GUTIERREZ. The time of the lady has expired. 

Ms. LOVOI. —in all cases, the difference between very, very small 

changes in fees and exchange rates. And understanding the impact 

that this can have on the money delivered at the back end is very, 

very important. 

Mr. Chairman, members, thank you again for the opportunity to 

testify this morning. Appleseed stands ready to assist you in taking 

our base-level suggestions to the next level, and the 12 centers that 

we have in the United States and Mexico want to bring their 

knowledge to the table to help you in any way we can. Thank you 

very much. 

[The prepared statement of Ms. LoVoi can be found on page 43 

of the appendix.] 

10 

Chairman GUTIERREZ. Thank you. 

Next, we have Mr. Mark Thompson, please, for 5 minutes. 

STATEMENT OF MARK A. THOMPSON, ASSOCIATE GENERAL 

COUNSEL, THE WESTERN UNION COMPANY 

Mr. THOMPSON. Thank you, Mr. Chairman. Good morning. My 

name is Mark Thompson, and I am an associate general counsel of 

The Western Union Company. I appreciate the opportunity to provide testimony at today’s hearing. 

Western Union is a leader in the global remittance market, and 

is the leading non-bank money transfer provider. With over 

365,000 agent locations worldwide, Western Union provides a convenient, fast, and reliable way to transfer money in over 200 countries and territories. Western Union enables millions of immigrants 

to send money back home to their families. 

Competition in the remittance market has increased steadily 

over the last decade. And, as a result, cost of remittances has 

dropped significantly. As Dr. Orozco reported in his May 2006 

paper for the Inter-American Dialogue, the cost of remittances has 

dropped dramatically from above 10 percent of the remittance 

amount to lower than 5 percent. 

The current global recession has resulted in a decrease in the 

amount of remittances. That decline in the amount of remittances 

has further stimulated competition, as participants in the market 

compete to survive in a shrinking market. 

The topic of this hearing includes both consumer disclosures and 

regulation of remittances. The committee staff has shared draft legislation regarding disclosure, and I will share our thoughts on the 

proposed language. But first I would like to share our thoughts on 

regulation of money transmitters in this new economic environment. 

Money transmitters like Western Union are currently licensed by 

the State. We are subject to Federal laws, such as the Bank Secrecy Act, the USA Patriot Act, and other relevant statutes, but our 

licensing and regulatory oversight, such as examinations, are done 

by the States. In most instances, that regulation is performed by 

a State’s banking department, in a similar fashion to its regulation 

of State banks. 

Given the growth of the remittance industry over the last decade, 

the increased importance of remittances to the global economy, and 

the increasing number of Federal issues related to remittances, 

such as anti-terrorism, anti-money laundering, and border security, 

we believe the time has come for Congress to establish a Federal 

license and a Federal regulator for money transmitters. This would 

grant the Federal Government greater oversight over the industry 

and its related issues, and would provide the industry with more 

consistent guidance and regulation than it currently receives. 

Turning to the issue of consumer disclosures, Western Union continues to support transparency with respect to fees and foreign exchange rates. We agree that consumers should have adequate information to make an informed decision, as they choose among providers. And we agree that remittance transfer providers should disclose this information to potential customers. Several States, including California, Texas, Washington, Alaska, and Hawaii manVerDate Nov 24 2008 13:43 Oct 20, 2009 Jkt 052395 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\52395.TXT TERRIE
11 

date specific disclosures prior to consummating a transaction. 

Western Union would support similar disclosure requirements 

under a Federal regulatory regime. 

We do have concerns about some of the specific disclosure requirements in the draft legislation, which are set forth in my written testimony. I would like to note that the current draft does address some of the issues we have raised in the past, and we appreciate the committee’s efforts to balance the competing interest related to these issues. 

Thank you again for the opportunity to appear before you today 

on behalf of the Western Union Company. We look forward to 

working with the subcommittee, as you continue to examine this 

issue. 

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

64 of the appendix.] 

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

And now, Mr. Scott McClain from Winne—I’m sorry? I want to 

get the name into the record: Winne, Banta, Hetherington, 

Basralian & Kahn. Okay. 

STATEMENT OF SCOTT K. McCLAIN, DEPUTY GENERAL 

COUNSEL, FINANCIAL SERVICE CENTERS OF AMERICA (FISCA) 

Mr. MCCLAIN. Thank you very much, Mr. Chairman. Chairman 

Gutierrez, Ranking Member Hensarling, and esteemed members of 

the subcommittee, I am Scott McClain. I serve as deputy general 

counsel to Financial Service Centers of America, also known as 

FISCA. I am grateful for the opportunity to appear here today to 

discuss issues affecting the industry, including the need for appropriate regulation to ensure the continued availability of affordable 

remittance services. 

FISCA is the trade association representing nearly 7,000 neighborhood financial service providers in the United States. Our membership is comprised of community-based financial service providers, which serve customers from all walks of life, including those 

with bank accounts, as well as the unbanked. 

Our members, which we call financial service centers, or FSCs, 

provide a wide range of services, including check cashing, remittances, money order sales, and utility bill payments. The FSC industry conducts more than 350 million transactions each year, providing over $100 billion in services to over 30 million customers. 

FSCs act as agents of licensed money transmitters. We are involved in the delivery of remittances with customers at the point 

of sale. Although remittances are also provided by banks and other 

financial institutions, due to our convenient locations, extended 

hours, and competitive pricing, the great majority of transactions 

are generated at agent locations. 

FISCA advocates transparency in consumer transactions. We understand that low- and moderate-income consumers need to manage tight budgets, and should not be hit with surprise fees and incomprehensible charges. In sharp contrast with credit card providers and other financial institutions, our members post fees on 

easy-to-understand signs, so that customers can know how much a 

transaction will cost before it begins. 

12 

We agree that consumers should have access to pricing and exchange rate information to help them make informed decisions on 

remittances. The majority of FISCA’s membership act as agents for 

either Western Union or MoneyGram, who make transaction fees 

and conversion rate information—which fluctuates daily—available 

through—including toll free numbers and the Internet. 

We applaud the subcommittee’s goal in ensuring that remittances remain accessible and affordable. In ensuring access, however, it is critical that the regulatory environment also allow those 

who provide remittances to remain in business. 

Our members are dependent on access to depository and banking 

service for their very survival. It is well known that over the last 

several years, our industry has experienced an epidemic of bank account closures. Banks that service our industry are faced with significant regulatory burdens, and are required to expend ever-greater resources in maintaining our accounts. 

As a result, a growing number of banks are terminating their 

FSCs, or refusing new accounts, which is placing onerous requirements on the accounts they maintain. Banks refer to regulatory 

pressure as the primary reason driving these actions. The pool of 

banks that service FSCs is growing dangerously small. 

Turning to the northeast regional market, in the past FISCA 

warned Congress that 90 percent of the New York industry was 

served by only 2 major banks. Two weeks ago, one of those banks, 

Banco Popular, announced that it, too, was terminating FSC accounts, due to regulatory concerns. Businesses in that area are now 

scrambling to find new banks. Other regions are affected, as well. 

It seems almost absurd that the licensed regulated business that 

serves an important need to its community would be driven out of 

business because no bank could serve it. That, however, is the current situation. This trend imperils a regulated industry and its 

ability to deliver remittances and other basic financial services. It 

also threatens to drive remittances underground to unregulated, illegal channels, including cash smuggling. 

It is critical to the interests of national security and consumer 

protection that transparency of transactions be maintained, and 

that our institutions have access to depository services. 

FISCA supports the introduction of a legislative solution designed to relieve banks of excess regulatory burdens in serving our 

industry. On July 22, 2008, the Money Service Businesses Act of 

2008, H.R. 4049, sponsored by Representative Carolyn Maloney, 

Chairman Barney Frank, Ranking Member Spencer Bachus, and 

Representative Judy Biggert, was passed in the House of Representatives. 

While the financial crisis last fall prevented the Senate from taking up that bill, the legislation had broad bipartisan support and 

the support of the banking industry. It is critical that consumer 

protections remain in place for the millions who send money to 

their home countries. Ensuring affordable access to remittances, it 

is also critical that businesses that provide remittances have access 

to banking services to ensure their survival. 

We ask that the members of the subcommittee support our efforts to protect remittance customers, and the businesses that 

serve them. 

13 

Again, we thank you for the opportunity to present these views. 

Thank you. 

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

53 of the appendix.] 

Chairman GUTIERREZ. Thank you, Mr. McClain. Dr. Orozco, in 

your testimony, you touched on some of your concerns about a Federal licensing regime for money remitters. Can you please expand 

on these comments? 

What specific problems do you see associated with such a system, 

in terms of safety and soundness and consumer protections? 

Mr. OROZCO. Thank you. I think the main problem that a Federal license mechanism poses is when a small money transmitter 

thinks that it can operate nationwide, but it doesn’t have the sufficient cash flow liquidity to do so. And on a—especially when we see 

today where there are lots of agents that are facing problems with 

their debts, they are using often remittances to pay off the debts 

and they delay the payment of the transaction. 

The money transfer operator has to cover those costs, and if it 

happens on a nationwide context, they are going to suffer a lot of 

losses, and they are going to go into default. 

So, the main problem is that there is a danger of financial default if you allow for a Federal license mechanism if there are not 

specific criteria on how to control the potential for financial default. 

