December 10, 2020

CFPB Remittance Transfer Consent Orders

Taylor R. Gess

What Is a Remittance Transfer?

Generally speaking, a remittance transfer occurs when a person in the United States transfers funds electronically to another person or organization in a foreign country. Regulation E (“Reg. E”), the regulation implementing the Electronic Fund Transfer Act (“EFTA”), defines “remittance transfer” as “the electronic transfer of funds requested by a sender” (i.e., a consumer in the United States sending funds electronically for personal, family or household purposes) “to a designated recipient” (i.e., a person or organization in a foreign country the consumer sender selects to receive funds) “that is sent by a remittance transfer provider.”[1]

In this Article, the person in the United States initiating the transfer of funds is referred to as the “consumer” or the “sender,” while the person or organization receiving the funds in the foreign country is the “recipient.”

Remittance Rule and Recent Enforcement Activity

The Consumer Financial Protection Bureau’s (“CFPB’s”) implementation of Subpart B of Reg. E., 12 C.F.R. §§ 1005.30 to 1005.36—the Remittance Transfer Rule (“Remittance Rule”)—became effective on October 28, 2013.[2] In the approximately seven years since the Remittance Rule became effective, there have only been three related public CFPB enforcement actions.[3] Two of these consent orders, In re Sigue Corporation and In re Maxitransfers Corporation, are more fully described below. The recent enforcement activity in this typically quiet area could signal the CFPB’s renewed attention to the remittance transfer industry and willingness to pursue enforcement action even when violations of the Remittance Rule are, in some cases, arguably technical.

Sigue Corporation Consent Order

In its settlement with Sigue Corporation and subsidiaries (“Sigue”)—a remittance transfer provider operating through storefronts and retail establishments—the CFPB required Sigue to comply with the Remittance Rule, develop a compliance plan, include its Board of Directors (“Board”) in consent order compliance, and pay approximately $100,000 in consumer redress and $300,000 in civil money penalty for its violations of the EFTA and Remittance Rule.[4] The CFPB alleged that Sigue violated the EFTA and Remittance Rule by: (1) not using proper terms or currencies when making required disclosures and otherwise providing inaccurate or incomplete consumer disclosures; (2) failing to make funds available to the recipient by the date promised in the required disclosures; (3) not providing consumers written explanation during the error resolution process; and (4) having policies and procedures in place that did not accurately reflect the Remittance Rule requirements.

Maxitransfers Corporation Consent Order

In its settlement with Maxitransfers Corporation (“Maxitransfers”)—a non-bank remittance transfer provider operating through retail and third-party locations with payment agents—the CFPB alleged that Maxitransfers violated the EFTA and the Remittance Rule by: (1) improperly disclaiming liability for acts of its payment agents; (2) not using specified or substantially similar terms in its consumer disclosures; (3) failing to follow error resolution procedures; (4) not having an adequate remittance transfer policy; and (5) failing to treat its international bill-pay services as remittances. Maxitransfers was ordered to comply with the Remittance Rule, develop a compliance plan, involve its Board in complying with the consent order, and pay a $500,000 civil money penalty to the CFPB.[5]

Violation Highlights: Unfair, Deceptive, or Abusive Acts and Practices

Maxitransfers allegedly misled consumers about its liability for errors in violation of the Consumer Financial Protection Act of 2010’s prohibition against unfair, deceptive, or abusive acts and practices.[6] The terms and conditions associated with the Maxitransfers disclosure allegedly stated that Maxitransfers “is not responsible for errors made by banks or payment agents, or for any other reason out of our control.”[7] The CFPB asserted that this language impermissibly limited Maxitransfers’s obligations as to error resolution because a transfer provider is liable for the acts of its agents, which might make the remittance provider responsible for circumstances beyond its control.[8]

Remittance providers should carefully consider limitation of liability language to ensure it does not limit a remittance provider’s liability for errors or acts of its agents.

