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On March 27, the CFPB issued Circular 2024-02, which warns that remittance providers may be liable under the CFPA for certain deceptive marketing practices related to the speed or cost of sending a remittance transfer. Under EFTA's "Remittance Rule," (Subpart B of Regulation E), the term "remittance transfer" includes most electronic transfers of funds sent by consumers in the United States to recipients in other countries. Alarmingly, the Bureau notes that providers may be liable irrespective of whether they are in compliance with the Remittance Rule's disclosure requirements. The Bureau's circular singles out the following advertising practices by remittance providers as potentially deceptive in violation of the CFPA:
- Marketing remittance transfers as being delivered within a certain time frame, when transfers actually take longer to be made available to recipients;
- Marketing remittance transfers as "free" when they are not in fact free, or as "no fee" when the provider does in fact charge fees (even if the terms and conditions are spelled out in the fine print or later in the transaction); and
- Marketing promotional fees or promotional exchange rates for remittance transfers without sufficiently clarifying when an offer is temporary or limited.
The guidance provided in the Circular applies not only to traditional providers of international money transfers, but also to digital wallet providers that offer the capability to send money internationally from the United States. Even though the Bureau's circular focuses on remittances, it tied its release to the agency's focus on so-called junk fees.
Note that CFPB circulars are statements of policy under the Administrative Procedures Act. While they do not impose any legal requirements on external parties, they advise market participants how they see applicable law on a particular topic and how they would enforce it.
Putting it into Practice: The circular follows recent CFPB enforcement actions targeting providers of international money transfers (see previous blog post here) and its Spring 2022 Supervisory Highlights detailing findings that providers of international money transfers made false and misleading representations about the speed of remittance transfers. The Bureau's circular is a warning not just to remittance providers, but to all financial services companies as it once again highlights the Bureau's ever expansive UDAAP authority, this time to tackle company advertising and marketing practices.
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