And it is very likely to happen. A small money transmitter may 

feel that he may be able to compete nationwide, and he will try to 

apply contracts in different States. And when he operates, but 

doesn’t have enough capital to back up transactions, he is going to 

face financial default. 

So, that is, to me, the critical issue. 

Chairman GUTIERREZ. Ms. LoVoi, as an alternative to displaying 

exchange rates in each location, Western Union suggests providing 

the fee and exchange rate information to consumers prior to the 

consummation of the transaction. 

In your view, would this be an acceptable compromise? Ms. 

LoVoi? 

Ms. LOVOI. Mr. Chairman, let me answer that question in general terms. 

We find that there are times when the fee is understandable, but 

the exchange rate is not understandable. And as all of us who deal 

with financial transactions that have two moving parts understand, 

a change in a fee can have an effect on the ultimate amount of 

money transmitted, as can a change in the exchange rate. 

We would like to see both disclosed in advance of a transaction, 

which I believe is your position. And then we would like the consumer to have some understanding of the interaction of the two. 

And I would say that’s a point that I would like to make clearly 

this morning. They can be disclosed separately, but what’s missing 

sometimes for the consumer is an understanding of the interplay 

of those two items. That is why we suggested sample transactions 

in our disclosure format. And that would be our preference, Mr. 

Chairman. 

Chairman GUTIERREZ. Thank you. I want to go to Mr. Thompson 

next. 

14 

In your testimony, you expressed concern about the provision in 

my draft legislation that would require remitters to display the 

daily exchange rates for the five highest volume countries for that 

location. In her testimony, Ms. LoVoi suggested each location 

should post the exchange rates for the top three volume countries. 

Would this be preferable to Western Union, or do you just oppose 

the idea of displaying exchange rates? 

Mr. THOMPSON. Our main concern is the practical difficulty of 

having an employee at each of the agent locations post a rate poster like this, or a rate sheet. 

Western Union changes the rates 3 times a day, potentially, and 

we have 40,000 locations. So, if we have a posting requirement, 

what that means is somehow we have to coordinate 120,000 

changes of posters every single day. That is 40 million posters 

every year. And we need to do it in a way that ensures that what 

is posted is what is given to the consumer. And, practically, we just 

don’t think we presently have the ability to do that. 

We are fine with handing a receipt to the customer prior to finishing the transaction that shows all the information on it. And 

you know, in addition to giving the fee and the exchange rate, it 

shows the total amount that the customer has to provide us in dollars, and then it shows the total amount that will be paid out in 

the foreign currency. 

And with those elements there, we think that is an adequate way 

for the consumer to make their choices. And I think that, you 

know, the studies that have occurred on prices indicate that there 

is a robust competition on prices. And— 

Chairman GUTIERREZ. Thank you. 

Mr. THOMPSON. —this is getting to consumers. 

Chairman GUTIERREZ. I agree, it is getting better. Mr. Castle, 

you are recognized for 5 minutes. 

Mr. CASTLE. Thank you, Mr. Chairman. And let me just preface 

my comments by saying a couple of things. One is I want to talk 

about what I spoke of in my opening, which is the funding of terrorism, to a degree. And, secondly, I basically have not used these 

different remittance methods, either to remit money or to receive 

money. I can barely operate an ATM machine, much less do some 

of this. So if I misstate the question, please straighten that out. 

But let me just start with this. The U.S. State Department recently issued a report warning that terrorist financiers could use 

mobile payments, or M-payments, to move money electronically 

through a cell phone account and avoid regulation. Do you share 

the State Department’s concerns about M-payments being abused 

by terror financiers? 

McClain, do you—can you answer that? 

Mr. MCCLAIN. Thank you, Mr. Congressman. Yes, we are certainly concerned about any potential avenue of terrorist financing. 

Our industry is on heightened alert with respect to this area, and 

we make every effort to ensure that our members have access to 

the information that allows them to be able to spot these transactions, prevent them, and certainly report them via suspicious activity reports. 

With respect to mobile payment devices, we haven’t seen that 

product being offered at any level through our locations. So I can’t 

15 

speak to that issue directly, as we have not seen it yet. As I understand, it is an emerging technology, it is something we are certainly keeping an eye on. But at this point, it does not seem to be 

a significant issue, again, just because the product is not out there, 

in terms of our specific membership location. 

Mr. CASTLE. Thank you. A report by the Treasury Department 

warned that the increased use of stored value cards like remittance 

cards and gift cards could be used to anonymously smuggle cash. 

Is there currently adequate regulation of stored value cards to regulate the amounts that could be put on these cards and taken out 

of the country? 

[no response] 

Mr. CASTLE. Anybody? Mr. Thompson? 

Mr. THOMPSON. We have been piloting a couple of programs involving stored value cards. When we have rolled out those programs, we have done some pretty intensive screening with our 

anti-money laundering folks to make sure that the kinds of limits 

that we place on card balances and card loans and card transactions are ones that we feel comfortable with. 

And, you know, it’s regulation that we are imposing on ourselves 

in order to comply with what we think are the requirements of the 

Bank Secrecy Act. 

I do support consideration of regulation of stored value providers, 

as part of our proposed Federal regulatory scheme over money 

transmitters. There are a number of States who have adopted the 

model act. The model act includes stored value as one of the items 

that is regulated at the State level. And I think it would be appropriate to look at including that in the new Federal licensing bill. 

Mr. CASTLE. Any other comments on that? Dr. Orozco? 

Mr. OROZCO. Yes. Any technology base, a stored value instrument, payment instrument, is actually more secure than the current mechanism or cash transfers, because it has a much more 

flexible space to introduce differing alternatives to increase security, especially to prevent financial crimes. You actually have more 

room through a software platform to introduce different mechanisms to prevent financial crimes than using cash-to-cash transfer. 

So, a mobile phone or a stored value card will be actually more secure. 

The critical issue is that you don’t start backwards from the prevailing standards that exist today on financial crime prevention. 

The first one is know your customer. If you can validate the customer who sends and receives, then you can introduce other 

failsafe mechanisms and ensure that the transfer is secure. So I actually disagree with the State Department’s statement. 

Mr. CASTLE. My time is almost up. Let me quickly ask another 

question. Saudi Arabia, obviously, has been very involved in terror 

financing, at least allegedly so. 

Does Saudi Arabia, to your knowledge, have in place adequate 

safeguards to prevent remittances from being used to finance terrorism, or is this beyond the knowledge of any of you? 

Mr. OROZCO. Not Saudi Arabia. I know of companies—what are 

called third countries companies—that basically have implemented 

stored value cards that do not require identification. They are the 

perfect instrument for money laundering and financial crimes, terVerDate Nov 24 2008 13:43 Oct 20, 2009 Jkt 052395 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\52395.TXT TERRIE
16 

rorism, you name it. And if it arrives into the United States, you 

can, within 10 seconds, be able to perform any financial transaction, and immediately cause any damage. 

But I don’t think the issue is in the country itself, but where the 

company is trying to operate this type of instrument. And it is not 

identified by the regulators in a given place. 

Chairman GUTIERREZ. Your time has expired. 

Mr. CASTLE. Thank you. 

Chairman GUTIERREZ. Mr. Moore, you are recognized for 5 minutes. 

Mr. MOORE OF KANSAS. Thank you, Mr. Chairman. Ms. LoVoi, I 

appreciate your testimony on the importance of consumer disclosure. Something I do worry about, though, is when we discuss the 

need for greater disclosures, that we might be going too far and 

create so many disclosure requirements that we actually end up 

confusing consumers. 

So, I wanted to ask you and any other witnesses who might have 

a comment on that, do you have suggestions as to how we can 

make sure the consumer is fully aware of the—what the fees and 

exchange rates are, but will not serve to confuse them? And that 

is—I know you have addressed some of that, but I hope you understand—I practiced law for 28 years before I came here, and I don’t 

read the disclosure agreements I get from my credit card, you 

know, because they’re so long. 

And I am just wondering if we can simplify that in some way, 

to make sure that people have the information they need without 

this horribly long disclosure form. 

Ms. LOVOI. Well, let me assure you, Congressman, I understand 

your perspective. We are looking for simplicity and plain language 

in all financial disclosures. And I am willing to make that general 

statement about the moment in which we find ourselves. I think 

that fair and understandable disclosure is important. 

Let me speak specifically to remittance disclosure. What we 

found in the four major bodies of research that Appleseed has conducted is that remittance disclosure is an outlier, and that when 

compared to other commonly used forms of financial transactions, 

less information was being provided about these transactions than 

many other transactions used by similar customers. 

And so, we find ourselves needing to gain ground here, and needing to come up to par, you might say. We are not looking for anything that is cumbersome, which is why we recommended that the 

new regulator work with the parties involved: the communities; industry; and other regulatory agencies with a great deal of knowledge in this arena. We are looking for something that is workable, 

something that is practical, and, most important, something that 

occurs pre-transaction. 

We have tried to help you by laying out what we consider to be 

the essential elements. 

Mr. MOORE OF KANSAS. Right. 

Ms. LOVOI. And the elements that we have laid out are not what 

I would call esoteric, or terribly complicated. We understand the 

points being raised about numbers of outlets and these sorts of 

things. And both Dr. Orozco and we have considered how technology can be used to make this easier. 

17 

We are at a moment in time when use of technology can simplify 

these disclosures, whether it’s the sort of switchboard that Dr. 

Orozco has recommended, or the sort of downloadable technology 

that we recommended in our testimony this morning. 

