[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Proposed Rules]
[Pages 5302-5318]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01606]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / 
Proposed Rules

[[Page 5302]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1090

[Docket No. CFPB-2014-0003]
RIN 3170-AA25


Defining Larger Participants of the International Money Transfer 
Market

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule; request for public comment.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau or CFPB) 
proposes to amend the regulation defining larger participants of 
certain consumer financial product and service markets by adding a new 
section to define larger participants of a market for international 
money transfers. The Bureau proposes this rule pursuant to its 
authority, under the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, to supervise certain nonbank covered persons for 
compliance with Federal consumer financial law and for other purposes. 
The Bureau has the authority to supervise nonbank covered persons of 
all sizes in the residential mortgage, private education lending, and 
payday lending markets. In addition, the Bureau has the authority to 
supervise nonbank ``larger participant[s]'' of markets for other 
consumer financial products or services, as the Bureau defines by rule. 
The proposal (Proposed Rule) would identify a nonbank market for 
international money transfers and define ``larger participants'' of 
this market that would be subject to the Bureau's supervisory 
authority.

DATES: Comments must be received on or before April 1, 2014.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Because paper mail in the Washington, 
DC area and at the Bureau is subject to delay, commenters are 
encouraged to submit comments electronically. You may submit comments, 
identified by Docket No. CFPB-2014-0003 or RIN 3170-AA25, by any of the 
following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments. In general, all comments received 
will be posted without change to their content.
     Mail/Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Bureau of Consumer Financial Protection, 1700 G 
Street NW., Washington DC 20552.
    In addition, comments will be available for public inspection and 
copying at 1700 G Street NW., Washington, DC 20552, on official 
business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You 
can make an appointment to inspect the documents by telephoning (202) 
435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and will be subject to public 
disclosure. Submit only information that you wish to make available 
publicly. Do not include sensitive personal information, such as 
account numbers or Social Security numbers. Comments will not be edited 
to remove any identifying or contact information, such as name and 
address information, email addresses, or telephone numbers.

FOR FURTHER INFORMATION CONTACT: Edna Boateng, Senior Consumer 
Financial Protection Analyst, (202) 435-7697, Amanda Quester, Senior 
Counsel, (202) 365-0702, or Brian Shearer, Attorney, (202) 435-7794, 
Office of Supervision Policy, Bureau of Consumer Financial Protection, 
1700 G Street NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION: 

