Statements on Introduced Bills and Joint Resolutions - S. 2868

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. SARBANES (for himself, Mr. CORZINE, Mrs. CLINTON, Mr. AKAKA, Mr. BINGAMAN, Mr. SCHUMER, Mr. DODD, Mrs. BOXER, and Ms. MIKULSKI):

S. 2868. A bill to amend the Electronic Fund Transfer Act to extend certain consumer protections to international remittance transfers of funds originating in the United States, and for other purposes; to the Committee on Banking, Housing, and Urban Affairs.

Mr. SARBANES. Mr. President, I rise today to introduce the International Remittance Consumer Protection Act of 2004. This legislation extends basic consumer protection rights to those who send remittances, and it creates new avenues and incentives for federally insured financial institutions to provide remittance and basic banking services to those who currently do not use such institutions to send remittances.

The practice of sending remittances is not new. Immigrants to the United States traditionally have used remittances to provide financial assistance to family members who remained in their country of origin, but the practice has been largely overlooked; it has not been systematically studied and its implications have not been fully understood. The 2000 census shows that 30 million people in this country are foreign-born-the largest number in our Nation's history and the vast majority of them-22 million-are citizens or legal residents. More than 40 percent of our Nation's foreign-born population immigrated to the United States in the 1990s, and some 15.4 million, or more than half the immigrant community, have come from Latin American countries.
Immigrants make a vital contribution to the economic and social life of our Nation.

In a recent study, Sending Money Home: Remittances to Latin America from the US, 2004, the Inter-American Development Bank (IADB) found that nationwide over 60 percent of Latin American immigrants send remittances. On average, each immigrant sends $240 at a time, 12 times per year. Although these individual transactions are not large, they have constituted an aggregate amount of over $30 billion from America to our Latin American neighbors in this year alone.

In my State of Maryland, we have 175,000 immigrants from Latin America and the vast majority send remittances back home. According to the IADB's study 80 percent of Maryland's immigrants from Latin America send remittances. The typical sender remits an average of $245, 14 times per year-in other words, remittances are a monthly matter, with special gifts for Christmas and Mother's Day.

The subject of remittances has been a major interest of mine for some time. As chairman of the Banking Committee, in February, 2002, during the 107th Congress, I chaired what I understand was the first congressional hearing devoted exclusively to the subject. Dr. Manuel Orozco, a leading researcher on remittances at the Inter-American Dialogue, told the committee that remittances from the U.S. to Latin America had grown substantially-at that point to an estimated $20 billion in 2001-and that between 15 to 20 percent-$3-$4 billion-was being lost in fees and other transaction costs. Since Dr. Orozco testified, remittances to Latin America have grown by $10 billion, 50 percent, in just 3 years, and continued growth is expected.

That an estimated 15 percent to 20 percent of the money sent in remittances is diverted to fees and other transaction costs, often hidden from the remittance sender, is evidence of the abusive practices that exist in the remittance market. There are two primary factors that account for this abuse. First, studies have shown that people who send remittances tend to be relatively low-wage earners, with modest formal education and relatively little experience in dealing with this country's complex system of financial institutions. As a result they are susceptible to unscrupulous actors who can take advantage of them by charging all sorts of exorbitant fees, which are often hidden or misrepresented. The exchange rate conversion is often the mechanism for this abusive practice.

Second, remittances are currently not subject to the requirements set by Federal consumer protection law, including the disclosure of fees. There is no requirement that a remittance transfer provider disclose to the consumer the exchange rate fee that will be applied in the transaction. Without knowing the exchange rate fee that the company is charging, a consumer has little ability to gauge accurately the full cost of sending a remittance. As Sergio Bendixen, a leading researcher of public opinion and behavior, with a specialty among Hispanic consumers, testified before the Banking Committee: "an overwhelming majority of Hispanic immigrants are unaware that their families in Latin America receive less money than what they send from the United States." Further, a remittance sender cannot effectively shop between remittance transfer providers. The lack of basic information limits the amount of competition in this market.

The legislation I am introducing today extends basic consumer rights to those who send remittances. Further, by requiring clear and understandable disclosures to the remittance sender of the cost of the remittance, thus presenting to the consumer the full cost of sending money, the legislation will enhance competition, which in turn should lead to an overall decrease in the cost of sending remittances. As Sergio Bendixen testified to the Banking Committee, "Full disclosure should unleash market forces that, hopefully, will result in a significant reduction in the cost of sending cash remittances."

