The Consumer Financial Protection Bureau has brought its first enforcement action for violations of a rule that took effect in 2013 designed to protect consumers who electronically transfer money from the United States to other countries.
The so-called “Remittance Transfer Rule” resulted from a requirement of the Dodd-Frank Act that foreign-bound money transfers be covered by existing federal consumer protection regulations, doing so by expanding the scope of the Electronic Fund Transfer Act (EFTA). Initially drafted by the CFPB in 2012, it requires providers to disclose fees, taxes, and exchange rate information.
No enforcement action has resulted since implementation of the rule, until now. On Aug. 27, the CFPB announced a $500,000 settlement with Maxitransfers (Maxi), a company that serves consumers looking to send money overseas. Under the terms of the consent order, Maxi must also refrain from violating the Consumer Financial Protection Act of 2010 (CFPA) by stating it is not responsible for the acts of its agents and must take steps to improve its compliance management to prevent future violations of the CFPA, EFTA, and Remittance Transfer Rule.
According to the CFPB, from October 2013 until May 2017, Maxi sent approximately 14.5 million remittance transfers for consumers in the United States. For each transfer, Maxi was required to provide consumer protection disclosures and to comply with other requirements of EFTA and the Remittance Transfer Rule.
According to the consent order, Maxi violated the following specific rules:
Failed to maintain error-resolution policies and procedures. Section 1005.33(g)(1) of the Remittance Transfer Rule requires a remittance-transfer provider to develop and maintain written policies and procedures designed to ensure compliance with error-resolution requirements. According to the consent order, Maxi “did not have any written policies and procedures addressing any requirements of the Remittance Transfer Rule from October 2013 to November 2016.
“In November 2016, Respondent developed a ‘CFPB Policy’ that consisted of 1.5 pages of general Remittance Transfer Rule information copied directly from the Bureau’s website,” the consent order stated. This policy document, however, failed to meet regulatory requirements because it did not address what constitutes an “error” under the Remittance Transfer Rule; what constitutes a notice of error from a consumer; what investigation is required; how investigation results should be provided to consumers; or the time limits for an investigation.
Failed to properly report the results of error investigations and failed to notify consumers of their rights after an investigation of error. Section 1005.33(c)(1) of the Remittance Transfer Rule requires a remittance-transfer provider to investigate promptly a notice of error from a sender and to determine whether an error occurred within 90 days of receiving the notice; to report the results to the sender, including notice of any remedies available for correcting any error the provider determines has occurred within three business days after completing its investigation; and to follow certain procedures if the company determines no error occurred or if a different error occurred than the error identified by the sender.
Failed to use ‘specified or substantially similar terms’ in its remittance disclosures. Section 1005.31(b)(1)(i) of the Remittance Transfer Rule requires a remittance-transfer provider to disclose the “amount that will be transferred to the designated recipient, in the currency in which the remittance transfer is funded, using the term ‘Transfer Amount’ or a substantially similar term.”
Failed to treat its international bill-pay services as remittances. In 2015, Maxi began to offer consumers international bill-pay services, facilitating the real-time transfer of funds from U.S. consumers to pay bills in foreign countries. Until at least 2017, however, Maxi failed to treat its international bill-pay services as remittance transfers covered by EFTA and the Remittance Transfer Rule and did not provide consumers of these services with all the consumer disclosures or protections these laws require.
The consent order directs Maxi to maintain policies and procedures reasonably designed to comply with the Remittance Transfer Rule; maintain a compliance-management system that is reasonably designed to ensure its operations comply with the rule; and conduct training and oversight of all agents, employees, and service providers reasonably designed to ensure compliance with the rule.