The CFPB has issued a new circular requiring money transfer providers to violate the Consumer Financial Protection Act by falsely advertising the cost or speed of money transfers, even if the provider's disclosures comply with the CFPB's money transfer rules. It was recommended that it may be considered. This circular is intended to address the CFPB's concerns regarding fees imposed on international transfers and false claims regarding the speed of such transfers. “Consumers should not pay junk fees for international money transfers that are advertised as free,” said CFPB Director Rohit Chopra.
This circular specifically addresses several practices used by remittance providers, including digital wallet providers. First, try marketing “free” or “free” services, where there are hidden costs. Examples provided by the CFPB include digital wallets that impose costs for converting funds into another currency or withdrawing funds from a product. The CFPB also notes that advertising international money transfers as “free” can be deceptive if the money transfer provider imposes costs on consumers through exchange rate spreads.
The second practice the CFPB addressed is the use of fine print to hide promotional terms. In particular, he notes that the CFPB notes that touting promotional rates or exchange rates without sufficient clarity as to whether the offer is temporary or limited may be considered deceptive. . The CFPB expressed concern that such conduct could have a significant impact on first-time customers who attempt to continue using the provider for subsequent transfers. These customers may face unexpected cost increases and have difficulty finding a new provider. Finally, the CFPB notes that advertising that a transfer will occur within a certain period of time, when the transfer may actually take longer to complete, may be considered deceptive. It states that there is.
The CFPB's notice is part of the agency's continued efforts to protect consumers making international money transfers. Over the past several years, the CFPB has taken action against several entities on issues related to the provision of remittances. For example, Servico UniTeller was ordered to pay a $700,000 penalty, refund money to affected customers, and comply with business practices laws for failing to refund customers after a money transfer error.
This notice is also part of the CFPB's efforts to reduce junk fees and improve competition in the marketplace. The CFPB said in its Fall 2023 Supervisory Highlights that examiners found that certain money transfer providers failed to disclose or refund fees as required by applicable regulations. The CFPB's concerns about fee transparency were raised by Sens. Elizabeth Warren (D-Mass.), Dianne Feinstein (D-Calif.), Brian Schatz (D-Hawaii), and Jack Reed (D-Hawaii). The same is true for some members of the Democratic Party of Japan. ) and Alex Padilla (D-Calif.) sent a joint letter to the CFPB in 2022 asking the CFPB to amend its money transfer rules to require providers to disclose upfront payments to consumers.
Given recent circulars, findings, and pressure from Congress, we expect the CFPB to continue to focus on the fee practices of remittance providers, and further enforcement actions may be taken in the near future.