This legislation amends the Electronic Fund Transfer Act (EFTA), which is the primary vehicle for providing basic protections to most persons who engage in electronic transactions, to cover remittances, and to provide the basic rights associated with EFTA to remittance transactions. The two most important components of EFTA are the requirement of full disclosure of fees and the establishment of a process for the resolution of transactional errors. These rights have been an integral part of the regulations that govern our banking infrastructure since EFTA's enactment in 1978. The new legislation will build upon the success of EFTA by extending these basic rights to remittance senders.

The cornerstone of this legislation is the requirement that remittance transfer providers make three key disclosures to their consumers: (1) The total cost of the remittance, represented in a single dollar amount; (2) the total amount of currency that will be sent to the designated recipient, and (3) the promised date of delivery for the remittance. These disclosures follow the core recommendations of the InterAmerican Development Bank, which in its publication, Remittances to Latin America and the Caribbean: Goals and Recommendations, states: "Remittance institutions should disclose in a fully transparent manner, complete information on total costs and transfer conditions, including all commissions and fees, foreign exchange rates applied and execution time."

The total cost disclosure will include the cost of the exchange rate conversion as well as all up-front fees. This single item will both give consumers a more accurate representation of the cost of the remittance transaction and allow consumers to more effectively compare costs between remittance transfer providers.

In order to calculate the cost of the exchange rate conversion, which is part of the total cost, the legislation requires that the Treasury Department post on its website, on a daily basis, the exchange rate for all currencies. At present the Treasury receives this information on a daily basis, but posts it only on a quarterly basis on the Treasury website. By posting the information daily, the Treasury could create a uniform and credible source for exchange rate information.

To calculate the cost to the consumer of the exchange rate differential, remittance transfer providers will use the difference between the previous business day's exchange rate, as posted on the Treasury website, and the exchange rate that the remittance transfer provider offers. Using the exchange rate posted by the Treasury will ensure that the exchange rate cost is calculated on a uniform basis. When the exchange rate cost is disclosed to the consumer as part of the total cost of the remittance transfer, the consumer will be better able to understand the full cost of the transaction and to shop between different remittance transfer providers.

In addition to fee disclosure requirements, this legislation establishes an error resolution mechanism so that consumers whose remittance transactions experience an error have a fair, open, and expedient process through which they may resolve those errors with the institution that conducted the flawed transaction. This basic right is already afforded to consumers who are protected by EFTA, and now this right will be extended to cover consumers who send remittances as well. Further, the legislation establishes an error resolution mechanism for remittance transfer errors that is responsive to the different types of errors that can occur in a remittance transaction and is reflective of the unique characteristics of the remittance market and its participants.

Under this legislation, a consumer has 1 year from the date that the remittance transfer company promised to deliver the money to notify the company that an error has occurred. The company is then required to resolve the error within 90 days. To resolve the error, the company must either (1) refund the full amount of the remittance that was not properly transferred, (2) resend that amount at no additional cost to the consumer or the designated recipient, or (3) demonstrate to the consumer that there was no error. The Federal Reserve Board is also granted the authority to establish additional remedies for specific situations that cannot be addressed by the three specific remedies that are described in the legislation.

It is urgent that we continue to encourage efforts to bring those who send remittances into the financial mainstream. In his testimony to the Banking Committee, Dr. Orozco pointed out that, "About two-thirds of immigrants cash their salary checks in check cashing stores that charge exorbitant fees. Many of these same immigrants then use what remains of their income to send remittances back home. In this common scenario, immigrants are penalized in both receiving and sending their earnings."
In order to further bank those who are currently unbanked, the legislation that I am introducing today requires that the Federal banking agencies and the National Credit Union Administration provide guidelines to financial institutions regarding the offering of low-cost remittance transfers and no-cost or low-cost basic consumer amounts. This legislation also amends the Federal Credit Union Act to allow credit unions to offer remittances and to cash checks for persons who are in their field of membership but are not credit union members. The guidelines set out in the legislation will help educate the financial services industry about the importance and potential profitability of providing these services.

The sending of remittances in a fair and scrupulous manner is likely to be profitable for the institution that provides the remittance service, and indeed we have begun to see aggressive moves into the remittance market by many of the largest banking institutions. Individuals who send remittances but are currently unbanked represent an expanded and profitable customer base for financial institutions.

By its very nature, remittances is an issue that involves both the United States and other nations. As Professor Susan Martin of Georgetown University, who also testified at our hearing, told the Banking Committee: "Until relatively recently, researchers and policy makers tended to dismiss the importance of remittances or emphasize only their negative aspects . . . but recent work on remittances show a far more complex and promising picture. . . Experts now recognize that remittances have far greater positive impact on communities in developing countries than previously acknowledged." In fact, the size of the remittance market is such that for six Central American and Caribbean nations-Nicaragua, Haiti, El Salvador, Honduras, Guyana and Jamaica-remittances constitute more than 10 percent of GDP; Haiti and Jamaica receive more in remittances than in revenues from trade. The World Bank estimates that Mexico receives more in remittances than it does in foreign direct investment. Reducing the costs of remittances is in the interest of both the United States and the countries that receive them.

