Relaxing Regulation E Subpart B Safe Harbor Exemption

Karen Nearing

By: Karen Nearing, AAP, APRP, CAMS, CRCM, NCP, Director, Regulatory Compliance Education

Say goodbye to the dreariness of winter, because summer is upon us! The days are longer, the sun is warmer and we’re about to embark on an unusual pandemic-impacted season. But, what about Regulation E Subpart B Safe Harbor Exemption, set to expire on July 21, 2020?

Though it took a few years to turn Dodd-Frank Section 1073 into what we know today as Regulation E Subpart B, there was a Safe Harbor provision added to the final regulation in 2012 that was effective for five years. The Consumer Financial Protection Bureau (CFPB) introduced the Safe Harbor Exemption to allow financial institutions an opportunity to build relationships and partnerships to gather the information required under Regulation E Subpart B disclosures. The Safe Harbor exemption allowed for institutions sending less than 100 consumer-initiated international wires or ACH transactions to forgo the prescribed disclosures.

When, and if, the Safe Harbor Exemption expires, all financial institutions sending consumer-initiated international wires and ACH transactions will be required to abide by all stipulations of Regulation E Subpart B. Those requirements include a prepayment disclosure, a receipt disclosure and the ability for the consumer to cancel the request within 30 minutes for a single transfer request or three business days for a recurring transfer. The error resolution timeframe for these transactions is also extended to 180 days for promised funds availability versus 60 days from statement date in traditional Regulation E error resolution.

The CFPB issued a Request for Comment (RFC) on December 4, 2019, proposing a change to the definition of a remittance transfer provider to adjust the safe harbor threshold from 100 to 500 international remittance transfers. The RFC also includes questions allowing for a permanent exception for estimates of the exchange rate for remittance transfers to a particular country. If the financial institution remits 1,000 or less transfers to that country and the recipient receives funds in the designated country’s currency. Other fee estimates are also allowed to certain countries based on a list maintained by the CFPB.

Amidst the pandemic, the CFPB came out with final rules to ensure the Safe Harbor Exemption did not fall to the wayside. On May 11, 2020 final rules were issued with an effective date of July 21, 2020. Within those rules, the definition of a Remittance Transfer Provider will be updated to define a provider who does more than 500 consumer initiated international transfers annually. The CFPB is also adopting tailored exceptions to address compliance challenges to disclose estimates to consumers with respect to exchanges rates and third-party fees. A permanent exception that permits institutions to estimate exchange rates for a particular country if the recipient will receive the funds in the country’s local currency and the institution made less than 1,000 transfers to that particular country in the previous calendar year. Another permanent exception will permit institutions to estimate third-party fees if the institution sent less than 500 remittance transfers to the recipient’s institution in the previous calendar year.

So, what does this mean for your institution?

If you send more than 500 transfers per year, it is most likely business as usual, but the two additional estimate exemptions may be helpful. If you send under the 100 transfers per year, you now have a larger buffer before the additional requirements of Regulation E Subpart B will impact your processes. For those between 100 and 500, you have already implemented processes and procedures to disclose the information. Your organization will need to decide what, if any, changes you want to implement based on these relaxed requirements.

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