WASHINGTON – The Obama administration has proposed new rules geared towards protecting consumers who send money to relatives in the Caribbean and other countries.
The US Federal Reserve said that the proposed rules are expected to be finalized by the new US Consumer Financial Protection Bureau, a consumer watchdog agency.
It said the new agency will implement provisions of the Dodd-Frank financial overhaul that the US Congress passed last summer.
It mandates that remittance transfer providers, such as Western Union Co. (WU) and MoneyGram International Inc. (MGI), disclose information about fees, the applicable exchange rate and the amount of currency to be received by the recipient.
The US Federal Reserve said that this summer the Consumer Financial Protection Bureau will inherit consumer protection powers from it and other regulatory agencies, adding that, as part of that transfer, the bureau will take over work on remittance transfers.
The US Federal Reserve also said that the Consumer Financial Protection Bureau will have broad authority to write new rules and supervise financial firms.
Consumer and public-interest groups have complained that Caribbean and other immigrants are paying excessive fees to send money home, and that the fees are not adequately disclosed.
Janis Bowdler, director of the wealth-building policy project at the National Council of La Raza, a Washington-based Hispanic civil rights and advocacy organization, described the remittance market as “the wild west of consumer products”.
She said the final regulations will be “very valuable for consumers” since they will mandate “common sense” practices so that Caribbean immigrants would not be ripped off by companies.
“Many consumers currently do not receive written information about their remittance transaction until after payment is tendered,” said the US Federal Reserve in a statement. “There is inconsistency in the type of information disclosed by different providers.”
Under the proposed rules, the US Federal Reserve said remittance transfer providers would be required to provide prepayment disclosures that include information about the money transfer, such as the exchange rate, applicable fees and taxes, and the amount to be received by the recipient.
The World Bank estimates that the total volume of remittance transfers to the Caribbean and other developing countries reached US$325 billion last year, adding that the US is the largest remittance-sending country in the world.
A majority of remittances from the US are sent to the Caribbean and Latin America, the US Federal Reserve said.
“There’s a lot of money moving in remittances, and we believe if we can make that a more competitive market, a more transparent market, a fairer market for families, some of that money is going to stay with the families instead of draining off to other institutions,” said White House adviser Elizabeth Warren. (CMC)