I. Overview

    Section 1024 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act), codified at 12 U.S.C. 5514,\1\ gives 
the Bureau supervisory authority over all nonbank covered persons \2\ 
offering or providing three enumerated types of consumer financial 
products or services: (1) Origination, brokerage, or servicing of 
consumer loans secured by real estate, and related mortgage loan 
modification or foreclosure relief services; (2) private education 
loans; and (3) payday loans.\3\ The Bureau also has supervisory 
authority over ``larger participant[s] of a market for other consumer 
financial products or services,'' as the Bureau defines by rule.\4\
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    \1\ Public Law 111-203, Sec.  1024, 124 Stat. 1376, 1987 (2010) 
(codified at 12 U.S.C. 5514).
    \2\ The provisions of 12 U.S.C. 5514 apply to certain categories 
of covered persons, described in subsection (a)(1), and expressly 
exclude from coverage persons described in 12 U.S.C. 5515(a) or 
5516(a). ``Covered persons'' include ``(A) any person that engages 
in offering or providing a consumer financial product or service; 
and (B) any affiliate of a person described [in (A)] if such 
affiliate acts as a service provider to such person.'' 12 U.S.C. 
5481(6).
    \3\ 12 U.S.C. 5514(a)(1)(A), (D), (E). The Bureau also has the 
authority to supervise any nonbank covered person that it ``has 
reasonable cause to determine, by order, after notice to the covered 
person and a reasonable opportunity . . . to respond . . . is 
engaging, or has engaged, in conduct that poses risks to consumers 
with regard to the offering or provision of consumer financial 
products or services.'' 12 U.S.C. 5514(a)(1)(C); see also 12 CFR 
part 1091 (prescribing procedures for making determinations under 12 
U.S.C. 5514(a)(1)(C)). In addition, the Bureau has supervisory 
authority over very large depository institutions and credit unions 
and their affiliates. 12 U.S.C. 5515(a). Furthermore, the Bureau has 
certain authorities relating to the supervision of other depository 
institutions and credit unions. 12 U.S.C. 5516(c)(1), (e). One of 
the Bureau's mandates under the Dodd-Frank Act is to ensure that 
``Federal consumer financial law is enforced consistently without 
regard to the status of a person as a depository institution, in 
order to promote fair competition.'' 12 U.S.C. 5511(b)(4).
    \4\ 12 U.S.C. 5514(a)(1)(B), (a)(2); see also 12 U.S.C. 5481(5) 
(defining ``consumer financial product or service'').
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    This Proposed Rule, if adopted, would be the fourth in a series of 
rulemakings to define larger participants of markets for other consumer 
financial products or services for purposes of 12 U.S.C. 
5514(a)(1)(B).\5\ The Proposed Rule would establish the Bureau's 
supervisory authority over certain nonbank covered persons 
participating in a market for international money transfers.\6\
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    \5\ The first three rules defined larger participants of markets 
for consumer reporting, 77 FR 42874 (July 20, 2012) (Consumer 
Reporting Rule), consumer debt collection, 77 FR 65775 (Oct. 31, 
2012) (Consumer Debt Collection Rule), and student loan servicing, 
78 FR 73383 (Dec. 6, 2013) (Student Loan Servicing Rule).
    \6\ The Proposed Rule would describe one market for consumer 
financial products or services, which the Proposed Rule labels 
``international money transfers.'' The proposed definition would not 
encompass all activities that could be considered international 
money transfers. Any reference herein to ``the international money 
transfer market'' means only the particular market for international 
money transfers identified by the Proposed Rule.
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    The Bureau is authorized to supervise nonbank covered persons 
subject to 12 U.S.C. 5514 of the Dodd-Frank Act for

[[Page 5303]]

