Regulation E Remittance Rule Amendment: Safe Harbor Threshold Increases

Thoughtware Alert Jun 30, 2020
Change pilled up in stacks

The Bureau of Consumer Financial Protection (Bureau) has issued a final rule amending its remittance rule. The final rule is effective July 21, 2020.  

The Electronic Fund Transfer Act (Regulation E) establishes certain protections for consumers sending international money transfers, or remittance transfers. The Bureau’s remittance rule in Regulation E implements these protections. 

Safe Harbor Threshold Increase

The Bureau is increasing a safe harbor threshold related to whether a person makes remittance transfers in the normal course of its business. Currently, the normal course of business safe harbor threshold states that a person is deemed not to be providing remittance transfers for a consumer in the normal course of its business if the person provided 100 or fewer remittance transfers in the previous calendar year and provides 100 or fewer remittance transfers in the current calendar year. Effective July 21, 2020, the safe harbor threshold increases from 100 transfers annually to 500 transfers annually. 

Use of Estimates

In response to the July 21, 2020, expiration of a statutory exception that allows certain insured institutions to disclose estimates to consumers of the exchange rate and covered third-party fees instead of exact amounts, the final rule creates two permanent exceptions:

  • Insured institutions are permitted to estimate the exchange rate for transfers to a particular country if, among other things, the insured institution made 1,000 or fewer transfers in the prior calendar year to the particular country for which the designated recipients of such transfers received funds in that country’s local currency.
  • Insured institutions are permitted to estimate third-party fees for a transfer to a particular designated recipient’s institution if, among other things, the insured institution made 500 or fewer transfers to the designated recipient’s institution in the prior calendar year.

The final rule includes a transition period for insured institutions that exceed, as applicable, the 1,000-transfer or 500-transfer thresholds in a certain year. During the transition period, an institution can continue to provide estimates for a reasonable period of time after crossing such thresholds while coming into compliance with the requirement to provide exact amounts.

COVID-19 

In the Supplementary Information, the Bureau references the policy statement it issued on April 10, 2020, regarding its approach to supervision and enforcement of remittance transfers during the COVID-19 pandemic. In the policy statement, the Bureau advises that for remittance transfers that occur on or after July 21, 2020, and before January 1, 2021, the Bureau doesn’t intend to cite in an examination or initiate an enforcement action in connection with the disclosure of actual third-party fees and exchange rates against any insured institution that will be newly required to disclose exact third-party fees and exchange rates after the temporary exception expires. 

To read the Bureau’s final rule on remittance transfers, click here.

For more information or assistance related to regulatory compliance matters, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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