Given the growing importance of annual remittance flows, we must work to increase their efficiency. One mechanism for accomplishing this objective, and for increasing the ability of financial institutions to offer remittances is linking our banking infrastructure with the banking infrastructures of other nations. The Federal Reserve operates an international automated clearing house system (ACHi) that is currently linked to seven countries, of which the vast majority are highly developed trading partners that receive relatively low levels of remittances. The ACHi was recently connected to Mexico, however, which will allow financial institutions throughout the United States, especially those institutions of smaller size, to provide remittance services more easily and cheaply to Mexico. This legislation directs the Fed to take into account the importance of remittance flows to other countries as it continues to expand the ACHi system. Linking the ACHi to countries that receive significant remittances has the potential to result in great benefits to consumers who send remittances from America as well as to those who receive the remittances around the world.

Finally, I am acutely aware of the need for better and more broadly available financial literacy and education for all Americans. I am pleased to report that in the last Congress, as part of the reauthorization of the Fair Credit Reporting Act, we established a Presidential Financial Literacy and Education Commission, which is charged with developing a national strategy to promote financial literacy and education. The Act addresses the issue of remittances by including in the commission's work a focus on increasing the "awareness of the particular financial needs and financial transactions, such as the sending of remittances of consumers who are targeted in multilingual financial literacy and education programs and improve the development and distribution of multilingual financial literacy and education materials." The legislation that I am introducing today builds on that framework by instructing the bank and credit union regulators to work with the commission to specifically increase the financial education efforts that target those persons who send remittances.

Millions of Americans send remittances to family members around the world, for a total far exceeding the $30 billion that goes to Latin America alone. Yet almost all of these transactions take place without the basic consumer rights and protections that apply to other electronic transfers. Consumers who send remittances are often immigrants and workers who earn modest wages, who are not aware of the full costs of each remittance, as a practical matter have no way of finding out and, as a consequence, in the aggregate pay billions of dollars in costs and hidden fees. They do not have available to them an established procedure for resolving transactional errors. This legislation rectifies this situation by extending to remittances the basic consumer rights established in EFTA. The bill also contains provisions that, when implemented, will allow more insured financial institutions to provide remittance services-and potentially at lower costs to consumers. The bill contains important provisions to help bring the unbanked-men and women without an account at a bank or credit union-into the financial mainstream. Taken together, these measures will increase transparency, competition and efficiency in the remittance market, while helping to bring more Americans into the financial mainstream.

A broad range of community, civil rights, and consumer groups have endorsed this legislation including the National Council of La Raza, the Mexican American Legal Defense and Educational Fund, the League of United Latin American Citizens, the Leadership Conference on Civil Rights, United Farm Workers of America, the Farmworker Justice Fund, the NAACP, Casa de Maryland, the National Federation of Filipino American Associations, the Asian Pacific American Labor Alliance, National Asian Pacific American Legal Consortium, Consumers Union, Consumer Federation of America, the National Consumer Law Center, the National Community Reinvestment Coalition, the Center for Responsible Lending, U.S. PIRG, ACORN, Woodstock Institute, and the National Association of Consumer Advocates.

I ask unanimous consent that the text of the Intemational Remittance Consumer Protection Act be printed in the RECORD, together with letters in support of the bill from the National Council of La Raza, the Mexican American Legal Defense and Educational Fund, the Leadership Conference on Civil Rights, Casa de Maryland, and a letter from Consumers Union, Consumer Federation of America, National Consumer Law Center, and U.S. PIRG.

There being no objection, the material was ordered to be printed in the RECORD, as follows:

S. 2868

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the "International Remittance Consumer Protection Act of 2004".

SEC. 2. TREATMENT OF REMITTANCE TRANSFERS.

(a) IN GENERAL.-The Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) is amended-

(1) in section 902(b), by inserting "and remittance" after "electronic fund";

(2) by redesignating sections 918, 919, 920, and 921 as sections 919, 920, 921, and 922, respectively; and

(3) by inserting after section 917 the following:

"SEC. 918. REMITTANCE TRANSFERS.

"(a) DISCLOSURES REQUIRED FOR REMITTANCE TRANSFERS.-

"(1) IN GENERAL.-Each remittance transfer provider shall make disclosures to consumers, as specified by this section and augmented by regulation of the Board.

