CFPB’s First Rule will Require 7.7 Million Hours
Posted: 31 Jan 2012 08:58 AM PST

The CFBP has estimated its first rule, the remittance proposal, will require 7.7 million employee hours of work to implement and comply with the new rule. The estimate includes a total one-time annual burden of 3.4 million employees hours and an ongoing burden of 4.3 million employee hours of work.

A CFPB report noted the remittance proposal will impose costs as institutions update systems, revise contracts, change communication protocols and business practices in order to obtain necessary information to comply with the rule. The report also described the possibility of institutions facing “additional exchange rate risks.”

The CFPB noted, “the costs of compliance will ultimately be shared among the consumers and businesses involved in remittance transfers.”

The CFPB remarked that due to the lack of available data “it is not possible for the Bureau to distinguish the impact of the final rule on depository institutions with $10 billion or less in total assets. ”

In May the CFPB conducted an initial regulatory flexibility analysis, concluding the proposed remittance rule “could have a significant economic impact on small entities.” Therefore, the CFPB stated it is “not certifying that the final rule will not have a significant economic impact on a substantial number of small entities.”

Where did you find this information?

It's in the impact analysis near the end of the prefatory material in the Federal Register document in which the regulation will be published (publishing date, by the way, is 2/7/12).

The Bureau doesn't have a lot of experience doing the bean-counter thing for estimating the financial impact of a new rule, but it has hired lots of people, presumably some with such expertise.

It may be pessimistic in its estimates. If so, it's a welcome change from many of these attempts to cost out the impact of regulatory change, most of which are laughable in the extreme as they grossly underestimate the effort needed to effect change.

Thanks John!

Yes, my thought was it is the first honest estimate!

Heather, it came in an ABA bulletin (not copyrighted as far as I could see).

ABA DAILY NEWSBYTES 02/01/2012:

Sen. Shelby Raises Concerns Over CFPB Rulemaking
Senate Banking Committee ranking member Richard Shelby (R-Ala.) at a hearing yesterday on the Consumer Financial Protection Bureau's first six months raised concerns about the CFPB imposing costly new rules without seeking public input.

Shelby noted, for example, that the CFPB's own analysis shows that businesses will spend more than 7.6 million hours complying with a rule to improve the price transparency of foreign remittances. Rather than conduct a cost-benefit analysis, the bureau has indicated that it will impose the rule and examine its impact afterward, he said.

CFPB Director Richard Cordray responded that the rule's costs are worth the benefit of protecting consumers. "Our understanding is it will cost a quarter for every $100 of remittance transfers," Cordray said. "That's a ... small price to pay for the fact there's never been any consumer protections for people who sent money overseas ... ."

He added that the bureau is required to convene small-business panels before proposing a new rule, but it didn't set up such a panel for the remittance regulation because it inherited the proposal from the Federal Reserve.

"Our understanding is it will cost a quarter for every $100 of remittance transfers," Cordray said. "That's a ... small price to pay for the fact there's never been any consumer protections for people who sent money overseas ... ."

From the preamble: "The World Bank further estimates that the United States has the highest volume of remittances, totaling $48.3 billion in 2009."

So, a mear $120 million a year. Why don't they just establish a victum's fund if it is such a problem?

I guess we should vote for Newt as last night he said one of his first acts would be to repeal the DFA - with the passage of the repeal through Congress. Right

I'm sorry, but somehow I think the game plan here is "ready, fire, aim."

The CFPB is spending the bank's money without input from the banks.

::does his cute little job security dance::

Do you think there is any cost that would outweigh a rule's benefit for this or any other agency?

::joins JJ::

The CFPB is showing that it is young, ambitious, green, and hopelessly ideological. The Bureau says it will take 7.7 million hours to implement this regulatory change (it's not a laughable underestimate, as other agencies have put out, but unfortunately it's still likely that the time and money to implement is underestimated). They're willing to be more honest because they're trying to show that they believe consumer protection is worth the cost. It's only a quarter per $100 here, $1 per $100 there (it all adds up, of course, but they don't have to pay for it).

Then they'll get put through the ringer a few times on these more honest estimates with some serious political pushback, and voila - after awhile, they will be "older" and more cynical, putting out laughable estimates themselves. Still not caring about how much it truly costs...still believing that consumer protection is paramount, and they alone have figured out how to protect the little guy.

Well said... EmilyAnn!

Quite frankly, no. Conceptually, sure, there must be a point at which cost exceeds benefit. However, I can't remember an instance in which a regulatory agency ever admitted that such a point had been reached.

So how many are getting out of the International remittance business before next February?

Okay, I've read and read and researched and researched. I understand, more or less, what a "remittance transfer" is, but I'm not sure I understand completely. If I may...

A remittance transfer (at least in the way it's being used here) is an international transfer of funds via wire, ACH initiated by the consumer, or prepaid access device. Is that right? What am I missing? What else is a remittance transfer? I looked at the definitions in the new Reg E and that did me little good.

TIA

It can also include a bill payment transaction by check if it is sent outside the U.S. and it qualifies as an EFT otherwise under Regulation E.

Has anyone done a cost analysis for your bank/cu on this? In last night's board meeting, the board wondered what it would cost if we were to be subject to the rule. Last year we had 40 remittance transfers, but the question arose after discussing what would happen if competitors down the street stopped offering these and we had an influx of business that pushed us over the 100.

Aside from the CFPB's $.25/$100 sent estimate, not a clue on this.

It's gonna cost plenty with the triplicate disclosures and form preparations.

Here is the risk that will be too much for banks to accept:

John's $100,000 CD matures and he wants to wire the funds to his mother in Central America. John gives you the beneficiay Mary account 1234. Funds are wired and deposited into Maria account 12345. John says mother did not get the $. You cant get it back because Maria has withdrawn the $. Mr. Banker you must use your bank funds to resend the $100,000 to Mary account 1234. Your bank is out $100,000.

Read page 6256 of the Federal Register column 3

Even though we may be exempt, we will still need to have monitoring procedures in place incase you do get the 100 mark. I know I have talked to our vendor for international wires and they are working to get the appropriate disclosures.

I envision once we get to close to the 100 a year mark, we will cease offering the service going forward.

The only way to mitigate this risk (other than keeping under the 101 transaction activity trigger) is to cap the dollar amount you're willing to send in a single transfer. Theoretically, for example, you could "test" the Sender's info by agreeing only to send a first entry of $100 to see if it is correctly received.