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Businesses That Transfer Money Out of State Need to Take Note

Posted by Chris Peterson | Jan 07, 2013 | 0 Comments

Businesses That Transfer Money Out of State Need to Take Note of the Remittance Rule Slated to Take Effect February 7, 2013

The Consumer Financial Protection Bureau's (CFPB) remittance rule is scheduled to take effect on February 7, 2013 to implement another facet of the Dodd-Frank Wall Street Reform Act.

The rule applies to companies who send money abroad for consumers, as well as other organizations that work with or represent consumers who send money abroad, including agents, software providers, foreign banks and others involved in international fund transfers from the United States.

Many businesses in Texas deal with this type of activity on a regular basis.  Each business needs to consider whether it is subject to the remittance rule, and whether proper controls are in place to ensure compliance with the rule.

These are some of the highlights of the remittance rule:

REQUIRED DISCLOSURES: Under the remittance rule, transferors must generally disclose to the consumer the exchange rate, transfer fees, the amount that will be transferred, and the date the money will be available to the recipient. Certain information must be disclosed to the consumer both before and after payment, in English and certain other languages.

CANCELLATION OPTION: Consumers must be allowed 30 minutes after payment to cancel a remittance for any reason.

CONSUMER COMPLAINTS: If a consumer reports a problem with a transfer within 180 days, the transferor/provider must generally investigate the complaint and correct errors, if any. According to the CFPB, the transferor/provider will generally be held accountable for errors, including mistakes made by their agents.

The final rule contains a safe harbor with respect to the phrase ‘‘normal course of business'' in the definition of ‘‘remittance transfer provider,'' which determines whether a person is covered by the rule.  Essentially, businesses who send funds abroad or assist customers in doing so in the “normal course of business” are subject to the rule.  Businesses that engage in such activities only occasionally may be able to support an argument that they are not subject to the remittance rule.

In addition, certain transfer recipient countries are designated as safe harbors according to a list published by the CFPB.  Generally, safe harbor countries do not permit determination of exact transfer amounts, making it impossible to disclose exact transfer amounts as required under the CFPB's remittance rule.  In those cases, estimated disclosures are permitted.

A fear among business owners and economists alike is that the remittance rule will cause the funds-transfer market to shrink due to higher compliance costs and liability exposure for providers.  When consumers have fewer providers to choose from, the basic economic law of supply and demand will drive up the cost of sending money home for many consumers.

If you are a business that may be subject to the CFPB's remittance rule, consult an experienced Bryan-College Station, Texas business law attorney who can provide assistance and answer your questions. Call the Peterson Law Group to make an appointment at 979-703-7014 or fill out our online contact form.

About the Author

Chris Peterson

Chris Peterson is the owner of Peterson Law Group. He practices primarily in the areas of wills, trusts and estate planning; probate and trust administration; elder law; and business law. Chris is also the owner of Brazos 1031 Exchange Company.


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