"(2) SPECIFIC DISCLOSURES.-In addition to any other disclosures applicable under this title, a remittance transfer provider shall clearly and conspicuously disclose, in writing and in a form that the consumer may keep, to each consumer requesting a remittance transfer-

"(A) at the time at which the consumer makes the request, and prior to the consumer making any payment in connection with the transfer-

"(i) the total amount of currency that will be required to be tendered by the consumer in connection with the remittance transfer;

"(ii) the amount of currency that will be sent to the designated recipient of the remittance transfer, using the values of the currency into which the funds will be exchanged;

"(iii) the total remittance transfer cost, identified as the 'Total Cost'; and

"(iv) an itemization of the charges included in clause (iii), as determined necessary by the Board; and

"(B) at the time at which the consumer makes payment in connection with the remittance transfer, if any-

"(i) a receipt showing-

"(I) the information described in subparagraph (A);

"(II) the promised date of delivery;

"(III) the name and telephone number or address of the designated recipient; and

"(ii) a notice containing-

"(I) information about the rights of the consumer under this section to resolve errors; and

"(II) appropriate contact information for the remittance transfer provider and its State licensing authority and Federal or State regulator, as applicable.

"(3) EXEMPTION AUTHORITY.-The Board may, by rule, and subject to subsection (d)(3), permit a remittance transfer provider-

"(A) to satisfy the requirements of paragraph (2)(A) orally if the transaction is conducted entirely by telephone;

"(B) to satisfy the requirements of paragraph (2)(B) by mailing the documents required under such paragraph to the consumer not later than 1 business day after the date on which the transaction is conducted, if the transaction is conducted entirely by telephone; and

"© to satisfy the requirements of subparagraphs (A) and (B) of paragraph (2) with 1 written disclosure, but only to the extent that the information provided in accordance with paragraph (2)(A) is accurate at the time at which payment is made in connection with the subject remittance transfer.

"(b) FOREIGN LANGUAGE DISCLOSURES.-The disclosures required under this section shall be made in English and in the same languages principally used by the remittance transfer provider, or any of its agents, to advertise, solicit, or market, either orally or in writing, at that office, if other than English.

"© REMITTANCE TRANSFER ERRORS.-

"(1) ERROR RESOLUTION.-

"(A) IN GENERAL.-If a remittance transfer provider receives oral or written notice from the consumer within 365 days of the promised date of delivery that an error occurred with respect to a remittance transfer, including that the full amount of the funds to be remitted was not made available to the designated recipient in the foreign country, the remittance transfer provider shall resolve the error pursuant to this subsection.

"(B) REMEDIES.-Not later than 90 days after the date of receipt of a notice from the consumer pursuant to subparagraph (A), the remittance transfer provider shall, as applicable to the error and as designated by the consumer-

"(i) refund to the consumer the total amount of funds tendered by the consumer in connection with the remittance transfer which was not properly transmitted;

"(ii) make available to the designated recipient, without additional cost to the designated recipient or to the consumer, the amount appropriate to resolve the error;

"(iii) provide such other remedy, as determined appropriate by rule of the Board for the protection of consumers; or
"(iv) demonstrate to the consumer that there was no error.

"(2) RULES.-The Board shall establish, by rule, clear and appropriate standards for remittance transfer providers with respect to error resolution relating to remittance transfers, to protect consumers from such errors.

"(d) APPLICABILITY OF OTHER PROVISIONS OF LAW.-

"(1) APPLICABILITY OF TITLE 18 AND TITLE 31 PROVISIONS.-A remittance transfer provider may only provide remittance transfers if such provider is in compliance with the requirements of section 5330 of title 31, United States Code, and section 1960 of title 18, United States Code, as applicable.

"(2) APPLICABILITY OF THIS TITLE.-A remittance transfer that is not an electronic fund transfer, as defined in section 903, shall not be subject to any of sections 905 through 913. A remittance transfer that is an electronic fund transfer, as defined in section 903, shall be subject to all provisions of this title that are otherwise applicable to electronic fund transfers under this title.

"(3) RULE OF CONSTRUCTION.-Nothing in this section shall be construed-

"(A) to affect the application to any transaction, to any remittance provider, or to any other person of any of the provisions of subchapter II of chapter 53 of title 31, United States Code, section 21 of the Federal Deposit Insurance Act (12 U.S.C. 1829b), or chapter 2 of title I of Public Law 91-508 (12 U.S.C. 1951-1959), or any regulations promulgated thereunder; or

"(B) to cause any fund transfer that would not otherwise be treated as such under paragraph (2) to be treated as an electronic fund transfer, or as otherwise subject to this title, for the purposes of any of the provisions referred to in subparagraph (A) or any regulations promulgated thereunder.

