By Maya Jackson Randall
A U.S. consumer-protection agency has scaled back a new rule on
wire transfers to make it easier for more banks and credit unions
to offer the service.
The Consumer Financial Protection Bureau unveiled a rule earlier
this year that would require firms such as Western Union Co. (WU)
and MoneyGram International Inc. (MGI) that offer wire-transfer
services to disclose upfront the fees, exchange rate and the amount
that the recipient will receive. These services, which consumers
use to send billions of dollars abroad every year, generally had
been excluded from existing federal consumer-protection
regulations. But the 2010 Dodd-Frank financial overhaul law, which
created the consumer bureau, directed the consumer agency to set
rules for this corner of the financial market.
Thousands of banks and credit unions offer wire transfers,
enabling consumers to send money overseas to family and friends.
The consumer agency announced Tuesday it would spare a larger pool
of firms from the new consumer-protection requirements, which are
set to take effect in February.
"We recognize that in regulations, one size does not necessarily
fit all," said the consumer agency's director, Richard Cordray.
"The final remittance rule will protect the overwhelming majority
of consumers while making the process easier for community banks,
credit unions, and other small providers that do not send many
remittance transfers."
Initially, the agency had proposed exemptions for companies that
conducted 25 or fewer wire transfers a year. But after gathering
feedback from stakeholders, the consumer-protection agency has
decided to boost that threshold to 100 transfers a year. Community
banks and other small institutions had argued that the rule would
deal an unfair blow to small firms that only sparingly offer the
service.
The consumer-protection agency has faced criticism from small
financial institutions that fear the agency will issue a slew of
new federal requirements too costly for them to meet. In several
congressional hearings this year, community banks and credit unions
have argued that their compliance costs are rising already, putting
them at a disadvantage compared to giant banks that should find it
easier to comply with new federal regulations due to more lawyers
and more money.
Mr. Cordray has said the bureau is being careful to consider the
impact of its rules on small businesses.
In the updated rule, the agency noted that some companies could
face uncertainty and litigation risk absent the new
100-transfers-a-year threshold. By exempting firms that don't do
more than 100 wire transfers a year, the bureau said it believes it
"can reduce compliance burden by increasing legal certainty in the
market."
Write to Maya Jackson Randall at
maya.jackson-randall@dowjones.com
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