purposes of: (1) Assessing compliance with Federal consumer financial 
law; (2) obtaining information about such persons' activities and 
compliance systems or procedures; and (3) detecting and assessing risks 
to consumers and consumer financial markets.\7\ The Bureau conducts 
examinations, of various scopes, of supervised entities. In addition, 
the Bureau may, as appropriate, request information from supervised 
entities without conducting examinations.\8\
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    \7\ 12 U.S.C. 5514(b)(1).
    \8\ See 12 U.S.C. 5514(b) (authorizing the Bureau both to 
conduct examinations and to require reports from entities subject to 
supervision).
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    The Bureau prioritizes supervisory activity among nonbank covered 
persons on the basis of risk, taking into account, among other factors, 
the size of each entity, the volume of its transactions involving 
consumer financial products or services, the size and risk presented by 
the market in which it is a participant, the extent of relevant State 
oversight, and any field and market information that the Bureau has on 
the entity. Such field and market information might include, for 
example, information from complaints and any other information the 
Bureau has about risks to consumers.
    The specifics of how an examination takes place vary by market and 
entity. However, the examination process generally proceeds as follows. 
Bureau examiners contact the entity for an initial conference with 
management and often request records and other information. Bureau 
examiners will ordinarily also review the components of the supervised 
entity's compliance management system. Based on these discussions and a 
preliminary review of the information received, examiners determine the 
scope of an on-site examination and then coordinate with the entity to 
initiate the on-site portion of the examination. While on-site, 
examiners spend a period of time holding discussions with management 
about the entity's policies, processes, and procedures; reviewing 
documents and records; testing transactions and accounts for 
compliance; and evaluating the entity's compliance management system. 
Examinations may involve issuing confidential examination reports, 
supervisory letters, and compliance ratings. In addition to the process 
described above, the Bureau may also conduct off-site examinations.
    The Bureau has published a general examination manual describing 
the Bureau's supervisory approach and procedures.\9\ As explained in 
the manual, the Bureau will structure examinations to address various 
factors related to a supervised entity's compliance with Federal 
consumer financial law and other relevant considerations. On October 
22, 2013, the Bureau released procedures specific to remittance 
transfers for use in the Bureau's examinations of entities within its 
supervisory authority.\10\ If this Proposed Rule is adopted, the Bureau 
will use those examination procedures in supervising international 
money transfers. The procedures include instructions on examining for 
compliance with, among other laws and regulations, new requirements in 
subpart B of Regulation E relating to remittance transfers (Remittance 
Rule), which went into effect on October 28, 2013.\11\
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    \9\ CFPB Supervision and Examination Manual (Oct. 1, 2012), 
available at http://www.consumerfinance.gov/guidance/supervision/manual/.
    \10\ CFPB Supervision and Examination Manual, Remittance 
Transfer Examination Procedures (Oct. 22, 2013), available at http://files.consumerfinance.gov/f/201310_cfpb_remittance-transfer-examination-procedures.pdf.
    \11\ 77 FR 6194 (Feb. 7, 2012); 77 FR 40459 (July 10, 2012); 77 
FR 50244 (Aug. 20, 2012); 78 FR 6025 (Jan. 29, 2013); 78 FR 30662 
(May 22, 2013); 78 FR 49365 (Aug. 14, 2013) (codified at 12 CFR part 
1005, subpart B). These changes implement the new Electronic Fund 
Transfer Act requirements imposed by the Dodd-Frank Act, Public Law 
111-203, Sec.  1073, 124 Stat. 1376, 2060 (2010). For additional 
information about the Remittance Rule, see http://www.consumerfinance.gov/remittances-transfer-rule-amendment-to-regulation-e/.
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    The States have been active in regulation of money transmission, 
with forty-seven States and the District of Columbia requiring entities 
to obtain a license to engage in money transmission, as defined by 
applicable law. Many States also actively examine money transmitters. 
If the Proposed Rule is adopted, the Bureau would coordinate with 
appropriate State regulatory authorities in examining larger 
participants of the international money transfer market.
    This Proposed Rule would establish a category of nonbank covered 
persons that is subject to the Bureau's supervisory authority under 12 
U.S.C. 5514 by defining ``larger participants'' of a market for 
international money transfers.\12\ The Proposed Rule pertains only to 
that purpose and would not impose new substantive consumer protection 
requirements. Nonbank covered persons generally are subject to the 
Bureau's regulatory and enforcement authority, and any applicable 
Federal consumer financial law, regardless of whether they are subject 
to the Bureau's supervisory authority.
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    \12\ The Bureau's supervisory authority also extends to service 
providers of those covered persons that are subject to supervision 
under 12 U.S.C. 5514(a)(1). 12 U.S.C. 5514(e); see also 12 U.S.C. 
5481(26) (defining ``service provider'').
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II. Summary of Proposed Rule

