CFPB Requires Money Transfer Providers to Disclose Fees to Consumers

Posted on January 23, 2012 by Lee Istrail

On January 20, the Consumer Financial Protection Bureau (CFPB) adopted a final rule regarding the disclosures that US consumers must receive when they transfer money to foreign countries. The rule generally requires that before a consumer makes an international transfer, companies offering remittance services in the regular course of business must disclose all associated fees, including the exchange rate, and the amount of money to be delivered to the recipient. In addition, after the transaction is completed, companies must tell the consumer which date the funds will arrive, and provide a receipt or proof of payment which contains the same information that appeared in the initial disclosure.

The new rule also gives consumers 30 minutes (sometimes more) to cancel a transaction, in which case consumers are entitled to a refund.

The rule applies not only to companies whose principal business is money transfer, but also to banks, thrifts, and credit unions which regularly offer money transfer services. The CFPB has issued a request for public comment on several aspects of the rule, including a proposal that an entity that makes no more than 25 remittance transfers in the prior year not be subject to the rule. Comments will be due 60 days after the request for public comment is published in the Federal Register.

The passage of the Dodd-Frank Act gave the CFPB authority to issue rules governing money transfer companies, debt collectors, payday lenders, and a host of other non-depository financial institutions that had previously been subject to more limited federal regulation. One can expect that the CFPB, with its recently appointed head, Richard Cordray, will continue to issue rules that cover these types of companies.

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Cordray Gets Recess Appointment to Head CFPB

Posted on January 5, 2012 by Christie L. Grymes

President Obama has made a recess appointment of Richard Cordray to head the Consumer Financial Protection Bureau ("CFPB"). The President had nominated Cordray as the Director in July, but Senate Republicans blocked Cordray's confirmation last month. Yesterday's recess appointment circumventing Senate approval has already triggered criticism from Republicans, who have claimed that the President "arrogantly circumvented the American people" and called the appointment an "extraordinary and entirely unprecedented power grab."

Now that the CFPB has a director, it can exercise authority under the Dodd-Frank Act to regulate financial institutions beyond the banking industry, such as payday lenders, nonbank mortgage lenders, and certain student loan providers. Without a director, CFPB only had authority to supervise banks. In a post on the CFPB's blog yesterday, Cordray noted that such nonbank entities "led a race to the bottom that pushed aside responsible businesses, including community banks and credit unions, and greatly harmed consumers." He stated that oversight of these entities is a "top priority" and that the CFPB will announce more information about its oversight program in the coming weeks. The CFPB also has several other deadlines in the next year, including issuing a proposed rule on information sharing with state regulators and supervisors by July 21, the anniversary of the CFPB's official start date.

Cordray most recently served as the CFPB's top enforcement official. Prior to that appointment, he was the Ohio Attorney General, was a litigator with the law firm Kirkland & Ellis for over ten years, and clerked for Supreme Court Justices Byron R. White and Anthony M. Kennedy. As Ohio Attorney General, he brought several lawsuits against global banks, mortgage servicers, credit rating agencies, subprime lenders, and other financial institutions.

The recess appointment could come under fire in a legal challenge. The President has authority to make a recess appointment when the Senate has been out of session for more than three days. Republicans and other opponents have argued that Cordray's appointment is unconstitutional because Congress has technically remained in session and not gone on a recess. Rather, the Senate has conducted pro forma non-business sessions that last about 30 seconds per day. Democrats first used this procedure to block President George W. Bush from using his recess appointment authority during his second term. The White House and Director Cordray, however, intend to move forward with full steam.
 

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