"(e) PUBLICATION OF EXCHANGE RATES.-The Secretary of the Treasury shall make available to the public in electronic form, not later than noon on each business day, the dollar exchange rate for all foreign currencies, using any methodology that the Secretary determines appropriate, which may include the methodology used pursuant to section 613(b) of the Foreign Assistance Act of 1961 (22 U.S.C. 2363(b)).

"(f) AGENTS AND SUBSIDIARIES.-A remittance transfer provider shall be liable for any violation of this section by any agent or subsidiary of that remittance transfer provider.

"(g) DEFINITIONS.-As used in this section-

"(1) the term 'exchange rate fee' means the difference between the total dollar amount transferred, valued at the exchange rate offered by the remittance transfer provider, and the total dollar amount transferred, valued at the exchange rate posted by the Secretary of the Treasury in accordance with subsection (e) on the business day prior to the initiation of the subject remittance transfer;

"(2) the term 'remittance transfer' means the electronic (as defined in section 106(2) of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7006(2))) transfer of funds at the request of a consumer located in any State to a person in another country that is initiated by a remittance transfer provider, whether or not the consumer is an account holder of the remittance transfer provider or whether or not the remittance transfer is also an electronic fund transfer, as defined in section 903;

"(3) the term 'remittance transfer provider' means any person or financial institution that provides remittance transfers on behalf of consumers in the normal course of its business, whether or not the consumer is an account holder of that person or financial institution;

"(4) the term 'State' means any of the several States, the Commonwealth of Puerto Rico, the District of Columbia, and any territory or possession of the United States; and

"(5) the term 'total remittance transfer cost' means the total cost of a remittance transfer expressed in dollars, including all fees charged by the remittance transfer provider, including the exchange rate fee.".

(b) EFFECT ON STATE LAWS.-Section 919 of the Electronic Fund Transfer Act (12 U.S.C. 1693q) is amended-

(1) in the first sentence, by inserting "or remittance transfers (as defined in section 918)" after "transfers"; and

(2) in the fourth sentence, by inserting ", or remittance transfer providers (as defined in section 918), in the case of remittance transfers," after "financial institutions".

SEC. 3. FEDERAL CREDIT UNION ACT AMENDMENT.

Paragraph (12) of section 107 of the Federal Credit Union Act (12 U.S.C. 1757(12)) is amended to read as follows:

"(12) in accordance with regulations prescribed by the Board-

"(A) to provide remittance transfers, as defined in section 918(h) of the Electronic Fund Transfer Act, to persons in the field of membership; and

"(B) to cash checks and money orders for persons in the field of membership for a fee;".

SEC. 4. AUTOMATED CLEARINGHOUSE SYSTEM.

(a) EXPANSION OF SYSTEM.-The Board of Governors of the Federal Reserve System shall work with the Federal reserve banks to expand the use of the automated clearinghouse system for remittance transfers to foreign countries, with a focus on countries that receive significant remittance transfers from the United States, based on-

(1) the number, volume, and sizes of such transfers;

(2) the significance of the volume of such transfers, relative to the external financial flows of the receiving country; and

(3) the feasibility of such an expansion.

(b) REPORT TO CONGRESS.-Not later than 180 days after the date of enactment of this Act, and on April 30 biannually thereafter, the Board of Governors of the Federal Reserve System shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the status of the automated clearinghouse system and its progress in complying with the requirements of this section.

SEC. 5. EXPANSION OF FINANCIAL INSTITUTION PROVISION OF REMITTANCE TRANSFERS.

(a) PROVISION OF GUIDELINES TO INSTITUTIONS.-Each of the Federal banking agencies (as defined in section 3 of the Federal Deposit Insurance Act) and the National Credit Union Administration shall provide guidelines to financial institutions under the jurisdiction of the agency regarding the offering of low-cost remittance transfers and no-cost or low-cost basic consumer accounts, as well as agency services to remittance transfer providers.

(b) CONTENT OF GUIDELINES.-Guidelines provided to financial institutions under this section shall include-

(1) information as to the methods of providing remittance transfer services;

(2) the potential economic opportunities in providing low-cost remittance transfers; and

(3) the potential value to financial institutions of broadening their financial bases to include persons that use remittance transfers.

© ASSISTANCE TO FINANCIAL LITERACY COMMISSION.-The Secretary of the Treasury and each agency referred to in subsection (a) shall, as part of their duties as members of the Financial Literacy and Education Commission, assist that Commission in improving the financial literacy and education of consumers who send remittances.