    The Bureau's existing larger-participant rule, 12 CFR part 1090, 
prescribes various procedures, definitions, standards, and protocols 
that apply with respect to all markets in which the Bureau has defined 
larger participants.\13\ Those generally applicable provisions, which 
are codified in subpart A, would also be applicable for the 
international money transfer market described by this Proposed Rule. 
The definitions in Sec.  1090.101 should be used, unless otherwise 
specified, when interpreting terms in this Proposed Rule.
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    \13\ 12 CFR 1090.100-.103.
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    The Bureau includes relevant market descriptions and larger-
participant tests, as it develops them, in subpart B.\14\ Accordingly, 
the Proposed Rule defining larger participants of the international 
money transfer market would become Sec.  1090.107 in subpart B.
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    \14\ 77 FR 42874, 42875 (Consumer Reporting Rule); 77 FR 65775, 
65777 (Consumer Debt Collection Rule); 78 FR 73383, 73384 (Student 
Loan Servicing Rule).
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    The Proposed Rule would define an international money transfer 
market that would cover certain electronic transfers of funds sent by 
nonbanks that are international money transfer providers. To be 
included in this proposed market, transfers would have to be requested 
by a sender in a State to be sent to a designated recipient in a 
foreign country. The Proposed Rule's definitions are modeled in part on 
the definition of ``remittance transfer'' and related terms in the 
Electronic Fund Transfer Act (EFTA) and its implementing regulation, 
Regulation E.\15\ Some of the Proposed Rule's definitions also are 
modeled in part on definitions in prior larger-participant rules.\16\ 
The definitions in existing Sec.  1090.101 apply for terms that the 
Proposed Rule does not define, such as ``person'' and ``consumer.'' 
\17\
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    \15\ 15 U.S.C. 1693o-1(g); 12 CFR 1005.2, 1005.30.
    \16\ 12 CFR 1090.104(a), 1090.105(a) (providing definitions of 
``annual receipts,'' which the Bureau used in crafting the proposed 
definition of ``aggregate annual international money transfer'').
    \17\ As a result, some terms may have different definitions for 
purposes of the Proposed Rule than they do for purposes of 
Regulation E. The definition of ``consumer'' in Sec.  1090.101 is 
``an individual or an agent, trustee, or representative acting on 
behalf of an individual,'' 12 CFR 1090.101, while the definition of 
``consumer'' in Regulation E is ``a natural person,'' 12 CFR 
1005.2(e). The definition of ``person'' in Sec.  1090.101 is ``an 
individual, partnership, company, corporation, association 
(incorporated or unincorporated), trust, estate, cooperative 
organization, or other entity,'' 12 CFR 1090.101, while the 
definition of ``person'' in Regulation E is ``a natural person or an 
organization, including a corporation, government agency, estate, 
trust, partnership, proprietorship, cooperative, or association,'' 
12 CFR 1005.2(j).

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[[Page 5304]]

    The Proposed Rule also would set forth a test to determine whether 
a nonbank covered person is a larger participant of the international 
money transfer market. An entity would be a larger participant if it 
has at least one million aggregate annual international money 
transfers.\18\ As prescribed by existing Sec.  1090.102, any nonbank 
covered person that qualifies as a larger participant would remain a 
larger participant until two years after the first day of the tax year 
in which the person last met the applicable test.\19\
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    \18\ As the Bureau has explained in prior rulemakings, the 
criterion selected for one market in a larger-participant rulemaking 
is not necessarily appropriate for any other market that may be the 
subject of a future rulemaking. Instead, the Bureau expects to 
tailor each test to the market to which it will be applied. 77 FR 
42874, 42876 (Consumer Reporting); 77 FR 65775, 65778 (Consumer Debt 
Collection); 78 FR 73383, 73384 n.16 (Student Loan Servicing).
    \19\ 12 CFR 1090.102.
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    Pursuant to existing Sec.  1090.103, a person would be able to 
dispute whether it qualifies as a larger participant in the 
international money transfer market. The Bureau would notify an entity 
when the Bureau intended to undertake supervisory activity; the entity 
would then have an opportunity to submit documentary evidence and 
written arguments in support of its claim that it was not a larger 
participant. Section 1090.103(d) provides that the Bureau may require 
submission of certain records, documents, and other information for 
purposes of assessing whether a person is a larger participant of a 
covered market; this authority would be available to the Bureau to 
facilitate its identification of larger participants of the 
international money transfer market, just as in other markets.

III. Legal Authority and Procedural Matters

A. Rulemaking Authority

    The Bureau is issuing this Proposed Rule pursuant to its authority 
under: (1) 12 U.S.C. 5514(a)(1)(B) and (a)(2), which authorize the 
Bureau to supervise larger participants of markets for consumer 
financial products or services, as defined by rule; (2) 12 U.S.C. 
5514(b)(7), which, among other things, authorizes the Bureau to 
prescribe rules to facilitate the supervision of covered persons under 
12 U.S.C. 5514; and (3) 12 U.S.C. 5512(b)(1), which grants the Bureau 
the authority to prescribe rules as may be necessary or appropriate to 
enable the Bureau to administer and carry out the purposes and 
objectives of Federal consumer financial law, and to prevent evasions 
of such law.

