After much anticipation, there is a welcome regulatory change for financial institutions and remittance transfer providers. Payments professionals, who previously objected to the onerous restrictions proposed by Section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 1073), can look forward to a newly augmented version that will benefit both consumers and industry professionals.
The controversy surrounding Section 1073 emanated partially from the fact that it affected overseas money transfers, long an area of concern for consumers and providers alike. Complexities related to foreign exchange rates and other factors make costs and fees unpredictable for all parties, thus creating frustration for consumers who often did not know what they would be charged. In an effort to create better transparency, the Consumer Financial Protection Bureau (CFPB) created standards that they believed were reasonable, but would have been impossible for many providers to meet. Because of the potential liability for incorrect information, many institutions considered leaving the business, thus creating a gap in crucial services.
Fortunately the amended final rule, set to take effect on October 28, 2013, carries positive implications for institutions that concentrate much of their business in electronic funds transfers, as well as creates opportunities for financial institutions to consider remittance transfers and provide a new service to their customers.
The amended version of the rule includes the following:
• Liability Limits: Error resolution provisions limit provider liability in cases where customers have given incorrect information, including wrong account numbers that have been passed on.
• Fee Disclosure: Disclosing foreign taxes or fees imposed by a recipient’s financial institution is now optional.
• Smaller Providers Exempt: A company that does not exceed 100 remittance transfers annually is exempt from compliance.
As part of its commitment to education and compliance for the electronic payments community, NACHA recently launched its 1073 Solutions Center which provides comprehensive information around consumer international remittance transfers to help financial institutions meet compliance and business needs under the final rule’s provisions. Payments professionals can access various resources on NACHA’s website, including the interactive Remittance Transfers Process Flow tool that walks the user through important considerations in the remittance transfer process. With access to comprehensive information on the new rule, financial institutions and remittance transfer providers have the opportunity to better their services in the electronic transfer business.
We can all agree that the new Section 1073 is a welcome revision for financial institutions. The task now is for payments professionals and organizations to take advantage of current resources available to educate themselves in order to provide the remittance transfer service their clients demand.
Karroll Searcy is the director of Viewpointe Association Services, which provides training and support for banks and other payments network participants.