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From Banking and Finance Law Daily, January 23, 2014

CFPB moves to supervise large nonbank remittance transfer service providers

By Richard A. Roth, J.D.

The Consumer Financial Protection Bureau is proposing a rule that would allow it to supervise large nonbank international remittance transfer service providers. Under the proposal, nonbank companies that carry out more than 1 million transfers annually would be subject to bureau oversight, on-site examinations, and enforcement actions. The bureau estimates that about 340 nonbank companies provide international remittance transfer services and that about 25 companies would meet the one million-transaction threshold. However, the rule also would allow the CFPB to supervise a smaller company that poses a risk to consumers.

Under the Dodd-Frank Act, the CFPB has the authority to supervise larger nonbank participants in a number of different consumer financial markets to ensure they are complying with federal consumer financial laws. The one million-transfer threshold would establish the criterion for what constitutes a larger participant in the international remittance transfer market. Rules defining larger participants in student loan servicing, debt collection, and consumer reporting already have been adopted.

Remittance transfer market. According to a CFPB fact sheet, nonbank companies carry out about 150 million international remittance transfers every year, totaling about $50 billion. At least seven million U.S. households have used nonbank remittance transfer services, and more than four million did so in 2010 alone, the bureau says.

Many of the nonbank companies that would be covered by the larger participants rule already are licensed and examined by state regulatory agencies. In fact, 47 states and the District of Columbia require licenses, according to the notice of the proposed rule. The bureau says it will coordinate closely with the state regulators when supervising these companies.

Remittance transfer regulations, supervision. The Dodd-Frank Act expanded the Electronic Fund Transfer Act to cover remittance transfers, resulting in amendments to Reg. E—Electronic Fund Transfers (12 CFR Part 1005) that took effect Oct. 28, 2013. These amendments require service providers to give consumers specified detailed disclosures, and they also create cancellation and error resolution rights.

When supervising covered companies, the CFPB will look at whether these new Reg. E obligations are being satisfied. The bureau also says it will ensure the companies are not engaging in unfair, deceptive, or abusive acts or practices that are banned by the Dodd-Frank Act.

Larger depository institutions that provide remittance transfer services already are subject to CFPB supervision. The bureau says it will use the same examination procedures for nonbanks that currently are used for banks, thrifts, and credit unions.

MainStory: TopStory CFPB DoddFrankAct

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