Guest Post: Betsy Cavendish: New CFPB Regulation on Remmittances

The new consumer protection agency, the Consumer Finance Protection Bureau, just issued its first major rule, providing for transparency and remedies in remittances. One of the key reasons people come to this country is the hope of earning sufficient money to help support loved ones in home countries. Indeed, people in the U.S. send $79 billion abroad annually through remittances. This rule affects these transactions and could help drive down the cost of remittances by allowing consumers to shop for the best deal.

By one year from now, when the final rule goes into effect, consumers in most instances will get a disclosure, up-front, before any cash changes hands, of how much their recipient will receive in the local currency. They are entitled to a receipt, too, and all the remedies of EFTA, the Electronic Funds Transfer Act. If for some reason, like finding a better deal up the street, the consumer wants to cancel the transaction, she or he has 30 minutes to do so. Consumers will get disclosures in languages that the remittance companies use for marketing in that area and will be notified of their rights should the transaction go awry. Significantly, US companies will be strictly liable for the acts of their agents abroad — they won’t be able to defend a discrepancy in the total amount told would be available by saying that they told the agents not to tack on extra fees.

This rule signals tremendous respect for those who come here, work hard, and send money to home countries. The U.S. sends the most money abroad of any country, and our legal regime will become a model for the world. According to the World Bank, the world market for remittances is $440 billion/year, with $325 billion/year going to developing countries. If by having information about how much money will be available for pick up helps drive down the price of sending money by 1/2 of one percent, the savings will be $2 billion annually, largely flowing to or staying with low income people on the sending or receiving end. Taking only the U.S. volume of remittances, for each half percent decline in the total cost of sending remittances, $395 million more dollars will stay in the pockets of people sending money abroad from here or will be sent to their family members abroad.

Remittances are critical to developing economies and the cost and security of remittance transactions are of deep concern to immigrants in this country. Remittances dwarf charitable contributions to the developing world as well as official development assistance.

The law, part of Dodd-Frank, and this week’s final rule, mark a tremendous development for immigrants in the U.S. and around the world, as well as migrants’ families who depend on remittances for basic needs.

Betsy Cavendish, Executive Director, Appleseed Appleseed, a network of public interest justice centers in the U.S. and Mexico, has been working to facilitate entry for immigrants into our financial system on safe, fair terms for more than a decade. Samples of it work on remittances can be found here.