We believe the answer is there, and we believe that, with a new 

regulator as the focal point, we can produce something that is what 

I might call elegantly simple, something that is useful, straightforward, and helpful to both businesses and consumers. And thank 

you for your questions. 

Mr. MOORE OF KANSAS. Thank you. Do any other witnesses have 

comments? Mr. Thompson? 

Mr. THOMPSON. At Western Union, we try to provide the consumer with a number of ways to get the information. We continually update our Web site. And on that Web site are calculators 

that will show how much it costs to send to a particular location 

at a certain amount, and what the exchange rate would be. 

We also provide a 24-hour 800 number that consumers can call 

to obtain that same type of information. And then, at the agent locations themselves, the agent has the capability to look up any fee 

or rate for the consumer, as they are inquiring about the transaction. 

So—and then, as I said before, we do provide this written statement prior to the consummation of the transaction to each consumer who is doing a transaction with us. 

Mr. MOORE OF KANSAS. Thank you, Mr. Chairman. I see my time 

is up, so I yield back. Thank you. 

Chairman GUTIERREZ. The gentleman yields back. Mr. Paulsen, 

you are recognized for 5 minutes. 

Mr. PAULSEN. Thank you, Mr. Chairman. Mr. Thompson, I heard 

in the past that the OCC has been pressuring small and regional 

banks to basically act as a de facto regulator regarding anti-money 

laundering regulations for small money service outlets and small 

local stores. Is this still an issue that we need to be concerned 

about, or aware about, or watching for? 

Mr. THOMPSON. Yes, it is still an issue. I think Mr. McClain has 

focused quite a bit of attention on that. But we have found that it’s 

still very much an issue. I think the last number that I received 

from our financial folks showed that we were providing approximately 4,000 local bank accounts to our agents, who were unable 

to obtain their own accounts in their own local regions to use in 

the conduct of our business. So, it is—yes, it is still very much a 

problem. 

Mr. PAULSEN. Mr. McClain, do you have any comments on that? 

Mr. MCCLAIN. Just briefly. Thank you, Congressman Paulsen. 

It does continue to be a problem. And it—there has been an atmosphere created over the last several years. And I don’t want to 

pin it on any particular one bank regulatory agency, but it is a pervasive atmosphere that somehow these accounts are high risk. And 

I think, if you look at the statistics and the numbers and the frequency of regulatory actions against MSBs, you will actually find 

them very low. So we don’t think that high-risk moniker is justified. 

As I had pointed out earlier in my testimony, it continues to be 

a significant, and a serious, and, unfortunately, as a result, I think, 

18 

of some of the recent focus on banks, a growing problem. Thank 

you. 

Mr. PAULSEN. Okay, Mr. Chairman, I yield back. 

Chairman GUTIERREZ. The gentleman yields back. Mr. Hinojosa 

is recognized for 5 minutes. 

Mr. HINOJOSA. Thank you, Mr. Chairman. I am very interested 

in posing a question to Mr. Mark Thompson. 

You spoke about Western Union having to post 3 times a day the 

exchange rate. And what I have found, in talking to people who are 

in the remittance business, and those individuals who send money 

to their families, is that oftentimes they feel—the senders of the 

money to the families—that they are being gouged by some of the 

companies that they have used. 

So, I would ask you this question. As a businessman, I went to 

the bank to borrow money. And oftentimes, I could borrow it at 

Wall Street-printed prime rate plus one percent. You negotiate 

that. It could be 2 percent, it could be at New York prime less one. 

The point is this. They make money lending us money in business. 

And you make money, as being number one in the remittance business. 

Why couldn’t you set the rate printed the previous day, appearing in today’s Wall Street Journal, and let that be fixed? That is 

the exchange rate that is going to be applied on money being sent 

to a family abroad. Could you live with that? 

Mr. THOMPSON. In our industry, the traditional transaction consists of two different components. One is the actual transfer of the 

money, and the other one is conducting a currency exchange. 

Now, not all transactions that we do involve that second component. But when we’re dealing with international transactions, most 

of them do. And as a profit-making business, we do earn money on 

both components, and we think it is fair— 

Mr. HINOJOSA. Excuse me for interrupting you, because my time 

is going to run out. 

Fees and lowest exchange rate are the two things that have been 

discussed here, and, of course, disclosure. So I want to ask Dr. 

Orozco, being that you seem to be very knowledgeable of the different nationalities and folks sending money to their families, do 

you think that Congress setting that as the exchange rate of the 

previous day that appears in—will be printed in today’s—it closes 

yesterday, and is printed in today’s Wall Street exchange rate. 

Could they live with that exchange rate fixed for the whole day, 

business day? 

Mr. OROZCO. It’s a question that I can answer, depending on the 

company we talk about. 

Mr. HINOJOSA. No. Congress would set it. We would say, ‘‘This 

is the way that it is going to be done.’’ 

Mr. OROZCO. I think many companies will struggle with that. 

Mr. HINOJOSA. Companies would struggle. 

Mr. OROZCO. Yes, because the exchange rate may be favorable 

one day but not the other for the company. So, at the end of the 

month, for example, they may have an actual loss of money from 

the buying of foreign currency. Because, basically, that’s how they 

make their money. They are constantly buying foreign currency on 

a daily basis. 

19 

Mr. HINOJOSA. Ms. LoVoi? 

Ms. LOVOI. Yes. 

Mr. HINOJOSA. How do you feel about having a fixed rate? 

Ms. LOVOI. We haven’t studied your particular proposal, and I 

would want to study it. As I mentioned in my testimony, our approach has been disclosure just immediately prior to the transaction. And what you’re presenting, Congressman, would be a disclosure that would be, you might say, a 24-hour window, such that 

the fee would be static for a certain period of time. 

It’s something I would like to think about. I don’t have comments 

for you on that today, but I will think about that. 

Mr. HINOJOSA. Thank you. Then the last question that I would 

have—and I am running out of time—is I am interested in the proposal to transmit remittances via cell phone. How could that be 

done? 

Mr. THOMPSON. We have a couple of pilots currently running in 

that area. I think the most active one is in the Philippines. And 

what we have done there is worked with the financial regulator in 

the Philippines and a local mobile operator to come up with a cooperative agreement on, essentially, creating a stored value account 

on the mobile phone, itself. 

And then, presently, the involvement of Western Union is from 

a location in Hawaii. We enable people to go into a Western Union 

agent location and send money to that mobile operator’s account for 

the consumer. And then the holder— 

Mr. HINOJOSA. Time has run out, and I just want to say that I 

would also be interested in seeing the success of Finland, because 

they have been using this system now for 10 years. And you are 

talking about the Philippines as a demonstration project. I would 

rather see actual proof of how they have worked it on the cell 

phone. 

And with that, I yield back, Mr. Chairman. 

Chairman GUTIERREZ. The gentleman yields back. Mr. Lee is recognized for 5 minutes. 

Mr. LEE. Thank you, Mr. Chairman. Not to pick on Mr. Thompson, but I am trying to get a little more educated on the fee structure here. And maybe it would help shed some light if you can give 

me an example. On a $100 transaction, what would be the base fee cost? And 

then, from a percentage on the currency, you’re saying that you 

make a profit, both off of the fee structure, which I understand, but 

what—off the currency do you make one percent, 2 percent? What 

is the—is there a set formula, in terms of what you make from the 

currency? 

Mr. THOMPSON. I didn’t come today prepared with those kind of 

numbers. I can speak generally to it. 

Mr. LEE. Sure. 

Mr. THOMPSON. You know, in Mexico transactions, U.S.-to-Mexico, to send up to $300 in what we call our Money in Minutes service, which is available almost immediately, I think the current 

transfer fee is $15, $14.99 probably. 

And then I think what you’re after is kind of the margin that we 

build into on— 

Mr. LEE. On the currency. 

20 

Mr. THOMPSON. —the foreign exchange rate. 

Mr. LEE. Correct. 

Mr. THOMPSON. And I am not sure exactly what today’s margin 

is, but I think it’s around one percent. So that would be, on a $300 

transaction, $3. 

Mr. LEE. That is— 

Mr. THOMPSON. That would be the margin on that. 

Mr. LEE. That is typically one percent of what that—whatever 

the— 

Mr. THOMPSON. I think the margins, you know, a decade ago, 

were much, much larger. And competition has really pushed those 

margins to a much smaller range. And Dr. Orozco maybe has better numbers than I do, but it is—I think that, you know, below 2 

percent is probably where most people are today. 

Mr. LEE. I mean, from a clarity standpoint, when you are—as a 

consumer, you are now having to weigh two different numbers, not 

only the fee structure, but then you’re also going to have to calculate what the—depending on how many dollars and what that 

margin rate is. 

It seems if you are—I’m assuming the majority of the people who 

are involved in these transactions are probably working class, they 

may not be as educated on some of these issues. 

Do any of these firms just do a flat fee, and they do not also take 

a cut on the currency? Is there anybody who does that in the industry? 

Mr. THOMPSON. I think that the common practice is to have both. 

And I mean, from the standpoint of a consumer comparing, the 

easiest way to do it is to—if the consumer says, ‘‘I want to send 

$300, how much is my relative in Mexico going to get in Mexican 

pesos,’’ and just compare those numbers. And we tell them that. 

Mr. LEE. I understand. But wouldn’t the simplest form just be 

to have a flat rate, regardless of whatever the actual currency rate 

is at that time that is transferred, but regardless, you just have a 

flat fee based on the number—if it’s $100, it’s $15 or $20, and if 

it’s $200—you have some—I’m just trying to understand. 

