CFPB Amends Rule Regarding Electronic Fund Transfer Act
by: Donna M. Saati, Esq.
On May 22, 2013, the Bureau of Consumer Financial Protection (“CFPB” or the “Bureau”) amended its regulation which implements the Electronic Fund Transfer Act (“EFTA”), and the official interpretation to the regulation (the “2013 Final Rule”).
The 2013 Final Rule refines three (3) narrow aspects of prior final rules issued on February 7, 2012 and August 20, 2012 (collectively, the “2012 Final Rules”). The 2012 Final Rules implemented section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or the “Act”) and amended the EFTA by creating a new EFTA section 919. Section 919 governs the electronic transfers of funds sent by U.S. consumers to designated recipients in other countries and establishes consumer protections for remittance transfers sent by U.S. consumers to individuals and businesses in foreign countries.
EFTA section 919 generally requires:
- Disclosures prior to and at the time of payment by the sender for the transfer;
- Cancellation and refund rights;
- The investigation and remedy of errors by providers; and
- Liability standards for providers for the acts of their agents.
Overview of the 2013 Final Rule
In response to industry concern over the costs and challenges of EFTA section 919, the 2013 Final Rule amends the 2012 Final Rules with regard to three (3) specific issues:
- In certain circumstances, the requirement to disclose fees imposed by a designated recipient’s institution for transfers to the designated recipient’s account is made optional;
- There is also an optional requirement to disclose taxes that are collected by a person other than the remittance transfer provider; and
- Last, the 2013 Final Rule creates an exception from the 2012 Final Rules’ error provisions for certain situations where a sender provides an incorrect account number or recipient institution identifier and that mistake results in the transfer being deposited into the account of someone other than the designated recipient.
Certain Fee Disclosures & Foreign Tax Disclosures
The 2013 Final Rule requires providers to include disclaimers on disclosure forms that have been provided to senders of remittance transfers. The disclosure forms provided must indicate that the recipient may receive less than the disclosed total due to certain recipient institution fees and any taxes collected by a person/entity other than the provider. The 2013 Final Rule also permits providers to disclose the fees and taxes, or a reasonable estimate thereof, as part of the new required disclaimer.
Error Resolution Provisions
The 2013 Final Rule creates an exception to the 2012 Final Rules’ error provisions. The exception only applies to certain situations where a sender provides an incorrect account number or recipient institution identifier and that mistake results in the transfer being deposited into the wrong account, (i.e., not the designated recipient’s account).
In order to satisfy the exception provision, the provider sending the remittance transfer must satisfy a number of conditions in order for the exception to apply. Included among the conditions to be satisfied are the requirements that:
- notice must be provided to the sender prior to the transfer that the transfer amount could be lost;
- the provider must have implemented reasonable verification measures so that the accuracy of the recipient institution’s identifier can be ascertained; and
- reasonable efforts are made to retrieve the funds that were incorrectly deposited into the account of someone other than the designated recipient.
Finally, the 2013 Final Rule streamlines the error resolution process for situations where a sender has provided incorrect or incomplete information resulting in an error under the rule. In so doing, the 2013 Final Rule requires a provider (in applicable situations) to refund a transfer but permits them to deduct from the refund amount any costs incurred due to fees and taxes. If the sender requests a resend after a reasonable verification investigation, the provider is permitted to treat the request as a new remittance transfer, and pass the costs of any new fees and/or taxes on to the sender.
Effective Date
The 2013 Final Rule will be effective October 28, 2013. The delay is anticipated to benefit small remittance transfer providers, providing additional time to mitigate any ongoing compliance costs. It is also anticipated that the additional time will allow providers to explore and build solutions for compliance that might cost less (if any cost is involved at all) than previously available.
About the Author:
Donna Saati is Associate Counsel at Bankers Advisory, Inc. She is a graduate of the University of Massachusetts, Lowell and earned her Juris Doctor at the New England School of Law. Donna received her LL.M. in Banking & Finance Law at Boston University. She is admitted to the Massachusetts Bar. She can be reached at donna@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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