Magazine article American Banker

CFPB Regs May Cut off Payments to Conflict-Torn Areas: Report

Magazine article American Banker

CFPB Regs May Cut off Payments to Conflict-Torn Areas: Report

Article excerpt

Byline: Chris Cumming

The Dodd-Frank Act and the Consumer Financial Protection Bureau might end up denying crucial funds to nations emerging from war, a new study says.

New rules that the CFPB hopes will protect consumers could choke off remittances needed to rebuild countries after a crisis, according to an essay by Raymond Natter published in a Boston University study of remittances and post-conflict states released Tuesday. The heavy regulatory burden and unrealistically stringent disclosures the new rules require could encourage remittance providers to leave the field once the rule takes effect on Oct. 28, writes Natter, a former deputy chief counsel for the Office of the Comptroller of the Currency and senior staffer with the Senate Banking Committee.

The Dodd-Frank Act created regulations to protect consumers sending remittances, or payments a person sends from abroad to his or her country of origin. The rules are intended to promote fee transparency and prevent overcharging, by requiring remittance-transfer providers to report any fees charged on the transfer, including those charged by third parties. The CFPB released the revised final rule on remittance payments in May.

Post-conflict zones often lack the stable financial institutions and infrastructure needed to track remittance payments with the precision that the CFPB's rules require, the report says. Additionally, the strict penalties it imposes for even accidental or inadvertent noncompliance may raise the cost of remittances or encourage more payment processors to stop providing remittances to countries emerging from violent conflict -- a harmful unintended consequence, since these payments can be crucial to a country's recovery, Natter says. …

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