Is there a simpler way to enact a fee, versus doing these two— 

where you’re charging off of two different venues? 

Mr. THOMPSON. Well, I mean, one of the problems with having 

everybody have the same exchange rate is that not all companies 

can acquire the currency at the same exchange rate. 

So Western Union, being one of the largest, is probably the most 

likely to be able to meet, like, a Wall Street rate. But the little 

company that may only have five locations, they may not be able 

to acquire currency at that rate. And is the expectation that they 

then lose money on the currency conversion? I don’t think they 

want to do that. 

Mr. LEE. Just one other question. Again, just trying to understand. 

In terms of the margin, is there any limit, in terms of what margin you can charge off—on the currency? Can you charge 3 percent? 

Four percent? Five percent? Six percent? 

Mr. THOMPSON. None of the regulators that we have today have 

capped prices or spreads. And we certainly hope that we don’t get 

21 

to that point. I think competition has addressed the issue adequately. 

Mr. LEE. Good. Thank you. I yield back. 

Chairman GUTIERREZ. Thank you. And I think that’s an area 

that we want to make sure, as we look—both Mr. Hinojosa and 

yourself are looking at what the exchange rate—but it used to be 

sometimes 2 or 3 times higher. They would make 2 or 3 times more 

money on the exchange rate than they did on the actual fee. 

So, when a company said, ‘‘Send money for free,’’ and you said, ‘‘What? They’re not going to charge me $14.99? It’s for free?’’ It 

wasn’t free, because it was actually—and that’s the way we really 

got involved in this, because somebody, a husband, called his wife 

and said, ‘‘I need this amount of money.’’ He was in the country, 

and he had seen the exchange rate at the hotel. So he called his 

wife and said, ‘‘What’s wrong? Don’t you have the money? I told 

you to send me this amount of money.’’ And she said, ‘‘I did.’’ 

Well, it got gobbled up in the exchange rate. It wasn’t that the 

husband and the wife had a problem communicating, it was a 

whole other system. And, anyway, long story short, we have improved since then, but we have much further to go. 

Mr. Sherman, you are recognized for 5 minutes. 

Mr. SHERMAN. Thank you. Before I focus on consumer protection, 

let me focus on something that will be useful to policy makers, and 

that is statistics on how much money is being sent where. 

I wonder whether Mr. Orozco or anyone else can comment on 

whether we are getting all the statistics that the industry could 

generate, and what additional statistics we would ask them to provide, or reports. 

Mr. OROZCO. Statistics is always an issue when it comes for 

money transfers. The main reason is that you don’t know how 

many immigrants are in the country. So the main sources that you 

use to identify the flow of money comes from central banks on the 

receiving side. In the United States, there is still no centralized 

unit that actually collects information on outbound money transfers. 

Mr. SHERMAN. Why don’t I ask Mr. Thompson? How difficult 

would it be for the industry if we required statistical reports so 

that we would be getting this information on the sending side, and 

not just from the central banks? 

And sometimes these remittances are even going to countries 

where we don’t particularly get along well with the government, 

and we would like statistics on those transactions, too. How difficult would it be? 

Mr. THOMPSON. A number of our State regulators are collecting 

the information on the volumes of transactions that we are doing. 

And then I know California, in particular, has— 

Mr. SHERMAN. Are they focusing on which countries the money 

is going to, or just the volume of transactions? 

Mr. THOMPSON. California, in the last year or so, has required us 

to report on, like, the top 20 or 25 countries that we are sending 

to. 

Mr. SHERMAN. So, if you can do it for California, you could do it 

nationwide, and in addition to the top 20 countries, if we identified 

5 or 10 countries of concern—I doubt you are sending a whole lot 

22 

of money to North Korea, but if you ever did, we would sure like 

to know about it. 

Mr. THOMPSON. We don’t do North Korean transactions. 

Mr. SHERMAN. I suspected that. Now, let me focus on consumer 

protection. 

It is my understanding, Mr. Thompson, from your testimony— 

and perhaps Mr. McClain can comment on this, as well—that if I 

show up at the window and say, ‘‘Here is my $300, I know how 

many pesos my relative is going to get,’’ is that clearly disclosed to 

me before you touch my $300? 

Mr. THOMPSON. It is discussed, or it is disclosed, before the 

transaction is finalized. We do require payment before we provide 

the receipt that the disclosure is on. But the actual transaction— 

Mr. SHERMAN. If I just show up at your office and say, ‘‘I am 

thinking of sending $300 to my uncle, how many pesos will he get,’’ 

will you tell me? 

Mr. THOMPSON. Oh, for sure. And, as I said, the agent will tell 

you, or you can call us and we will tell you, or you can look it up 

on the Internet. 

Mr. SHERMAN. So I can do it before I show up at your office? Because once I show up at your office, if you’re going to charge me 

$4 more than anybody else, I am still going to give you the business. 

So, Mr. Moore was talking about how you needed something understandable, and the one thing that is understandable is I put in 

$300, this is how many pesos my relative gets. 

Mr. THOMPSON. No, we will tell you ahead of time. 

Mr. SHERMAN. And the other thing that is understandable is I can see you charge $14.95 for up to $300. What is less understandable is the exchange rate. 

And what would be the advantage or disadvantage if Congress 

were to let you charge your own fee, because that’s something understandable, but impose a requirement that you never have an exchange rate that is more than 2 percent worse than the Wall Street 

rate? How would that affect you? And perhaps Mr. McClain could 

comment on behalf of the industry, as well. 

Mr. THOMPSON. Well, we are strong believers in a free market. 

And we don’t think, historically, price controls have worked very 

well. 

Mr. SHERMAN. But this wouldn’t be real price controls, because 

you could charge whatever fee you wanted. It’s just the part of your 

price that is least understandable would be controlled, and then 

you would set your own price for the stuff that—for the fee that 

is understandable by your consumers. 

Mr. THOMPSON. Yes, I mean, that would limit competition in exchange rates. 

Mr. SHERMAN. Limit in the sense that if somebody wanted to 

charge a really high exchange rate and hope the consumer didn’t 

know about it, they couldn’t get away with it. 

Mr. McClain, where would you be on regulation as to the amount 

of fee, but a requirement that the exchange rate be within 2 percent of what Wall Street is providing? 

Mr. MCCLAIN. Thank you, Congressman. Our members act as 

agents of Western Union, and Moneygram, and the other remitters. 

23 

We—our agents, as agents, they are simply third-party processors. 

They don’t make anything on the spread. They charge a rather, you 

know, modest transaction fee— 

Mr. SHERMAN. So your people don’t benefit from the exchange 

rate piece of the profit. Would it hurt your—do you think it would 

hurt the industry if we regulated that? 

Mr. MCCLAIN. I think we would have to defer to our money 

transmitter processors. But again, we just receive a nominal—or 

marginal, small processing fee. So that issue really doesn’t affect 

us, individually. 

Mr. SHERMAN. Do any of the other witnesses have a comment on 

some maximum amount that could be charge on the exchange rate? 

[no response] 

Mr. SHERMAN. I see no other witnesses; my time has expired. I 

yield back. 

Mr. SCOTT. [presiding] Thank you very much. The Chair will now 

recognize the gentleman from Texas, Mr. Hensarling, for 5 minutes. 

Mr. HENSARLING. Thank you, Mr. Chairman. First, my apology 

to the panel. I missed your earlier testimony. So this may be covering some other ground, as I try to split myself between a budget 

hearing and this hearing. 

But I am a firm believer that the best consumer protection is a 

competitive marketplace, an educated consumer, and effective disclosure. Certainly, I think there have been at least 200 years, if not 

several thousand years in world history, that price controls do not 

work for the consumer, and ultimately leads to rationing. 

But I haven’t looked at this market recently. So for those—and 

I believe, Mr. Thompson, you were certainly pushing back on the 

idea of some type of price control—what would you point to as evidence that there is a robust, competitive market in remittances? 

Mr. THOMPSON. Well, there are a number of studies that Dr. 

Orozco has done that indicate that it’s an extremely competitive 

market, and the competition has resulted in a significant decrease 

in fees and more favorable exchange rates over the last decade. 

Mr. HENSARLING. Well, and in fact, I recall attending several of 

these hearings over the years. I believe the first one I might have 

attended was in 2003, and I think I have seen data come across 

my desk showing that fees have dropped considerably—I don’t 

know what magnitude that would be—over the course of the last 

5 or 6 years. 

Dr. Orozco, since Mr. Thompson mentioned your name, do you 

care to comment on this question? 

Mr. OROZCO. Yes. The cost has dropped significantly. In 2001, it 

was 9 percent, and now it’s about 5 percent. So it’s a drop of about 

50 percent in relationship to 8 years ago. It hasn’t changed very 

much, but that’s one measure of competition. 

Another measure is the number of players in the market, and another measure is the interest in the investor community to put 

money into this industry. And in the three cases you see that there 

is significant dynamism. 

Mr. HENSARLING. I know that Chairman Gutierrez has been 

quite passionate about this issue over the years, and I have heard 

him speak before of consumer-oriented disclosure. And again, you 

24 

may have testified about this previously, forgive me, but I just arrived. 

Could you comment on what—Mr. Thompson, you in particular— 

what do you believe that Western Union could do, or other industry 

participants, to make disclosure more consumer-oriented? 