B. Proposed Effective Date of Final Rule

    The Administrative Procedure Act generally requires that rules be 
published not less than 30 days before their effective dates.\20\ The 
Bureau proposes that the final rule arising from this Proposed Rule 
would be effective no earlier than 60 days after publication.
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    \20\ 5 U.S.C. 553(d).
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IV. Section-By-Section Analysis

Section 1090.107--International Money Transfer Market

    Proposed Sec.  1090.107 relates to international money 
transfers.\21\ As a general matter, international money transfers are 
electronic transfers of funds sent by nonbanks from consumers in the 
United States to persons or entities abroad.
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    \21\ The term ``international money transfer'' is very similar 
to the term ``remittance transfer'' as defined in the Remittance 
Rule, 12 CFR 1005.30(e). However, the definitions differ in some 
substantive respects as specified below, including, for example, 
that transfers of $15 or less can be ``international money 
transfers'' but not ``remittance transfers.'' Other definitions in 
this Proposed Rule are similarly based on Regulation E. Usage, or 
omission, of specific language from the EFTA or Regulation E in the 
Proposed Rule is not an endorsement by the Bureau of any specific 
interpretation of the EFTA or Regulation E.
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    Many consumers who send money abroad do so through money 
transmitter companies that are nonbanks.\22\ Many money transmitters 
operate through closed networks, receiving and disbursing funds through 
their own outlets or through agents such as grocery stores, 
neighborhood convenience stores, or depository institutions. Some money 
transmitters may send transfers of any size, while others cap the size 
of transfers they send.
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    \22\ CFPB, Report on Remittance Transfers 6 (July 20, 2011), 
available athttp://www.consumerfinance.gov/wp-content/uploads/2011/07/Report_20110720_RemittanceTransfers.pdf. Federal law requires 
money transmitters that meet certain criteria to register as a 
``money services business'' with the U.S. Department of the 
Treasury's Financial Crimes Enforcement Network (FinCEN). 31 U.S.C. 
5330; 31 CFR 1010.100(ff), 1022.380. Most States also have licensing 
requirements for similar types of entities.
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    For an international transfer conducted through a money 
transmitter, a consumer typically provides basic identifying 
information about himself and the recipient and often pays cash 
sufficient to cover the transfer amount and any fees charged by the 
money transmitter. The consumer may be provided a confirmation code, 
which the consumer relays to the recipient. The money transmitter sends 
an instruction to a specified payout location or locations in the 
recipient's country where the recipient may pick up the transferred 
funds, often in cash and local currency, upon presentation of the 
confirmation code and/or other identification on or after a specified 
date. These transfers generally are referred to as cash-to-cash 
transfers.
    Many money transmitters provide other types of transfers. For 
example, money transmitters may permit transfers to be initiated using 
credit cards, debit cards, or bank account debits and may use Web 
sites, agent locations, stand-alone kiosks, or telephone lines to do 
so. Abroad, money transmitters and their partners may allow funds to be 
deposited into recipients' bank accounts, distributed directly onto 
prepaid cards, or credited to mobile phone accounts. Funds also can be 
transferred among consumers' nonbank accounts identified by 
individuals' email addresses or mobile phone numbers. According to one 
survey of companies that send funds from the United States to Latin 
America and the Caribbean, 75 percent permit consumers to send 
transfers of funds that can be deposited directly into recipients' bank 
accounts, including transfers initiated through the internet.\23\
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    \23\ Manuel Orozco et al., Inter-American Dialogue, The Market 
for Money Transfers: Ranking of Remittance Service Providers in 
Latin America and the Caribbean 4 (Oct. 23, 2012), available at 
http://www.thedialogue.org/uploads/Remittances_and_Development/LatAm_Final_120712.pdf. Like cash-to-cash transfers, some of the 
transfers to bank accounts rely on closed networks, though others 
rely on open networks (between an entity and non-agents or non-
affiliates) or reflect some characteristics of both open and closed 
network transactions.
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    Although this Proposed Rule would apply only to nonbank covered 
persons, depository institutions and credit unions, including those 
already subject to the Bureau's supervisory authority, also offer 
consumers international transfer services. This is often done by way of 
wire transfers.
    International transfers play a critical role in the lives of many 
consumers in the United States. U.S. consumers send funds abroad for a 
number of reasons, including to assist family or friends with their 
expenses, to pay for purchases of goods, to pay the tuition of children 
studying abroad, or to purchase real estate. Data from the 2011 Current 
Population Survey (2011 CPS) show that more than 4 million households 
nationwide had used nonbanks to transfer funds to friends and family 
abroad in the preceding year, and more than 7 million households had 
used