SEC. 6. STUDY AND REPORT ON REMITTANCES.

(a) STUDY.-The Comptroller General of the United States shall conduct a study and analysis of the remittance transfer system, including an analysis of its impact on consumers.

(b) AREAS OF CONSIDERATION.-The study conducted under this section shall include, to the extent that information is available-

(1) an estimate of the total amount, in dollars, transmitted from individuals in the United States to other countries, including per country data, historical data, and any available projections concerning future remittance levels;

(2) a comparison of the amount of remittance funds, in total and per country, to the amount of foreign trade, bilateral assistance, and multi-development bank programs involving each of the subject countries;

(3) an analysis of the methods used to remit the funds, with estimates of the amounts remitted through each method and descriptive statistics for each method, such as market share, median transaction size, and cost per transaction, including through-

(A) depository institutions;

(B) postal money orders and other money orders;

© automatic teller machines;

(D) wire transfer services; and

(E) personal delivery services;

(4) an analysis of advantages and disadvantages of each remitting method listed in subparagraphs (A) through (E) of paragraph (3);

(5) an analysis of the types and specificity of disclosures made by various types of remittance transaction providers to consumers who send remittances; and

(6) if reliable data are unavailable, recommendations concerning options for Congress to consider to improve the state of information on remittances from the United States.

© REPORT TO CONGRESS.-Not later than 1 year after the date of enactment of this Act, the Comptroller General shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on the results of the study conducted under this section.

NATIONAL COUNCIL OF LA RAZA,
Washington, DC, Sept. 30, 2004.

Hon. PAUL SARBANES,
Ranking Member, U.S. Senate Committee on Banking, Housing, and Urban Affairs, Washington, DC.

DEAR SENATOR SARBANES: On behalf of the National Council of La Raza (NCLR), the largest national Hispanic constituency-based organization, I write to express our support for your proposed legislation, the International Remittance Consumer Protection Act of 2004.

As you know very well, the cost of sending remittances to Latin America can be very high-as much as 12 percent per transaction. Lack of competition in the remittance business, which is dominated by a small number of companies that charge higher fees than financial institutions, has kept prices high. In addition to fees, consumers are often subject to poor monetary exchange rates that are not fully disclosed. These exorbitant fees and hidden charges adversely affect many Latinos who send money regularly to Latin America. Many of these remitters are working poor, and nearly half (43 percent) do not have basic banking accounts to conduct simple transactions.

For these reasons, we appreciated the opportunity to meet with your staff and provide input regarding several issues that affect Latino remittance senders. Specifically, we support provisions in your bill that require disclosing upfront all fees and exchange rates to consumers, most of whom are immigrant and/or English language learners (ELL), in languages and formats accessible to them; allow credit unions to offer remittance and check cashing services to nonmembers in the field of membership, which will connect remitters to low-cost financial services facilitating their entry into the financial mainstream; and assist the Federal
Financial Literacy Commission in informing remitters of new consumer rights relating to remittance transactions via wire transfers.

Again, thank you for soliciting our feedback on the International Remittance Consumer Protection Act and for your continued support of Latino and immigrant communities. We look forward to working with you to ensure that immigrants have access to information and make fully-informed choices when wiring money to family members abroad. In the end, we hope such legislative measures will provide remitters greater access to mainstream banking tools and services to improve their long-term financial security. We hope to work with you to achieve these goals. Please do not hesitate to contact me if I can be of assistance to you.

Sincerely,

RAUL YZAGUIRRE,
President/CEO.

[Sept. 30, 2004]

MALDEF APPLAUDS SARBANES BILL TO REGULATE REMITTANCES AND PROTECT LATINOS' CONSUMER RIGHTS

(By MALDEF President and General Counsel Ann Marie Tallman)

MALDEF applauds Senator Paul Sarbanes' (D-MD) introduction of the International Remittance Consumer Protection Act of 2004. We believe this bill is the first step in the right direction to improve Latino immigrants' access to banks, and to protect their rights as consumers. This bill is long overdue. MALDEF urges Congress to pass it into law and protect Latino consumer rights.

Senator Sarbanes' International Remittance Consumer Protection Act would bring remittance transfers under the umbrella of protection of U.S. financial services laws. It would make remittance transfers subject to the same set of laws to which any other money transaction in the U.S. is subject. Senator Sarbanes' bill would provide for basic consumer protections for the millions of Latinos and the billions of dollars they send through remittances, by requiring full disclosure of all transfer fees, and a receipt with such full disclosure in the language used by the consumer. It would also provide for error resolutions and reimbursements when family members overseas do not receive the full amount of funds sent. The bill would also: (1) permit credit unions to offer remittance and check cashing services; (2) direct the Federal Reserve Board to provide guidelines to encourage U.S. financial institutions to offer low-cost remittance services and tap into this market; (3) assist the Federal Financial Literacy Commission in improving "financial literacy" of consumers who send remittances; and (4) direct the General Accounting Office to study the remittance market and report to Congress with its findings.