Mr. THOMPSON. Well, as I mentioned in my earlier testimony, 

you know, there are a number of States that currently mandate 

disclosures. And, essentially, what you do is you provide a written 

disclosure to the consumer of the principal amount they have given 

you, what the amount of the fee will be, the total amount that they 

need to pay you in cash, what the exchange rate is, and then what 

the pay-out in the foreign currency is. 

Those disclosures are required prior to consummation of the 

transactions. We comply with that, and we think those are adequate disclosures. 

I also mentioned that the fees and the exchange rates are available from a number of sources. They—we have a Web site that has 

a price calculator on it, that people can look it up on. We have 24- 

hour toll-free telephone operators who can be called. They can provide that same information. And then the agents are able, through 

our system, to look up a rate, an exchange rate, for any particular 

transfer for any customer who makes an inquiry. 

Mr. HENSARLING. Do any other panel members wish to comment 

upon this question of things that might be done to make disclosure 

more effective for the consumer? Ms. LoVoi? 

Ms. LOVOI. Yes, Congressman Hensarling. Thank you very much. 

I bring you greetings from the great State. 

Mr. HENSARLING. How wonderful. 

Ms. LOVOI. I will not repeat my testimony this morning, but I 

would like to give you an excerpt or two. 

Just a moment ago, Congressman Lee asked a question that I believe gets to the heart of our testimony, which is that the interplay 

between fees and exchange rates is very, very complicated. I believe it would be complicated not only for the users of the services, 

but for all of us in this room, and I would include myself in that 

category. That is what makes this pricing particularly difficult, 

that we are dealing with two variables, the fee and the exchange 

rate. 

We presented today a proposed disclosure template, which is the 

final page in my testimony on your desk this morning. And we believe that that presents what we would consider to be baseline disclosures that ought to be made. 

One of the problems in the marketplace today is that sometimes 

the disclosures are made verbally, and sometimes they are in writing. Sometimes they are pre-transaction, sometimes they are posttransaction. It depends upon the marketplace player, how these are 

delivered. 

And what we are looking for is bringing what you might call rationality to the system, such that there are consistent disclosures 

across businesses that a consumer can learn about and can come 

to understand. We made the comparison this morning in our testimony to price scanners in grocery stores and to nutrition labeling. 

We are looking for something that is simple, elegant, consistent, 

25 

and understandable. And we believe that would be the best form 

of consumer literacy. 

Mr. HENSARLING. Thank you. I see my time has expired. 

Mr. SCOTT. Thank you. The Chair now recognizes the gentleman 

from California, Mr. Baca, for 5 minutes. 

Mr. BACA. Thank you, Mr. Chairman. Dr. Orozco, I have a question for you. I am curious as to what your thoughts are of the practices of the institutions like Bank of America, Wells Fargo, 

Citibank, and their use of credit card and debt card for low-cost 

money transfers. 

And do you know of any current problems, or can you foresee any 

problems that may arise with these practices, as it relates to the 

industry, transparency, or possible industry abuse? 

Mr. OROZCO. Thank you. What we have seen is actually that the 

banking industry is becoming increasingly a matter of choice by migrants, because it offers them greater value added in the use of different financial services offered by the bank. 

So, using a card, for example, is increasingly being adopted. It 

has more failsafe mechanisms for the consumers, as well as for regulation, and it allows migrants, basically, to use the card at different locations. Also, the recipient can take advantage of a card, 

if possible. We haven’t found any problems of abuse, of misuse of 

the card, especially in these particular banks. In fact, there has 

been greater popularity among them. 

Mr. BACA. Okay. And this one is for Annette LoVoi. In your testimony, you talked about the need to make the market more predictable and more secure, in order to better service the customers. You 

go over the results of the pilot program that you organized and engaged in, and you emphasize the increased disclosure in the market. 

I am curious, though, of all the suggestions you mentioned, 

which do you think meets the most resistance by the industry’s 

participant, and why? And what can be done to overcome this resistance? 

Ms. LOVOI. I think that’s a very, very interesting question. 

I would like to refer back to a recommendation in our testimony, 

and that is that a new regulatory body would be in an excellent 

position to work with various elements of the industry and understand what legitimate concerns might be set forward, and how 

these concerns could be dealt with. 

We think that perhaps some focus groups of industry and consumers could shed some light on this subject because, again, the 

industry is not a monolith. It is bifurcated in many ways. There are 

many different sorts of players, large and small players that work 

in certain corridors and players that work in all corridors. And so 

I think your question is interesting because it goes to the heart of 

what individual businesses would need to contend with. 

I would hearken back to a comment that we made earlier. What 

matters here is the ability for the consumer to have pre-transaction 

information for the consumer to be able to walk away from a transaction if it’s too costly, or doesn’t do what the consumer wants, and 

then an ability to compare costs among providers. 

Our template is workable. We tested it with five different market 

players, very, very large to very, very small. And we were exVerDate Nov 24 2008 13:43 Oct 20, 2009 Jkt 052395 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\52395.TXT TERRIE
26 

tremely gratified to find that there were positive results across the 

network of five testers. So that may go to the heart of your question, which is could this be workable among different types of players, and we believe the answer is yes. 

Mr. BACA. Okay. Thank you. Mr. Thompson, in your testimony 

you state while you are in favor of increased disclosure on Federal 

regulations, you do not favor the proposed requirement to display 

the daily exchange rate. 

In Dr. Orozco’s testimony, he offered an alternative that would 

alleviate the administrative headaches that you believe the proposal creates. He suggests that the institutions may want to utilize 

some sort of switchboard telecommunications device that would 

allow for real-time update exchange rates. This proposal seems like 

it would take away the responsibility from individual franchise 

managers to provide updates throughout the day. 

How do you feel about this proposal, and do you think it is a viable solution or a compromise, in light of your concerns? Or, do you 

think it would be a waste of multiple updates that are not needed 

throughout the day? 

Mr. THOMPSON. I am not sure I am totally familiar with his proposal. But at our agent locations, the vast majority of them are 

hooked into our central computer system, so that the agent can do 

a real-time inquiry to find out what the present fees and rates are. 

And for those that don’t have that ability, they call into our customer service center. 

Mr. BACA. Okay. I am going to cut you short on here, because 

my time has expired, but I want to ask the final question to get 

that in. 

What impact, if we do not allow the 12 million to 14 million immigrants right now—because we’re trying to deal with comprehensive immigration—what impact would it have on the industry if 

they were not allowed to have remittals or transfers, the 12 million 

to 14 million undocumented? And that is a variety of different people. What impact would it have on the industry? 

[no response] 

Mr. BACA. Any one of you can answer this. 

Mr. OROZCO. Well, the impact will be many-fold. The first one is 

that you will have increased informality. That is, money will go underground. And that will have severe implications, in terms of security. 

The other one is that any decline in flows going to developing 

countries will have also an economic impact on these countries and, 

in turn, create a vicious cycle of more migration. 

Ms. LOVOI. I would like to answer the question as well. When 

we began our work 6 years ago, we studied the markets and we 

found that money was going through many informal channels, as 

well as formal channels. We believe, Congressman, the money will 

continue to move. It might not move in the volume in which it is 

moving today, but immigrants will continue to find ways to send 

money home. 

Mr. BACA. So we wouldn’t have the accountability, the oversight 

that would be there to regulate that process, so it would be more 

or less through a black market than it would done—right? 

27 

Ms. LOVOI. That’s right. And let me mention there are ancillary 

consumer dangers in that kind of system. There are different consumer dangers. Individuals are subject to personal threats if they 

are carrying large sums of cash. So I just want to point out that 

there would be many threats in that system, as well. 

Mr. BACA. Does anybody else want to answer that? If not, I know 

that my time has run out. 

[no response] 

Mr. BACA. If not, I guess what you are all saying is that we need 

comprehensive immigration. Thank you. 

Mr. SCOTT. Thank you, Mr. Baca. The gentleman from Texas, 

Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. And I thank the witnesses for appearing today. I would like to ask you to kindly look 

through the vista of time, and tell me if you envision a world 

wherein, in the not too distant future, we will have international 

transfers from computer to computer, cell phone to computer, computer to cell phone, cell phone to cell phone, literally without going 

into any office, without leaving your home, or wherever you happen 

to be. 

Will we have transfers that can take place instantly by way of 

cell phones and computers on an international basis? Assuming 

that the technology currently exists—the necessary agreements 

and accords may not be in place, but is that a world that we will 

have in the immediate future, or is that world already here? Yes, 

sir? 

Mr. OROZCO. In the immediate future, no. Unfortunately, the 

technology is not the challenge, it’s the financial payment infrastructure that is missing in many developing countries. The technology may enable you to use a device of any sort, whether it is 

a mobile phone or a card. But if you don’t have a location where 

that can be honored, that transaction can be honored through electronic financial transfers, it’s not going to happen. 

And in order to build that financial transferring structure, you 

have to focus on developing countries. If you look at Africa, for example, you have many— 

Mr. GREEN. Well, excuse me for interceding. I want to follow up 

on this. 

Mr. OROZCO. Yes. 

Mr. GREEN. The technology does exist. Is that what I heard you 

say? So it now is a matter of infrastructure with the technology. 

Assuming we accomplish technological infrastructure, is the next 

question do we have any agreements and accords that have to be 

developed between nations so that this transfer can take place? 

Anyone? Yes, sir? 

Mr. THOMPSON. When we have looked into this, the main issue 

that you have to deal with in the developed country is what entity 

is going to hold the money that is on the account that is having 

transfers made in and out of on the— 

Mr. GREEN. Did you—if I may interrupt for just a moment, did 

you say in a developing country? 

