By Coppelia Padgett AffirmX
Every year, consumers in the U.S. transfer billions of dollars out of the country through banks, credit unions, and other businesses in wire transfers or automated clearing house (ACH) transactions, and many of these transactions fall under the definition of a remittance transfer. Despite their commonness, there is much confusion clouding the issue of what exactly qualifies a transaction as a remittance.
Recently, the CFPB amended Regulation E to include new rules governing remittance transfers. The amendments include implementation of the statutory requirements established by Dodd-Frank and extension of the temporary exemption that allows financial institutions to estimate certain pricing disclosures until July 2020, among other changes.
In light of these amendments, we feel that it would be pertinent to help clear the air about what a remittance transfer is and what it involves, because you might be surprised at what is and is not covered by this regulation and the recent amendments.
A remittance is an electronic funds transfer (EFT) requested by a sender to be sent to a designated recipient in a foreign country made by a remittance transfer provider, such as a bank or money transmitter. For example, transactions that qualify as remittances include international wire transfers, international ACH entries, foreign cash-to-cash transactions, and certain foreign prepaid card transactions. Simply mailing a check abroad does not qualify, because there is no remittance provider involved and it is not an electronic transfer. However, consumers do not have to have an account at the institution to be a sender; transfers made in person can be remittances.
At the same time, the sender cannot be just anybody—it must be an individual consumer (not a business or corporation) who sends the funds abroad for personal, family, or household reasons. It is important to note that the sender must be in a state, territory, or possession of the United States (including places like Puerto Rico and US military bases or embassies located in foreign countries). Likewise, if the receiver is located in any state, territory, or possession of the United States, then this transaction does not meet the qualifications to be a remittance. On the other hand, the designated recipient can be either an individual or business, as long as that individual or business is located in a foreign country.
Now, there are a few types of transactions that, at first glance, may seem to be covered by this rule but are not. For example, the following two transactions are not covered:
- A consumer providing a debit, credit, or prepaid card directly to a foreign merchant to purchase something. (Because the transaction is conducted by the foreign business.)
- A consumer providing checking account number directly to the foreign merchant. (Because the merchant initiates ACH payment request to consumer’s bank.)
If a transaction meets the aforementioned requirements, you will need to provide the necessary remittance disclosures. However, there is no penalty for disclosures made when not necessary, so a good rule of thumb is: when in doubt, disclose!
We hope this review will help clear the air surrounding the new amendments to Regulation E, subpart B. For more information about how AffirmX can help your staff stay abreast of current regulatory alterations like this one, please contact Alberto Gamez at firstname.lastname@example.org.
Now for a little pop quiz! Are the following transactions considered remittances? (Answers follow.)
- I wire cash to my daughter in Puerto Rico to buy a surf board.
- AffirmX wires money to me in Paris for shopping.
- My son has a US-based bank account and his bank mails him an ATM card in South Korea where he is studying martial arts.
- I wire money to the state of Alaska for king crab.
- My husband sends an ACH from a bank account in Utah to make a mortgage payment in Mexico.
- My sister-in-law buys a prepaid card in the US and takes it to England.
- No. Puerto Rico is a territory of the United States and thus is not a foreign country.
- No. AffirmX (the sender) is a business, not an individual consumer.
- No. The recipient’s account is located in the United States and mailing an ATM card does not qualify as a monetary transaction.
- No. Alaska (the recipient) is a state, not a business or consumer.
- Yes! This ACH transfer qualifies as a remittance because the sender (an individual) sends money from a US-based bank account to pay a fee to a business located in a foreign country.
- No. The card is taken with her to England, not sent as a monetary transaction from her to a recipient in England.