Violation Highlights: Disclosure Language and Accuracy


“Substantially Similar” Language

The Remittance Rule requires transfer providers to give specific disclosures to each consumer in either the currency funding the transfer or the currency in which the funds will be received. The Remittance Rule provides specific terms for such disclosures while also allowing the use of “substantially similar term[s].”[9] One of the required disclosures is the amount of funds to be transferred to the recipient in the funding currency “using the term ‘Transfer Amount’ or a substantially similar term.”[10] Maxitransfers allegedly used the term “Dollars” rather than “Transfer Amount” on its consumer disclosures.[11] The CFPB asserted that “Dollars” was not “substantially similar” to “Transfer Amount” under the Remittance Rule.[12] Likewise, the CFPB also found another term used by Maxitransfers in consumer disclosures—“Amount MXP (Mexican Pesos),” instead of the Remittance Rule’s “Total to Recipient”—in violation of the Remittance Rule.[13]

Similarly, the CFPB alleged that Sigue failed to use “substantially similar term[s]” when its consumer disclosures used the Spanish phrase that translates to “Net Before Exchange” rather than “Transfer Amount.”[14] The CFPB also asserted that Sigue failed to provide the currency of the disclosed amounts, fees, and taxes on its disclosures to consumers.[15]

These consent order allegations signal that the CFPB may not broadly interpret the Remittance Rule’s permission to use “substantially similar” language such that remittance transfer providers should give serious consideration before using terms or disclosure language that differs from what is provided in the Remittance Rule or Model Forms.

Other Disclosure Violations

The Remittance Rule also requires that certain monetary disclosures be generally grouped together on the disclosure provided to the consumer prior to providing payment for the transfer.[16] Sigue’s disclosure allegedly failed to properly group the monetary disclosures in violation of the Remittance Rule.[17]

The CFPB also asserted that Sigue’s receipt disclosures failed to provide the accurate state-licensing agency, telephone numbers and websites for certain states as required by the Remittance Rule.[18]

Additionally, the CFPB alleged that Sigue included a statement that non-covered, third-party fees or taxes collected on the remittance transfer by someone other than the provider may apply to the transfer such that the recipient would receive less money.[19] The Remittance Rule requires that disclosures be made only when non-covered, third-party fees or taxes do or may apply to the transfer.[20] In no circumstances would these fees or taxes apply to the transfers Sigue was providing, so the CFPB asserted that providing this disclosure when it was never applicable violated the Remittance Rule.[21]

Remittance transfer providers should review their required disclosures to ensure that all required information is included on the disclosures and check for potential monetary grouping issues. Additionally, if a non-covered, third-party fee or taxes statement is included on the required disclosures, remittance providers should make sure that there are at least some instances where such fees or taxes are imposed.

Violation Highlights: Error Resolution and Refunds

Error Resolution

The Remittance Rule requires remittance transfer providers to “investigate promptly and determine whether an error occurred within 90 days of receiving a notice of error . . . [and] report the results to the sender . . . .”[22] To the extent an error is confirmed, the Remittance Rule sets forth procedures and remedies for resolving the error, such as refunds.[23] The Remittance Rule also requires a remittance provider to give the consumer a written explanation of the error investigation findings with a statement that the consumer can request the documents the provider relied on in making its determination when the remittance provider determines that no error occurred or that the error is different than that alleged in the consumer’s error notice.[24]

The CFPB asserted that Sigue failed to properly provide consumers who had alleged errors with the investigation results and notice of any remedies when no error or a different error than alleged by the consumer occurred. Instead, the CFPB alleged that Sigue only provided investigation explanations over the phone even though a written explanation should have been given.[25] The CFPB also asserted that Maxitransfers violated these error resolution provisions by failing to properly and timely investigate errors and failing to provide written responses to consumers when required.[26]

Fund Availability and Refunds

An error occurs under the Remittance Rule when funds are not made available to the recipient by the date stated in the required disclosures.[27] The CFPB alleged that Sigue failed to refund fees to all consumers when a remittance transfer was not provided to a recipient by the date stated on the required disclosures.[28] Rather, Sigue allegedly only provided fee refunds to consumers who requested the remittance transfer be cancelled (and not to consumers who elected to have the transfer resent), thus failing to refund fees as required.[29]

Remittance transfer providers should review their error resolution, cancellation and refund procedures for compliance with the Remittance Rule, including conducting investigations and providing written explanations of investigations to consumers as required. Remittance providers should also ensure that error remedies, such as providing refunds, are handled properly.

Violation Highlights: Policies and Procedures

The Remittance Rule requires remittance providers to maintain written policies addressing error resolution.[30] The CFPB alleged that Maxitransfers did not have any policies or procedures related to error resolution during roughly the first three years of the Remittance Rule’s existence.[31] The CFPB further asserted that once Maxitransfers created a policy, the policy only addressed the Remittance Rule generally rather than covering the required error resolution topics and was taken verbatim from the CFPB’s website.[32] As to Sigue, the CFPB alleged that, although Sigue had written policies and procedures related to error resolution in place, the policies were incomplete and inaccurately described the error resolution obligations set forth by the Remittance Rule.[33]

Remittance providers should revise policies and procedures as necessary to ensure error resolution is addressed in a manner that complies with the Remittance Rule.

