Each year, consumers in the U.S. send tens of billions of dollars to friends, family members or businesses in other countries using wire transfers and other electronic payments — often called “remittances.”
While remittance transfer providers have been subject to federal laws against money laundering and to state licensing requirements (and in some cases, other state rules and restrictions), the protections for consumers sending remittances abroad varied widely by state, and international money transfers have been largely outside of the scope of federal consumer protection laws. But in 2010, the Dodd-Frank financial reform law expanded the Electronic Fund Transfer Act to establish minimum consumer protections for remittances. Those new protections will take effect on October 28, 2013, under new rules from the Consumer Financial Protection Bureau (CFPB) that are heavily focused on disclosures for consumers.
If you plan to send money abroad, here are key points to remember.
Remittance transfer providers must give consumers important information before and after a transaction takes place. Before a consumer pays to send money internationally, the service provider must disclose details such as the exchange rate to be used when converting the money to the foreign currency, the amount of certain fees and taxes, and how much money the recipient will receive. Assuming the sender goes forward with the transaction, the provider must give the consumer a receipt that includes the information disclosed before making the payment as well as additional details, such as when the money will be available and who the sender can contact if there is a problem with the transfer.
“Increasing transparency on the costs of the transaction will help consumers shop for the best deal among providers,” said Sherry Betancourt, a Senior Attorney in the FDIC’s Legal Division. “Consumers will benefit from knowing early on about important information such as fees and exchange rates, as well as who to contact if there is a problem.”
Consumers have the ability to cancel a transfer that has taken place. After making payment, a consumer may cancel the transaction and get a full refund as long as the request is made within 30 minutes. However, different cancellation procedures may apply for wire transfers scheduled in advance, such as recurring, pre-authorized remittances from a bank account. To cancel a transfer, the service provider must be able to identify the sender and the transaction. Finally, the funds must not have been picked up by the designated recipient or deposited into that person’s account.
Complaints and errors must be resolved within a certain time frame. Service providers are obligated to investigate a complaint and respond to the consumer in a timely manner. If the provider finds that an error did occur, it must either send the correct amount at no additional cost to the consumer or provide a refund. Although it’s generally best to report a problem to the provider as soon as possible, the sender will have up to 180 days to do so.
If the sender isn’t satisfied with the outcome of the company’s review, he or she can file a complaint with the CFPB (see below). “And unlike in the past, any consumer who is overcharged or whose funds do not reach the intended recipient now has remedies under federal law,” said Richard M. Schwartz, Counsel in the FDIC Legal Division.
Most but not all remittance transactions will be subject to the new consumer protections. The rules will apply to remittances that exceed $15, are made by consumers in the U.S., and are sent to a person or a company in a foreign country. However, the rules generally do not apply to providers that consistently make 100 or fewer remittance transfers per year.