Mr. THOMPSON. In the developing country— 

Mr. GREEN. Okay, let me intercede for just a moment. 

Mr. THOMPSON. Yes, yes. 

28 

Mr. GREEN. Let’s remove developing countries from the paradigm, and let’s just talk about developed countries now. From one 

developed country to another developed country, does the paradigm 

currently exist? 

Mr. THOMPSON. It is a regulatory regime that is so rigid in that 

generally you have to have a bank-to-bank transfers, that the dollar cost of the transfer isn’t one that— 

Mr. GREEN. Permit me to ask this question. 

Mr. THOMPSON. —is currently usable for mobile phones. 

Mr. GREEN. Are we moving in that direction? 

Mr. THOMPSON. It is moving very slowly. People, there are a lot 

of people— 

Mr. GREEN. Regardless as to the rate of speed— 

Mr. THOMPSON. —around the world working on it. 

Mr. GREEN. —are we moving in that direction? 

[no response] 

Mr. GREEN. I see others nodding yes. I see you are a bit reluctant. So, let me go to someone nodding yes. Mr. Orozco? 

Mr. OROZCO. Well, the technology exists, and I can, for example, 

make a transaction right now with my cell phone to a bank in the 

UK. That is feasible. And we are going in that direction. The process is very slow, however, and uneven, depending on the countries 

that you are looking into, the corridors where the transaction is 

going to take— 

Mr. GREEN. Well, permit me to ask this. We currently have laws 

that circumvent the transfer of dollars if I am moving from one 

country to another. I think our standard is $10,000, is that correct, 

when I have to account for the money as I am taking it out of the 

country or bringing it into the country? 

Mr. OROZCO. Yes. But for banking—for wire transfers, actually, 

sometimes the transaction is limited to $1,000. 

Mr. GREEN. Okay. Then my question is, will this new technology 

allow this to be circumvented, and do we need to regulate some 

regulation, so as not to permit persons who want to do dastardly 

things, engage in money laundering, move money for criminal activity purposes? 

Are we—do we have the regulations in place to deal with this? 

And I will allow—I think Mr. McClain, I have noticed that you 

seem to want to have a response, and then others who may want 

to respond. Yes, sir? 

Mr. MCCLAIN. Thank you, Congressman. I am not really entirely 

studied on the question of the mobile payment system. I am familiar with it. But as I understand it, there, you know, obviously 

would need to be a regulatory structure in place to ensure that the 

system would not create a conduit for those types of transfers. 

It is my understanding that in other countries, they have addressed this. But again, this is not something I am entirely studied 

in. So it is an emerging technology, companies are looking at it, but 

I don’t think we are there yet, in terms of— 

Mr. GREEN. Ms. LoVoi? 

Ms. LOVOI. Yes. Mr. McClain is not the only one who is not studied on the subject. I think, in general, this arena is understudied. 

It is coming. I think it is a debatable question how quickly it is 

coming, and even the panelists might disagree about that. 

29 

But I think the point is that under the regulatory framework 

that we seem to be agreeing to this morning, this would be a priority for a remittance regulator, to look at the emerging technologies, to understand them, and to understand the conflicts in jurisdictional laws that might govern these sorts of transactions. 

And we testified this morning that these new emerging technologies ought to be held to the same standard of disclosure as that 

we laid out in our testimony. So that would be our number one concern, that as there are emerging technologies, that they not be a 

way to skirt the standards, and they not be a way to avoid consumer disclosure. 

Mr. GREEN. Thank you. My time is up. Thank you, Mr. Chairman. 

Mr. SCOTT. Let me have my time at the horn for a few questions 

before we move to Mr. Cleaver. Very briefly, let me ask, first, Dr. 

Orozco. 

In your testimony, you brought up the idea of a remittance clearinghouse switchboard that would provide fee and exchange rate information to the consumers. What I want to ask you is what you 

didn’t mention. Who would pay for this? Who would pay to set it 

up? Who would operate the clearinghouse? And where would the 

clearinghouse get the information? 

Mr. OROZCO. Thank you. The industry will pay for it. Basically, 

right now, the large majority of the money transfer operators have 

their call centers operational. And they service the customers, they 

provide information about the fee and the exchange rate. 

What I am proposing is that, for the benefit of the consumer, 

that you centralize all those call centers through a software platform that allows people to dial a number, and they can check and 

compare different transactions from different companies at the 

same time. So, the cost is very effective, because you have to basically have a couple of people just directing and redirecting the lines 

and controlling the flow of the traffic of the calls. 

But the calls go directly to the existing money transfer company, 

and you can go on the spot to an agent location and call the company and say, ‘‘How much does it cost to send ‘X’ to this country, 

to this location,’’ and they give you the amount right on the spot. 

And if the agent doesn’t comply with that information, then there 

is a problem. Or, if it does, then you are confirming your transaction. 

Mr. SCOTT. So, quickly, the answer to that question, who pays for 

it, is who, again? The remitter? Who pays for it? 

Mr. OROZCO. Yes, the remitter, or the industry. I mean, whichever way you want to look at it. It is already—the infrastructure 

exists already there. Every company already has the 800 line 

where you can call. So what I am suggesting is that you get a 

switchboard that picks up on those lines, and then the consumer 

can call this number, and then it directs you and redirects you to 

the different existing lines that are already paid for by the companies. 

Mr. SCOTT. Right. Let me ask this. Ten years ago, the average 

cost for sending $200 to Latin America was $3, which is 15 percent. 

What is it today? 

30 

Mr. OROZCO. To Latin America, it is 5 percent. To Africa, it is 

still higher, it is about 8 percent. 

Mr. SCOTT. And why is that? That was my next question. The 

major areas are India and China, Africa, Latin America, and the 

Carribean. What is it about the different—is there something about 

the different areas, geographical areas, as to why that price differential and the cost differential is taken into consideration? What 

are those considerations? Why is one cost higher than the other? 

Mr. OROZCO. There are at least five reasons. One is volume. A 

country that has a larger market is going to have economies of 

scales. So the prices are likely to be lower. 

The second one is in formality. If you are competing with informal networks, usually the cost of remitting is higher. And informality is often informed by poor regulation in developing countries. 

The third one has to do with competition. There is very limited 

competition, for example, in the African continent. So when there 

are only two competitors in the market, your costs remain high. 

Mr. SCOTT. Okay. Thank you very much. As we move forward 

with some of the regulations that we would be offering, in terms 

of legislation—dealing with pricing, dealing with costs, transparency, disclosure, all of the things we have gone over—is there 

a legitimate argument from the industry standpoint that these 

costs will be overly burdensome to them? 

Is there a legitimate—we have some of the industry here. Is that 

a concern? 

Mr. THOMPSON. Our concern about a posting requirement is the 

practical implementation of that kind of proposal, and the— 

Mr. SCOTT. Excuse me a minute. The what concern? The posting? 

Mr. THOMPSON. The posting requirement in the—as I said earlier, we would have to produce and post approximately 40 million 

of those posters, and ensure that they are kept up-to-date at each 

of our 40,000 locations on a daily basis. That is a very great burden, and would be quite costly. 

Mr. SCOTT. Okay. What would the estimate cost on that be? 

Mr. THOMPSON. I haven’t done an estimate on the cost, sir. 

Mr. SCOTT. All right. My time has expired. Let me turn to my 

colleague from Missouri, Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. I am one of the seven 

individuals who became a Communist by visiting Cuba about 7 

weeks ago in a United States Air Force jet with the approval of the 

State Department, the Speaker of the House, and the Administration. 

So, I realize that the remittances is a big issue with Cuba. And, 

frankly, I guess it’s a big issue everywhere. But one of the questions that I want to raise is—well, two questions that may be political, but they’re still in the realm of what the four of you have 

talked about. 

One, do you believe that this should be a foreign policy tool? 

Should this be one of the tools in our foreign policy tool box that 

we use? For example, Daniel Ortega, the Sandinistas elect someone 

or put someone in office, and then we respond to that with a hold 

on remittances, or we do the same thing with Kim Jong Il in North 

Korea. I am interested in your feelings or position, maybe, about 

remittances as a foreign policy tool. Anyone? 

31 

Mr. THOMPSON. Well, we have been providing remittances to 

Cuba for a number of years, under an OFAC license. It has been 

a very limited program, and some steps that the Cuban government took to restrict the use of the U.S. dollar in Cuba really 

caused a negative impact to our customer transaction volumes, etc. 

But we have certainly favored opening up Cuba to more and 

more remittances for a very long time. And right now we are asking that we be able to do pay-out in the Cuban peso, for example, 

because the government there charges 10 percent— 

Mr. CLEAVER. Right. 

Mr. THOMPSON. —to convert the U.S. dollars that we pay out into 

Cuban pesos, and that’s a problem. 

And, you know, we also would like the dollar limits that have 

been set on remittances to be raised. 

So our customers are sending money to their families. And using 

that as a foreign policy tool has an adverse effect on real people. 

Mr. CLEAVER. Of course a positive effect might be that, in Cuba 

in particular, even with the high remittance fee, that it would 

cause people there to depend less on the government for daily survival, if their family members were able to get money to them. 

Is that—the other kind of foreign policy question on this is we 

have the purchasing power of immigrants in the United States, 

around $200 billion or so. Is that about right? 

Mr. OROZCO. I think it’s about $600 billion. 