Latino immigrants' remittances represent the most important source of "development aid" to most Latin American countries. Hard-working Latino immigrants are making essential contributions to the U.S. economy, and U.S. financial institutions have benefited greatly from Latino immigrants' money transfers or "remittances." In keeping with the tradition of American immigrants, more than 60 percent of Latin American born adults generously send money to their extended families in Latin America on a regular basis. The volume is staggering-the International Monetary Fund reported that over $30 billion in remittances are expected to be sent from the United States to Latin America in 2004. The Hispanic Association of Corporate Responsibility reported that Mexico is the second-largest recipient, just behind India, and that nearly 12 percent of remittances worldwide go to Mexico. This market is unregulated, leaving Latinos vulnerable to excessive processing fees imposed by some remittance transfer agencies. As the PEW Hispanic Center has reported, the fees have been inappropriately high, reaching up to 20 percent. Even worse, some Latinos have had their hard-earned money never reach their intended recipients, or portions of their transfers have been skimmed by unscrupulous agents.

For all these reasons, MALDEF thanks Senator Sarbanes for the introduction of the International Remittance Consumer Protection Act, and urges the Congress to enact this essential piece of legislation as soon as possible, in order to protect Latino consumer rights.

LEADERSHIP CONFERENCE ON
CIVIL RIGHTS,
Washington, DC, Sept. 30, 2004.

Hon. PAUL SARBANES,
U.S. Senate,
Washington, DC.

DEAR SENATOR SARBANES: On behalf of the Leadership Conference on Civil Rights (LCCR), the nation's oldest, largest and most diverse civil and human rights coalition, we write to express our strong support for the "International Remittance Consumer Protection Act of 2004." LCCR greatly appreciates your efforts to strengthen the rights of consumers who send money overseas.

This important legislation will, for the first time, bring remittances under the framework of federal consumer protection law, and will encourage transparency and competition in the remittance market. There are three key components to the bill:

First, it establishes clear disclosure requirements for remittance transfer companies, including the requirement that the cost of the exchange rate conversion be included in the total cost of the transfer. This cost is, at present, a hidden fee through which consumers are unwittingly charged excessive and abusive additional costs. The bill also takes an innovate approach to calculating the exchange rate fee, so consumers will be able to shop among different remittance companies with the full knowledge of each company's prices.

Second, it creates an open and fair error resolution process for remittance transfer errors. Currently, consumers who send remittances do not have any guaranteed recourse to recover money if a remittance transfer company fails to deliver on its promises. The bill establishes an error resolution mechanism for remittance transfer errors that is responsive to the different types of errors that can occur in a remittance transaction, and is reflective of the unique characteristics of the remittance market and its participants.

Finally, it requires Federal bank and credit union regulators to encourage federally-insured financial institutions to offer low-cost remittance services and no-cost or low-cost basic consumer bank accounts. It is estimated that half of all remittance senders do not have a bank account, and only one in ten consumers use banks to send remittances. This requirement on the Federal regulators will further encourage competition in the market and will assist in the critical effort to bank the unbanked.

We greatly appreciate your leadership on this issue, and we look forward to working with you to enact the International Remittance Consumer Protection Act of 2004. If we can be of any help, please feel free to contact Rob Randhava, LCCR Policy Analyst, at (202) 466-6058.

Sincerely,

WADE HENDERSON,
Executive Director.

NANCY ZIRKIN,
Deputy Director.

CASA OF MARYLAND, INC.,
Takoma Park, Md.

Hon. PAUL SARBANES,
U.S. Senate,
Washington, DC.

DEAR SENATOR SARBANES: On behalf of CASA of Maryland, Inc., the largest Latino service and advocacy organization in Maryland, I write to offer strong support for the "International Remittance Consumer Protection Act of 2004." CASA greatly appreciates your efforts to strengthen the rights of consumers who send money overseas.

CASA of Maryland, Inc. provides high quality and affordable remittances services for the Latino community in Maryland. We witness every day the abuses that this legislation will prevent.

