The Dodd-Frank Wall Street Reform & Consumer Protection Act

In the few days remaining before the end of the comment period on the Dodd-Frank Wall Street Reform and Consumer Protection Act, representatives of major remittance providers met with Vivian Wang and Samantha Pelosi of the Consumer Affairs Branch of the Federal Reserve Board at an Inter-American Dialogue luncheon to discuss what many viewed as the legislation’s burdensome effects on the remittances sector.

One of the major legislative accomplishments of the 111th Congress, the reform legislation was designed to protect consumers by placing new regulations on financial firms. During a presentation on the bill, Wang remarked that the comment period is meant to improve the bill by clarifying its points rather than making legal reforms. But representatives from companies including Wells Fargo, Viamericas, Microfinance International Corporation, and Jamaica National Overseas agreed that the bill contains cumbersome and impractical regulations for remittance providers.

One point of concern was the requirement that remittance transfer companies provide consumers with information on all taxes, exchange rates, and transfer fees. Viamericas CEO Paul Dwyer questioned whether there is any other “industry in the world that is required to keep track of taxes in every country, every state and every municipality.”

Also under fire were the requirements that money senders be allowed a full refund within one business day after their transaction request and that consumers have access to a written receipt explaining the total cost of the transaction, both in English and in any additional language used to place the transfer order. The companies’ representatives said this provision would make transfers less efficient. “Why lengthen the transaction time?” asked Leesa Kow of Jamaica National Overseas.

The executives suggested that the refund requirement would create opportunities for “friendly fraud” and require firms to manage events outside of their control. They pointed out that the companies’ extensive networks depend heavily on file transfer services that take much longer to stop once they have begun. “Every industry will have to raise their remittance costs,” stated Atsumasa Tochisako of Microfinance International Corporation.
Pelosi acknowledged that some responsibility falls on the consumers, in cases where the recipient picked up the fund before the order for cancellation went through.

Remittances to Latin America from the United States currently total $60 billion per year – surpassing the amount of funds transferred to these countries for development assistance and constituting a significant portion of GDP in many countries, including El Salvador, Honduras, and Mexico. Most of these transactions take place in small cash transfers that pay for basic expenses such as food and housing.

The industry representatives’ concerns were recorded by Wang and Pelosi to be submitted as part of the bill’s comment period. The legislation goes into effect in January of 2012.