Mr. CLEAVER. Six hundred? Oh, my goodness. Then that makes 

this even more important. 

Would it be of some value to U.S. banks if they had the opportunity to enter into this largely untapped market? Because many 

of the immigrants are unbanked for a lot of reasons, cultural reasons and so forth. Do you think that would be a positive benefit to 

the banking industry in the United States? Both you and McClain, 

both. 

Mr. OROZCO. It would be significantly beneficial. Let me put it 

this way. Immigrants not only are unbanked, but have a higher capacity to save than the average American population. The average 

amount that an immigrant has saved under conditions of normalcy—that is, no recession—is $4,500. The average amount saved 

by an American, an average American, is $200. 

But the 60 percent of immigrants are not banked. So the revenue 

proposition for a financial institution to attract immigrants is quite 

profitable, more profitable than offering money transfers, for example. 

Mr. CLEAVER. Mr. McClain? 

Mr. MCCLAIN. Just briefly, I just want to point out that we view 

our industry as a stepping stone for immigrants. You know, there 

isn’t a shortage of account availability. But all too often, people 

who are living paycheck-to-paycheck don’t have the ability to maintain the levels of minimum deposit requirements to have banking 

relationships. 

So, we don’t think it is necessarily a question of access. We think 

it is a question of perhaps ability. And, again, our membership provides a stepping stone for those individuals. We provide a conduit 

into the legitimate and regulated financial system. 

32 

FISCA itself, for example, has created a stored value card with 

a deposit function, whereby an individual can cash a check and 

place a portion of their earnings onto a deposit stored value card 

with a depository account, whereby they earn interest on that account. 

So, again, I don’t think it’s a question of necessarily access to accounts. I think it is a question of our membership providing another alternative, a more realistic alternative, I think, for many individuals who are living paycheck-to-paycheck. 

Mr. CLEAVER. My time is probably running out. But, Ms. LoVoi, 

you were going to respond? 

Ms. LOVOI. Yes. I will be brief. Appleseed has worked with banks 

and financial institutions over the last 6 years to help modify products and services such that they are more attractive to immigrants. 

And we agree with Dr. Orozco, that this is a tremendously 

unbanked population who could do asset building if admitted into 

the formal banking system. Thank you for your question. 

Mr. CLEAVER. Thank you. I yield back the balance of my time. 

Mrs. MALONEY. [presiding] The gentleman’s time has expired, 

and the Chair recognizes Congressman Meeks from the great City 

of New York, and applauds his outstanding leadership in this committee, and for our City and State, and the Chair grants him 5 

minutes. And thank you for being here. 

Mr. MEEKS. Thank you, Madam Chairwoman. Let me tell my 

brother reverend, ‘‘You are not a Communist.’’ 

Let me ask a question of somewhat of a different sort. The world 

is so interconnected today, and to a large degree dependent upon 

credit. And we know that many of these developing countries are 

working to implement credit bureaus to bring greater transparency 

to local credit markets. 

So, I was wondering if remittances data could be incorporated 

into these systems to strengthen the credit worthiness of local borrowers, particularly in the area of microfinancing. And, similarly, 

can the sender’s remittances data be incorporated into domestic 

credit bureaus to strengthen their credit information? 

You know, because today’s world credit is everything, and so this 

is—income can—any one of you. Yes? 

Ms. LOVOI. I will take that one. Thank you for your question. We 

are extremely interested in recognizing that the roughly average 

$200 per month that might be sent from a family in this country 

to a family member abroad represents a form of savings and represents the sort of savings potential that Dr. Orozco mentioned a 

moment ago. 

We are very interested in seeing this information used for credit 

building purposes, perhaps for the sender in this country, and perhaps for the recipient in another country. We also recognize that 

this money is a great source of income for other countries, and can 

be used to leverage economic development activities in those countries. 

So, the short answer to your question is yes, yes, and yes. There 

is potential on all of the fronts that you mentioned. 

Mr. MEEKS. Yes? 

Mr. MCCLAIN. If I may just add quickly, these individuals, the 

customers that we serve, they are responsible, bill-paying individVerDate Nov 24 2008 13:43 Oct 20, 2009 Jkt 052395 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 K:\DOCS\52395.TXT TERRIE
33 

uals. They are paying rent, they are paying credit card balances, 

they are paying everything else that normal people do. However, 

they have not yet established credit, and they are not able to reflect that on credit reports. 

FISCA is looking for a partner at this point, with respect to a 

credit agency, whereby our members would be able to report those 

types of credit events and bill payments, etc. So we are actively 

looking for a partner, and we have been. Thus far we haven’t been 

successful in finding a credit reporting bureau that would work 

with us. 

Mr. MEEKS. Now, that’s something that maybe we should follow 

up on, then, because I think that helps get individuals into a working class or middle class, and in a lot of these developing countries, 

that’s what they need. They need to have the opportunity, especially when you deal with the areas of microfinancing. 

Further, you know, when you talk about developing countries, we 

look at—I was wondering whether the transparency issues in remittances can be used to leverage—you know, especially internationally—development initiatives, because that is one of the big 

problems. You know, these countries need to be developed. 

And, in particular, how can we change the dynamics so that a 

greater share of remittances received are used to invest in a productive capacity, as opposed to just an immediate consumption capacity, which then leaves these undeveloped countries undeveloped. 

The ideas begin to move, and I think that would be better for all. 

Is there a way that we can do that? Doctor? 

Mr. OROZCO. Basically, what we have proposed is to link remittances through financial access. And one of the steps that has been 

done is to increase the capacity of microfinance institutions to be 

payers of remittances in developing countries and, in doing so, provide financial services. And it has been very successful. Once you 

motivate people to mobilize their resources into savings at the financial institution, there is an increased impact in their quality of 

life. 

And so, in different countries, in Africa, in Latin America, and 

Asia, we have had different experiments. Now it is more than experimentation. There is a strategy, a development strategy linking 

remittances through microfinance and through banking access, in 

order to precisely increase the savings mobility into the formal financial system, which, in turn, has an effect on development. 

Just to give you an illustration, a poor country, for example, like 

Cape Verde, where it has basically 50 percent of the population is 

abroad, the average amount saved by a remittance received is 

about $1,000. Mobilizing those by 30,000 people in a very poor 

country like that will have a significant impact in increasing the 

opportunities to mobilize savings for investment. 

Mr. MEEKS. I am just about out of time. I just want to say how 

important—I just came back from Colombia, and I have seen communities there where if, in fact—and a lot of remittances are coming in—but if some of those could be utilized, it could change—for 

development—it can change the living conditions, because many of 

those are horrible, especially in those areas where African Colombians are living. It could change their living conditions overnight 

almost, if we could move in that direction. 

34 

And I see that I am out of time. I have one more question, 

Madam Chairwoman. It is a quick question. 

Mrs. MALONEY. The Chair yields to the gentleman as much time 

as he may consume. 

Mr. MEEKS. I just wanted to note that in communities where formal banking has gotten involved, has that changed savings in investment behavior at all in some of these developing—you know, 

I don’t know whether—but has it changed? Could you just give me 

a quick response to that? And I thank the chairwoman. 

Mr. OROZCO. Yes, yes. We have cases of Mexico, Colombia, El 

Salvador—just the case of Bank Colombia, for example. It’s a bank 

that introduced a strategy to bring remittance receiving into the 

banking system. Their conversion is about 40 percent. For every 

person receiving remittances, they have been able to capture the 

deposit of 40 percent of these people. And that is a significant impact. 

Mr. MEEKS. Thank you, Madam Chairwoman. Thank you very 

much. 

Mrs. MALONEY. Thank you. The Chair recognizes herself for 5 

minutes. And I would like to ask Mr. McClain and Mr. Thompson 

to respond to a bill that I have put forward called the Money Services Business Act. This piece of legislation passed unanimously out 

of this committee last year, moved to the Floor of Congress, and, 

in a strong bipartisan vote, passed. My question is really in relationship to the testimony of Mr. Thompson. 

In your testimony you assert that a Federal licensing and regulatory regime would help the money remitter industry deal with 

the BSA compliance issue. And I—after going through the aspects 

of the bill, I want to know, would you think that this licensing system would be in addition to the MSB legislation that I have put 

forward, an alternative, or should it be put together? 

But I would like—the MSB—meaning the Money Servicing Business Act—really addresses a critical industry for the unbanked. It 

addresses a critical problem of the money services business that 

are called MSBs. Many of them are denied access to the banking 

system. Many money service businesses have experienced—and I 

think in a very unfair way—blanket terminations of their commercial accounts over the past several years, due in part to banks responding to unclear guidance from regulators. 

Now, I tried to get clear guidance from the regulators unsuccessfully, so I put forward a bill which establishes a mechanism that 

would allow MSBs to self-certify their compliance with the Bank 

Secrecy Act, and anti-money laundering requirements, while allowing banks to make risk-based decisions about banking particular 

MSBs. 

MSBs include check cashers, money transmitters, money order 

issuers, and these services have really served our Nation’s communities for, literally, years. If this issue is left unaddressed, the viability of MSBs will be compromised, potentially pushing many of 

their transactions underground, and potentially untraceable to law 

enforcement, which was the whole reason for all of this oversight. 

But if they can’t have access to the institutions, they have no other 

way but to go underground. 

35 

And many banks, reacting to regulatory fears, have terminated 

MSB accounts in a blanket fashion. I am most concerned about the 

steps that have been taken by Banco Popular, who was processing 

this business, but they have now indicated they no longer will be. 

