Academic journal article ABA Banking Journal

Getting It Right with CFPB Remittance Rule

Academic journal article ABA Banking Journal

Getting It Right with CFPB Remittance Rule

Article excerpt

Q. We are planning to use a combined disclosure for consumer foreign wires (remittances). We'll follow up with the required proof of payment. Proof of payment will be a confirmation advice generated by our wire system. We normally email or fax confirmation advices, as this is an automated function of our system. Will this still meet regulatory requirements?

A. The Consumer Financial Protection Bureau remittance rule requires banks to provide consumers with information about international transfers of funds. The general rule requires two items:

* A prepayment disclosure, which tells how much a transfer will cost.

* A receipt, which also provides information about delivery date, right to cancel, and error resolution rights.

Because the receipt duplicates much of the information in the prepayment disclosure, the rule allows a combined disclosure.

The goal is to let a consumer know how much a transfer will cost before paying, so the prepayment disclosure and the combined disclosure must be given to the consumer before agreeing to the transaction. However, the receipt is also a confirmation that a consumer has paid for the transfer. Since a combined disclosure must be provided before funds are sent, there has to be some way to confirm the consumer has paid for the transfer. Instead of a receipt, the rule lets the bank provide a proof of payment.

There may be some confusion on the part of many banks regarding the precise definition of "proof of payment." The "proof of payment" is proof that the customer has paid for the transaction--it is not proof that the bank sent the wire. There are a number of ways a provider can show that payment was made, such as stamping the disclosure with a "Paid" stamp or attaching a copy of the debit advice. (e.g., a separate piece of paper.)This is proof of payment.

It sounds like what you are calling proof of payment is, in reality, proof the wire was transmitted; that is separate from the remittance rule. Under the rule, there is no requirement to provide the consumer with proof the wire was sent. Note: Check state law to see if there is a separate requirement to furnish such a confirmation. (Response provided September 2013.)

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