Clearing the air: remittance transfers

by: Coppelia Padgett

Every year, consumers in the U.S. transfer billions of dollars out of the country through banks, credit unions, and other businesses in wire transfers or automated clearing house (ACH) transactions, and many of these transactions fall under the definition of a remittance transfer. Despite their commonness, there is much confusion clouding the issue of what exactly qualifies a transaction as a remittance.

Recently, the CFPB amended Regulation E to include new rules governing remittance transfers. The amendments include implementation of the statutory requirements established by Dodd-Frank and extension of the temporary exemption that allows financial institutions to estimate certain pricing disclosures until July 2020, among other changes.

In light of these amendments, we feel that it would be pertinent to help clear the air about what a remittance transfer is and what it involves, because you might be surprised at what is and is not covered by this regulation and the recent amendments.

A remittance is an electronic funds transfer (EFT) requested by a sender to be sent to a designated recipient in a foreign country made by a remittance transfer provider, such as a bank or money transmitter. For example, transactions that qualify as remittances include international wire transfers, international ACH entries, foreign cash-to-cash transactions, and certain foreign prepaid card transactions. Simply mailing a check abroad does not qualify, because there is no remittance provider involved and it is not an electronic transfer. However, consumers do not have to have an account at the institution to be a sender; transfers made in person can be remittances.

At the same time, the sender cannot be just anybody—it must be an individual consumer (not a business or corporation) who sends the funds abroad for personal, family, or household reasons. It is important to note that the sender must be in a state, territory, or possession of the United States (including places like Puerto Rico and US military bases or embassies located in foreign countries). Likewise, if the receiver is located in any state, territory, or possession of the United States, then this transaction does not meet the qualifications to be a remittance. On the other hand, the designated recipient can be either an individual or business, as long as that individual or business is located in a foreign country.

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