It appears to be an attempt to minimize exposure to high-risk businesses by these banks. 

But without a banking relationship, MSBs are unable to provide 

financial services to communities, making it difficult for millions of 

Americans to pay their bills, send money, or cash checks. And Federal regulatory agencies, recognizing the problem facing MSBs, 

have sought to address this issue through agency guidance and regulatory changes, but they haven’t really had any success. 

This legislation that I put forward addresses this problem by enabling the MSBs to self-certify their compliance with the Bank Secrecy Act, and anti-money laundering requirements. This approach 

is not novel. We basically built it on another project or proposal 

that is similar to that used for international correspondent banking. It would not relieve banks of their due diligence responsibilities with regard to their MSB customers. Rather, it would permit 

appropriate reliance on self-certification to relieve banks of being 

the de facto regulators only of MSBs, Bank Secrecy Act, and antimoney laundering compliance. 

The mechanics of this self-certification will be handled by regulations set forth by the Secretary of the Treasury, and the certification will be filed with the financial institutions where the MSBs 

have a commercial account. 

To ensure there is appropriate access to these self-certifications, 

it has been requested—and we implemented this in the bill—that 

the Secretary of the Treasury, while coming forward with these 

regulations, would require a duplicate copy of the self-certification 

to be filed with the Financial Crimes Enforcement Network, 

FinCEN, and the Department of Justice have access to these files. 

And I am fully in support of the suggestion—in fact, we incorporated it in our legislation—and it would allow even greater 

transparency. 

The Chair recognizes additional—as much time as she may consume. 

And I do want to mention that even with the implementation of 

the self-certification, MSBs would continue to be responsible for 

complying with all other existing provisions of the Bank Secrecy 

Act, and will continue to be the subject of rigorous on-site examinations of the IRS. And MSBs are also State-regulated in many jurisdictions. In fact, 28 States and the District of Columbia require 

MSBs now to be licensed, and are regulated by State banking agencies. 

So, there is a lot of regulation on them already. And both MSBs 

and the financial institutions banking them will still be required to 

fully comply with all aspects of the Bank Secrecy Act, including the 

filing of suspicious activity reports and the currency transaction reports. And any violation of their certification would render the 

same civil and criminal penalties provided for by the Bank Secrecy 

Act and the Anti-Money Laundering Act. 

36 

So, I feel that this is a well-crafted bill that has passed not only 

the subcommittee, but the full committee, passed the full House. 

The House voted for it in the last Congress. 

And my first question, really to Mr. Thompson and Mr. McCain, 

is, given the fact that we have the regulation on the State level, 

and that 28 States have licensing, do you still believe that we 

should have a Federal licensing component for the BSA issue? 

I would like to begin first with Mr. McClain, and then go to Mr. 

Thompson. 

Mr. MCCLAIN. Thank you, Madam Chairwoman. I want to also 

thank you immensely for your work on the MSB—Money Service 

Businesses Act. You certainly are very, very well versed on the 

issue, and the critical nature of the problem. 

And you were right to point out that the problem has gained, at 

least in the northeast and in some other regions, a higher level of 

importance, as a result of recent termination by Banco Popular. It 

is immensely frustrating for me, as a practitioner, and as a representative of FISCA, to speak with many, many of our membership who are wonderful people who have legitimate regulated businesses, who are being threatened with going out of business, literally, because they cannot find a bank that will service them. 

With respect to the question of a Federal regulator for the money 

transmitter industry, we certainly support consistency throughout. 

We are aware of certain problems that have arisen because of inconsistent State regulation of money transmitters, and, to a lesser 

degree, check cashers. 

We feel, however, that to tie that provision into the MSB bill 

may complicate the issue. Again, we support a Federal regulator 

for money transmitters, but money transmitters are only one piece 

of the MSB pie. There are check cashers, money order remitters, 

there is a stored value industry. 

So, I think we are very far along with the BSA issue, and the 

question of a Federal regulator, I think, is something that obviously needs to be addressed. We support it, but I don’t think it 

would be advantageous to link it with this particular issue. 

Mrs. MALONEY. Thank you. Mr. Thompson? 

Mr. THOMPSON. We certainly thank you for your help in dealing 

with the bank account closure issue. And your bill is extremely 

helpful in that regard. 

The concept of a Federal regulator, I think, goes beyond what 

you are trying to accomplish with that particular bill. We are presently regulated by—it’s 48 States plus the District and a couple of 

the territories. I am told that in the last 18 months, we had 30 examinations— 

Mrs. MALONEY. When you say ‘‘we,’’ are you talking about— 

Mr. THOMPSON. Western Union. 

Mrs. MALONEY. So you are regulated in 48 States? 

Mr. THOMPSON. Yes. And we had 30 exams over the last 18 

months. And we think that, given the global importance of remittances, and the issues related to anti-terrorist activities, and antimoney laundering activities, that it’s time for there to be a central 

consistent Federal regulatory scheme to not only regulate activities 

under the Bank Secrecy Act, but also regulate the safety and 

soundness of the industry, and also regulate consumer disclosures. 

37 

Mrs. MALONEY. Well, do you think a Federal regulator would 

then be of such a nature that banks such as Banco Popular would 

not be closing access to BSAs? 

Mr. THOMPSON. We are hoping that the Federal regulator would 

be one of the current Federal banking agencies. So we think it 

would go a long way in convincing that banking agency, anyway— 

Mrs. MALONEY. Oh, I see. 

Mr. THOMPSON. —we are adequately regulated. 

Mrs. MALONEY. So where would you put it? Would you put it in 

the OCC? Or where would you put this regulation? 

Mr. THOMPSON. It’s being debated. I think in our small industry 

group, we favor the Federal Reserve. But we can see benefits to 

having the OCC to do it, or even the OTS, as things develop. 

With the Federal Reserve, the Fed is currently active in the regulation of electronic transfers. The Fed acts as a clearing vehicle 

for our hundreds of millions of dollars of money orders. They act 

as a settlement vehicle for the wire transfers that we do through 

the banking system to settle with our agents. They act as an ACH 

clearinghouse for some of our domestic activities. So they are already active in our industry. 

Mrs. MALONEY. Well, there has been sort of a feeling that you 

want a lot of regulators involved. And, in fact, in this regulation 

that we are moving forward with, in the future there is a feeling 

of a council of regulators. I don’t know if you have read about that 

idea that is out there, that there would be at a table a council of 

regulators who would look at systemic risk. 

And you would favor it under one regulator, as opposed to putting it in a council of regulators, is that correct? 

Mr. THOMPSON. Well, I mean, the Federal scheme, obviously, is 

currently in flux. What we are looking for, at least, is that the Federal—whatever Federal scheme is developed replaces this State 

regulatory scheme. 

Mrs. MALONEY. Okay. And would you—would this licensing system be in addition to the MSB legislation that I outlined that selfcertifies, or would it be in addition to it, or build on top of it, or 

should it be separate, or how do you feel about it? 

Mr. THOMPSON. I think you’re—it is important to move your bill 

ahead separately from the Federal licensing issue, because I think 

it’s a problem that we currently face and don’t have another solution to. And the other one, I think, will take a lot longer to solve. 

Mrs. MALONEY. Okay. Well, I am pleased to report that Chairman Gutierrez and I will be sending a letter to Chairman Frank 

to move forward and mark-up the MSB legislation, and try to get 

that forward so that that banking service can continue to operate 

and help my constituents and others. 

But I would be willing to work with you on this idea of a Federal 

regulator down the street at another time, and will certainly commit to writing the Federal Reserve and asking for their input on 

how we should move forward. 

But I see this as a separate issue, and it’s—it should not in any 

way impede the MSB fix that we have been talking about. It’s not 

an alternative; it’s an additional challenge that we have. 

Mr. THOMPSON. I agree with that, and I thank you for your efforts. 

38 

Mrs. MALONEY. I think it is all very important. We really need 

to help the unbanked in many ways. The way we help them is by 

having other services there for them. And the MSBs are there, the 

remittances, there are many, many different services that we need 

to work on to keep our financial system moving forward. 

I want to thank all the panelists for their testimony today. And 

I would like to ask unanimous consent that a letter from the National Association of Federal Credit Unions, and a statement from 

the Credit Union National Association regarding the issue of regulation of remittances, be entered into the record. Without objection, 

it is so ordered. 

The Chair notes that some members may have additional questions for the witnesses, which they may wish to submit in writing. 

Therefore, without objection, the hearing record will remain open 

for 30 days for members to submit written questions to the witnesses, and to place their responses in the record. 

This hearing is now adjourned. 

[Whereupon, at 12:13 p.m., the hearing was adjourned.] 

(39) 

A P P E N D I X 

June 3, 2009 

40 


52395.001
41 


52395.002
42 


52395.003
43 


52395.004
44 


52395.005
45 


52395.006
46 


52395.007
47 


52395.008
48 


52395.009
49 


52395.010
50 


52395.011
51 


52395.012
52 


52395.013
53 


52395.014
54 


52395.015
55 


52395.016
56 


52395.017
57 


52395.018
58 


52395.019
59 


52395.020
60 


52395.021
61 


52395.022
62 


52395.023
63 


52395.024
64 


52395.025
65 


52395.026
66 


52395.027
67 


52395.028
68 


52395.029
69 


52395.030
70 


52395.031
71 


52395.032
72 


52395.033
73 


52395.034
74 


52395.035