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Oct. 10, 2013 – CFPB's new remittance rule, set to go into effect on Oct. 28, might have an adverse impact on foreign aid and investment transfers to nations in need, according to a new Boston University study.

The study, "Remittances to Post-Conflict States: Perspectives on Human Security and Development," highlights the challenges of delivering remittances to post-conflict states and unstable countries. It gives recommendations to ease the process of remittance transfers through financial inclusion and partnerships, but it also notes the new regulatory burden the CFPB has created for financial institutions participating in remittance transfers.

The CFPB's final international remittance rule creates a comprehensive consumer protection regime for remittance transfers sent by consumers in the United States to individuals and businesses in foreign countries. It requires remittance transfer providers to disclose certain fees and taxes, as well as the exchange rate that will apply to the transfer. It also provides consumers with error resolution and cancellation rights.

The study says that while the rule is aimed at protecting consumers, it comes with a big compliance burden: "The most significant problems include harsh penalties imposed on remittance companies for minor or inadvertent misstatements relating to the mandated disclosures; the imposition of liability for the acts of literally thousands of agents and representatives around the globe; and the costs imposed on remittance companies to correct mistakes even if the mistake was due to customer errors."

The CFPB, in finalizing its rule, did take into account some of NAFCU's recommendations to scale back disclosures of foreign taxes. However, the rule still imposes several costly requirements, and NAFCU remains concerned that many credit unions will either leave the market or sharply reduce their presence.

Though there is an exemption for credit unions that only facilitate up to 100 remittances a year, NAFCU holds that the exemption remains far too low.