The federal Consumer Financial Protection Bureau (CFPB) last month ordered money remittance firms to disclose upfront all the fees they charge customers – one in a slew of new rules to oversee the multi-billion money transfer business.
The rules won’t be enforced until next year but will have a major impact on Filipinos in the United States, who sent home nearly $8 billion (about P330 billion) in 2011, posting one of the most robust increases in decades.
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"With these new protections, international money transfers will be more reliable,” the bureau’s newly appointed director Richard Cordray said. “Consumers will know the costs ahead of time and be able to compare prices. Transfer providers will also be held accountable for errors that occur in the process."
Most of the money remittance companies that have predominantly Filipino clients appear to be already practicing the new rules.
"People sending money to their loved ones in another country should not have to worry about hidden fees," Cordray said.
The new rules require money remittance companies to disclose to customers any fees, theexchange rate and the amount that will be paid to the recipient in local currency. They also stipulate that customers must be given 30 minutes to cancel a transaction.
In addition, money remittance companies are bound to investigate all complaints, such as funds not reaching recipients.
Western Union spokesman Tom Fitzgerald said the company plans to be compliant with the rules by the effective date. He said the company already provides customers with disclosures on fees, exchange rates and payouts.
"We agree that consumers will benefit if all remittance providers are held to the same requirements," he said.
The Bangko Sentral ng Pilipinas (BSP) reported that total dollar remittances from overseas Filipinos reached $18.3 billion from January to November 2011, a 7.31 percent rise over the same period in 2010.
Of that amount, $7.7 billion came from Filipinos in the US, a 7.46 percent increase. The November figure nearly matches total remittances from the US for the whole of 2010 which reached $7.8 billion. Remittances back to the Philippines usually peak during the Christmas holidays.
Bank officials in Manila said more remittances allow for greater consumer spending that makes up partly for poor exports. Foreign remittances account for about 10 percent of the Philippine economy.
The CFPB was created as part of financial reforms following the Wall Street crisis in 2008. Cordray was appointed the bureau’s first director earlier this month, a move that drew criticisms from Republican members of Congress opposed to the CFPB.
Republican lawmakers fear the agency would be too powerful but with very little accountability.
International money transfers have never been subject to federal consumer regulations until this month.
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