October 20, 2020

Volume X, Number 294

October 19, 2020

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Remittance Companies in CFPB's Crosshairs

The Consumer Financial Protection Bureau (CFPB) recently announced settlements with two remittance transfer providers for violations of the Electronic Funds Transfer Act (EFTA) and the Remittance Rule, part of the regulation that implements the EFTA—an area in which there isn’t typically much CFPB enforcement activity.

In its settlement with Trans-Fast Remittance LLC, the CFPB found that the company violated the Remittance Rule because it, among other things, failed to adhere to error resolution requirements, provide refunds, and respond properly to cancellation requests.  In addition to the EFTA/Remittance Rule violations, the CFPB found the company violated the Consumer Financial Protection Act of 2010’s prohibition against deceptive acts and practices.  According to the settlement, the company did so by making misleading statements in advertisements concerning the speed of remittance transfers and limiting consumers’ error resolution rights.  The company is required to pay $1.6 million in civil penalties.

The action against Sigue Corporation and its subsidiaries (“Sigue”), which resulted in a substantially smaller penalty,  (roughly $100,000 in consumer redress and a $300,000 civil money penalty), focused on more technical violations of the Remittance Rule. The major concern focused on Sigue’s failure to provide refunds to certain senders when the remittance was not available to the recipient on the date shown on the receipt.  Other violations appear to be more minor and technical, such as informing consumers by telephone, rather than with a written explanation, when an error had occurred or using the phrase “net before exchange” rather than “transfer amount” on the pre-payment disclosure.

But rules are rules. And it appears clear that the CFPB is giving a message to the remittance industry that it takes very seriously every line and word of the Remittance Rule and will prosecute even minor technical violations – whether or not such violations have caused any appreciable consumer harm.  

Copyright 2020 K & L GatesNational Law Review, Volume X, Number 258

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About this Author

Associate

Jeremy McLaughlin is an associate in the firm’s San Francisco office and a member of the Consumer Financial Service group. His practice focuses principally on regulatory compliance and government enforcement for Fintech and consumer financial products and services, with particular attention on emerging payments and compliance with state and federal consumer protection laws, state money transmitter licensing laws, and international remittances, as well as advising on privacy, data security, and PCI compliance. He represents and advises financial technology companies,...

415-882-8230
Judith E. Rinearson, KL Gates, federal consumer protection lawyer, anti money laundering attorney
Partner

Judith Rinearson is a partner in the firm’s New York and London offices. Ms. Rinearson concentrates her practice in prepaid and emerging payment systems, electronic payments, crypto/virtual currencies, reward programs, ACH and check processing. She has more than 25 years of experience in the financial services industry, including 18 years at American Express’s General Counsel’s Office. Her expertise focuses particularly in the areas of emerging payments and compliance with state and federal consumer protection laws, anti-money laundering laws, state money transmitter licensing laws and abandoned property laws. 

Fully experienced in both the “issuing” and “acquiring” side of the payments business, Ms. Rinearson has drafted and negotiated complex agreements with strategic co-branded partners, processors and Independent Sales Organizations (ISOs), ATM networks, major retailers and service providers, prepaid card issuers and program managers, international remittance companies, virtual and mobile payment providers, as well as the Terms and Conditions and disclosures that usually accompany such products. She has hands-on experience in all legal aspects of launching and managing a range of payment products, from prepaid cards of all kinds, to Bitcoin exchanges and miners, wire transfer services, ACH, electronic banking, money orders and credit cards. Her practice includes advising on fraud avoidance and compliance with federal banking and anti-money laundering laws, as well as state money transmitter licensing laws, consumer protection laws and abandoned property laws. On the international level, Ms. Rinearson has supervised the launch of a range of payment and foreign currency products in Europe, Asia and Latin America; met with international regulators; and spoken on the issue of payment regulation. 

212-536-3928