(Updates to add comments from bank-industry trade
associations.)
WASHINGTON--A U.S. consumer regulator will delay and make
changes to a rule designed to protect consumers who transfer money
overseas from being hit with high fees, responding to complaints
from the financial industry.
The Consumer Financial Protection Bureau said Tuesday that the
rule, which had been scheduled to go into effect on Feb. 7, will
now be pushed back until spring. The regulator also said it would
propose a set of changes, focusing on how firms should disclose
third-party fees and taxes and the procedure for handling money
sent to incorrect account numbers.
The extension was welcomed by bankers, who have expressed their
concerns about the rules in several meetings with the CFPB this
year.
"I applaud the CFPB for taking a step back and saying we need to
get this right, not first," said Richard Hunt, president of the
Consumer Bankers Association, in an interview. He said some retail
banks were considering exiting the market because of how
complicated it would be to comply with the rule.
While the money transfers aren't significant revenue-generators
for many banks, they are key relationship-builders for many
financial institutions looking to compete with other firms for
customers, said Hunt.
Similarly, the Independent Community Bankers of America said the
CFPB rule would have made it "nearly impossible" for smaller banks
to provide wire transfers but now the revisions could make way for
these firms to continue offering these services to customers.
The consumer regulator said in a bulletin to the industry that
it "expects to move quickly once the proposal is issued to ensure
that the new consumer protections afforded by the rule can be
effectively implemented and delivered to consumers as soon as
possible."
The rule requires 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
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 directed the consumer agency to set rules
for this corner of the financial market.
Banks must also comply with the rules. In fact, the financial
industry pressed for a longer delay, arguing that they needed an
extra year to comply with key elements of the rule. They said they
needed to track down data on foreign taxes and overhaul their
systems in order to provide consumers the required information on
fees and exchange rates.
While some banks have grown more interested in tapping into this
consumer market, their activity pales in comparison with that of
Western Union and MoneyGram, which respectively handled $73.2
billion and $15.3 billion in cash transfers last year, according to
Aite Group.
Wells Fargo & Co. (WFC), a leading bank in the market,
remitted more than $1.8 billion in 2011.
Jim Aramanda, President and CEO of The Clearing House, an
industry group, praised the decision. The move "demonstrates the
bureau's interest in ensuring the availability of safe, fair, and
widely available transfer services that are beneficial to both
consumers and banks," he said in a prepared statement.
Write to Alan Zibel at alan.zibel@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires