On March 27, 2024, the Consumer Financial Protection Bureau (CFPB) issued Circular 2024-02, stating that certain marketing activities may constitute deceptive practices and therefore violate the Consumer Financial Protection Act (CFPA). We have alerted our remittance transfer provider that there is. Of particular concern to the CFPB are representations regarding the pricing and cost of transfers, as well as the speed of transfers, that are inconsistent with these providers' actual practices.
What types of remittance representations create a risk of fraud claims?
The CFPB's concern that certain money transfer marketing practices may be deceptive stems from the fact that consumers are now increasingly comparing money transfer services online. In particular, he said, the CFPB is concerned that online marketing may promote inaccurate benefits (such as faster access to funds to recipients or lower cost of services) that do not meet actual practices. .
This circular describes several specific money transfer provider marketing practices that the CFPB may consider deceptive. For example, the CFPB notes that remittances are often made to send money to family members overseas, making speed particularly important to consumers. Therefore, statements that the transfer will be delivered within a certain time frame may actually mean (even in some cases) that it will take longer for the transfer to be available to the recipient. Become deceptive. The circular also states that the CFPB has identified remittance transfer providers that represent transfers as free when in fact they charge fees or earn revenue through exchange rate spreads on transfers. This could possibly be a deceptive act.
Importantly, the circular also specifically addresses “companies offering remittances through digital wallets and other prepaid products.” The CFPB cited the potentially deceptive marketing practices of these companies, such as certain providers telling customers that “free account-to-account transfers” or “friend transfers” are free, but then charging fees. has been identified. For currency conversion or for recipients to withdraw funds.
Looking to the future
In recent months, the CFPB has focused on marketing activities for online consumer financial services, issuing both guidance and rulemaking governing this area. In early March 2024, the CFPB issued a warning to online intermediaries that directing customers to certain products based on a counterparty's payment rather than based on the consumer's interests is also potentially “fraudulent.” We warned that there was a possibility (also through a circular).
Remittance providers should review their existing marketing materials (including, if applicable, marketing materials provided by authorized representatives at their physical location) and identify fees and costs (including with respect to exchange rate spreads); You should consider making sure that you and your transfer speed are set correctly. their service. Providers should also be aware that acts and practices may be deceptive even when there is no harm associated with the representation.
Additionally, this notice follows the CFPB's notice of proposed rulemaking on November 7, 2023 that would allow it to supervise domestic payment service providers as “large participants,” including digital wallet and payment app providers. The government emphasizes that it continues to promote the regulation of Therefore, companies offering remittances via digital wallets and peer-to-peer payment apps should pay special attention to developments in this area, given the CFPB's interest in these services.
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