This historic legislation brings remittances under the framework of federal consumer protection law, and will encourage transparency and competition in the remittance market. There are three components to the bill:

First, it establishes clear disclosure requirements for remittance transfer companies, including the requirement that the cost of the exchange rate conversion be included in the total cost of the transfer. This cost is, at present, a hidden fee through which consumers are unwittingly charged excessive and abusive additional costs. The bill also takes an innovate approach to calculating the exchange rate fee, so consumers will be able to shop among different remittance companies with the full knowledge of each company's prices.

Second, it creates an open and fair error resolution process for remittance transfer errors. Currently, consumers who send remittances do not have any guaranteed recourse to recover money if a remittance transfer company fails to deliver on its promises. The bill establishes an error resolution mechanism for remittance transfer errors that is responsive to the different types of errors that can occur in a remittance transaction, and is reflective of the unique characteristics of the remittance market and its participants.

Finally, it requires Federal bank and credit union regulators to encourage federally-insured financial institutions to offer low-cost remittance services and no-cost or low-cost basic consumer bank accounts. It is estimated that half of all remittance senders do not have a bank account, and only one in ten consumers use banks to send remittances. This requirement on the Federal regulators will further encourage competition in the market and will assist in the critical effort to bank the unbanked.

On behalf of the immigrant community throughout Maryland, I congratulate you on your leadership with this issue, and we look forward to working with you to enact the International Remittance Consumer Protection Act of 2004. If I can be of any assistance, please feel free to contact me at 301-270-0419.

Sincerely,

GUSTAVO TORRES,
Executive Director.

CONSUMERS UNION
WEST COAST OFFICE,
San Francisco, CA, September 30, 2004.

Senator PAUL SARBANES,
U.S. Senate.

DEAR SENATOR SARBANES: Consumers Union, the nonprofit publisher of Consumer Reports, the Consumer Federation of America, the National Consumer Law Center on behalf of its low income clients, and U.S. PIRG are pleased to express our strong support the International Remittance Consumer Protection Act of 2004, as introduced today. This bill will provide essential information and consumer protections to hardworking people who send money to family members in other countries, very significantly improving the operation of the money transmission marketplace for consumers.

Consumers in the U.S. send a significant dollar volume of international remittances using both financial institutions and non-financial institutions. Money sent to family members outside the U.S. represents hard-earned family income. As the Inter-American Development Bank has said: "The dramatic growth of international remittances is testimony to the hard work and commitment of migrant workers seeking better lives for themselves and their families." Money transmission costs, disclosures, and consumer rights are not an issue that extends beyond recent immigrants. Consumers who are U.S. citizens or longstanding residents also send money to family members outside of the U.S.

U.S consumers sent $13.2 billion to Mexico in 2003, usually in amounts of about $500 per transmission, according to a report by the Pew Hispanic Center. According to the Inter-American Development Bank, U.S. consumers send $38 billion a year to Latin America and the Caribbean, often in amounts of $200 to $300 per transmission. U.S. workers also send money to India, the Philippines, and other countries.

Consumers who transmit funds internationally need the protections that would be provided by the International Remittance Consumer Protection Act of 2004. These protections include plain disclosures before sending the money such as the amount of foreign currency that will actually be sent to the recipient in another country and the total cost of the money transmission.
The bill will require that this information to be given before the transaction starts, which is the time that pricing information is most useful to the consumer. Consumers who are informed about the true amount of funds that will be sent, and about the full cost of the money transmission transaction, can shop around much more effectively for the best rates and fees.

The bill will also require that the consumer be given a receipt with this important pricing information and with the date when the money is to be delivered. In addition, the bill will protect persons in the U.S. who send money out of the country if that money is not received in the other country, or if the wrong amount is received. These error resolution provisions are designed specifically for money transmission, but are based on the same principles as existing protections that consumers enjoy when they make payments domestically using an electronic fund transfer from a bank account. Money that is sent to family members outside the country often is essential to the economic survival of those family members. It is important that the funds arrive as promised.
This bill would require money transmitters to tell the sender when the money should arrive and would also create a mechanism for a refund if there is a problem with the sending of the funds.

Finally, the bill would encourage more federally insured financial institutions to offer low cost remittance services. Since some
consumers who send remittances do not have bank accounts, this could be a way for federally insured financial institutions to serve new markets. According to an extensive study by the Pew Hispanic Center, financial institutions current have only about 3% of the international remittance market.

For these reasons, we are pleased to express our very strong support for the International Remittance Consumer Protection Act of 2004.

Very truly yours,

GAIL HILLEBRAND,
Consumers Union of U.S., Inc.

JEAN ANN FOX,
Consumer Federation of America.

MARGOT SAUNDERS,
National Consumer Law Center.

ED MIERZWINSKY,
U.S. PIRG.