We live in an increasingly connected world, whether for business or because our personal lives transcend national boundaries. Accordingly, the ability to offer international wire transfers is important to many community banks. But new changes contemplated by the Consumer Financial Protection Bureau (CFPB) have many bankers concerned that this important product may become too difficult to offer.
As the leading provider of services to banks throughout the Northeast, Bankers’ Bank Northeast (BBN) has been working diligently on this issue, both with the banking community and with the CFPB. Because bankers are seeking guidance on the proposed changes to the Electronic Fund Transfer Act (Regulation E), BBN has created a brief update and summary regarding this regulation.
Although some details of the proposal may seem onerous, this rule is still somewhat in flux. It is important for banks to realize that, with patience and training they will be able to continue processing international remittances, so they can continue to retain valuable fee income and customer relationships as well as remain in compliance.
As a correspondent and core provider of international transactions, BBN has been actively following this new regulation. In July 2011, we submitted a comment letter opposing the proposed changes to Regulation E. Furthermore, in response to our original comment letter, the CFPB reached out to Bankers’ Bank Northeast to obtain additional information. They recognized that as an aggregator of community institution international activity, we would be able to provide them with statistical data regarding foreign exchange activity in order to assist them with their final ruling.
We know, for example, that the transactional volume data we provided to the CFPB helped amend the threshold of 25 remittances over a 12-month period. In addition, industry data support groups have both individually, and jointly, submitted comments regarding the proposed rule.
In addition, industry data support groups have both individually, and jointly, submitted comments regarding the proposed rule.
BBN Input Crucial
Recently, the CPFB changed the threshold regarding compliance with Reg E and International wire transfers. Initially, the regulation would apply to all institutions providing 25 or more such transfers per year.
At Bankers’ Bank Northeast, we knew that threshold was far too low. Since BBN had already been communicating with the CFPB about proposed changes to the regulation, they contacted us again to get a better idea of what we were seeing for transaction amounts from our client institutions. After the CFPB had looked at the data we supplied them, it was one of the many factors in their decision to change the qualifying transaction count.
While we lobbied for an even greater number, the CFPB settled in at a benchmark of 100 or fewer transactions per year. That level is four times more than where the CFPB started, and it should mean that 75 percent of community banks and credit unions will fall under that threshold.
Regardless of the level of activity an institution has in international wire transfers and ACH, they should start revising their disclosure language now.
Bankers’ Bank Northeast will continue to work with the financial services industry to educate policy makers of the impact of this rule on ACH and wire transfer systems and to seek further clarifications on the proposed rule.
Crystal Sides is senior vice president and enterprise risk manager for Bankers’ Bank Northeast. The bank, based in Glastonbury, Conn., serves more than 200 community banks and credit unions throughout New England and New York.
