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CFPB issues proposal to supervise “larger participant” international money transfer providers

Posted in CFPB Exams, Remittance Transfers

We had been expecting the CFPB’s next “larger participant” proposal to be a rule for the auto finance market.  Instead, the CFPB issued a proposed rule yesterday that would allow it to supervise nonbank international money transfer providers that qualify as “larger participants” in the international money transfer market.  The proposal is based on the CFPB’s Dodd-Frank authority to supervise nonbank entities considered to be “a larger participant of a market for other consumer financial products or services.”  If adopted, the rule would represent the CFPB’s fourth “larger participant” rule.  Comments are due on or before 60 days after the proposal is published in the Federal Register.

The proposal defines as “larger participants” nonbank providers that have at least one million aggregate annual international money transfers.  To determine a nonbank’s “aggregate” transfers, the rule would combine the nonbank’s annual international money transfers with the annual transfers of its affiliated companies.  A nonbank’s transfers would include transfers in which an agent acts on the nonbank’s behalf.  The CFPB estimates that the one million transfer threshold would make approximately 25 international money transfer providers subject to the CFPB’s supervisory authority and that these providers are responsible for approximately 90% of transfers in the international money transfer market.    

The proposal would allow CFPB examiners to examine nonbanks that qualify as larger participants for compliance with all relevant federal consumer financial laws, most notably the Electronic Fund Transfer Act and Regulation E (which includes the CFPB’s Remittance Transfer Rule which became effective on October 28, 2013) and “unfair, deceptive or abusive” standards. 

Unlike the Remittance Transfer Rule which contains an exclusion for transfers of $15 or less, the proposal would count all transfers regardless of dollar amount for purposes of determining the number of transfers made by a nonbank.  The CFPB states in the proposal that it is considering alternatives to the one million transfer threshold, such as a threshold based on annual receipts from international money transfers and annual transmitted dollar volume, a substantially higher threshold of aggregate annual transfers (with 3 million given as an example), or different thresholds for different destination regions. 

As the CFPB notes in the proposal, because Dodd-Frank allows it to supervise, regardless of size, service providers to nonbanks it supervises, the CFPB will be able to supervise all service providers to “larger participant” international money transfer providers, including agents acting as service providers.  In addition, as the CFPB notes in its press release on the proposal, nonbank international money transfer providers that do not qualify as larger participants may still be subject to the CFPB’s supervisory authority if the CFPB has reasonable cause to determine that they pose risks to consumers.