Violation Highlights: International Bill-Pay

The CFPB also alleged that Maxitransfers did not treat its international bill-pay services as remittance transfers subject to the Remittance Rule such that consumers using the international bill-pay services were not provided with the required disclosures and protections.[34]

Remittance providers should ensure that international bill-pay services are treated as remittance transfers covered by the Remittance Rule.

Conclusion

Although it is impossible to predict the CFPB’s next move in the remittance transfer space, covered remittance transfer providers should evaluate their cancellation and refund protocols, error resolution procedures, written policies and procedures, and required disclosures in light of the recent CFPB consent orders.

 
  1. See 12 C.F.R. § 1005.30(e)(1) (defining “remittance transfer”); see also 12 C.F.R. § 1005.30(c) (defining “designated recipient”); id. at § 1005.30(g) (defining “sender”); id. at § 1005.30(f) (defining “remittance transfer provider”).
  2. 78 Fed. Reg. 49365, 49365 (Aug. 14, 2013). 
  3. See In re Sigue Corporation, CFPB No. 2020-BCFP-0011 (consent order) (Aug. 31, 2020), https://files.consumerfinance.gov/f/documents/cfpb_sigue-corporation_consent-order_2020-08.pdf [hereinafter Sigue Consent Order]; In re Maxitransfers Corporation, CFPB No. 2019-BCFP-0008 (consent order) (Aug. 23, 2019), https://files.consumerfinance.gov/f/documents/cfpb_maxitransfers_consent-order_2019-08.pdf [hereinafter Maxitransfers Consent Order]; see also In re Trans-Fast Remittance LLC, CFPB No. 2020-BCFP-0010 (consent order) (Aug. 31, 2020), https://files.consumerfinance.gov/f/documents/cfpb_trans-fast-remittance-llc_consent-order_2020-08.pdf.
  4. Sigue Consent Order at 16-23.
  5. Maxitransfers Consent Order at 9-13.
  6. See Maxitransfers Consent Order at 5-6; see also 12 U.S.C. §§ 5531(a), 5536(a).
  7. See Maxitransfers Consent Order at 5; see also 12 C.F.R. § 1005.35 (“A remittance transfer provider is liable for any violation of this subpart by an agent when such agent acts for the provider.”).
  8. Maxitransfers Consent Order at 5-6.
  9. See 12 C.F.R. § 1005.31(b)(1), (b)(2) (setting forth disclosure requirements for remittance transfers).
  10. 12 C.F.R. § 1005.31(b)(1)(i).
  11. Maxitransfers Consent Order at 8.
  12. Maxitransfers Consent Order at 8-9.
  13. Id.
  14. Sigue Consent Order at 13.
  15. Sigue Consent Order at 11-12.
  16. 12 C.F.R. § 1005.31(c)(1).
  17. Sigue Consent Order at 14-15.
  18. See Sigue Consent Order at 13-14; see also 12 C.F.R. § 1005.31(b)(2)(vi).
  19. Sigue Consent Order at 15.
  20. 12 C.F.R. § 1005.31(b)(1)(viii), (b)(2)(i); Official Interpretations, 12 C.F.R. § 1005.31(b)(1)(viii)-1.
  21. Sigue Consent Order at 15.
  22. See 12 C.F.R. § 1005.33(c)(1); see also id. § 1005.33(a) (defining error).
  23. 12 C.F.R. § 1005.33(c)(2) (describing remedies).
  24. See Sigue Consent Order at 8-9; see also 12 C.F.R. § 1005.33(d)(1).
  25. Sigue Consent Order at 9.
  26. Maxitransfers Consent Order at 7-8.
  27. 12 C.F.R. § 1005.33(a)(1)(iv).
  28. Sigue Consent Order at 8-9
  29. Sigue Consent Order at 8.
  30. 12 C.F.R. § 1005.33(g).
  31. Maxitransfers Consent Order at 6-7.
  32. Maxitransfers Consent Order at 6.
  33. Sigue Consent Order at 9-10.
  34. Maxitransfers Consent Order at 9.

Taylor R. Gess

Ballard Spahr LLP

Taylor R. Gess is an Associate in the Minneapolis office of Ballard Spahr LLP. She serves as a young lawyer liaison to the Membership Subcommittee of the Consumer Financial Services Committee. Taylor can be contacted at gesst@ballardspahr.com