[[Page 5305]]

nonbanks to make such transfers at some time in the past.\24\
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    \24\ Fed. Deposit Ins. Corp., National Survey of Unbanked and 
Underbanked Households 32 (Sept. 2012), available at http://
www.fdic.gov/householdsurvey/2012_unbankedreport.pdf (2011 CPS 
Report) (stating that 3.7 percent of households used ``nonbank 
remittances'' as defined in the survey in the preceding year); id at 
142-43 (providing estimate of 120 million U.S. households in 2011 
for purposes of the survey); id. at 79 (estimating the number of 
households that have used ``nonbank remittances'' as defined in the 
survey at any time in the past).
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    Transferring money to international recipients can present unique 
challenges for consumers and providers, many of which are addressed in 
the Remittance Rule recently issued by the Bureau. Pricing for 
transfers is complex and may depend not only on fees and taxes, but 
also on exchange rates. Because wholesale currency markets fluctuate 
constantly, the exchange rates applied to individual international 
transfers may change from day to day, or even over the course of the 
day, depending on how frequently providers update their retail rates. 
Providers may also vary their exchange rates and fees charged based on 
a range of other factors, such as the sending and receiving locations, 
and the size and speed of the transfer. Taxes may vary depending on the 
type of provider, the laws of the recipient country, and various other 
factors. As a result, determining how much money will actually be 
received and which provider offers the lowest price can be challenging 
for consumers, particularly when not provided with proper 
disclosures.\25\ In some cases, language barriers may further 
complicate consumers' ability to obtain and understand transaction 
information from providers and their agents.\26\
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    \25\ See CFPB, Report on Remittance Transfers 17-21 (July 20, 
2011); see also 77 FR 6194, 6199 (Feb. 7, 2012).
    \26\ See 77 FR 6194, 6199 (Feb. 7, 2012).
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    The Bureau believes that compliance with recent legislative and 
regulatory changes will significantly improve the predictability of 
remittances and provide consumers with better price information. 
Congress amended the EFTA in the Dodd-Frank Act.\27\ The Bureau then 
implemented the amendments to the EFTA by promulgating the Remittance 
Rule, which went into effect on October 28, 2013.\28\ The Remittance 
Rule created a comprehensive new system of consumer protections for 
remittance transfers sent by consumers in the United States to 
individuals and businesses in foreign countries. First, the amendments 
generally require that information be disclosed prior to and at the 
time of payment by the sender for the transfer.\29\ Second, under the 
Remittance Rule, consumers will generally have thirty minutes after 
making payment to cancel a transaction.\30\ Third, the Remittance Rule 
increases consumer protections when transfers go awry by requiring 
providers to investigate disputes and remedy certain types of 
errors.\31\ The Remittance Rule applies to any institutions that send 
remittance transfers in the normal course of their business, including 
banks, credit unions, money transmitters, broker-dealers, and others. 
The Bureau and prudential regulators can examine depository 
institutions and credit unions within their supervisory authority for 
compliance with Regulation E, including the new Remittance Rule.
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    \27\ Public Law 111-203, Sec.  1073, 124 Stat. 1376, 2060 
(2010).
    \28\ 77 FR 6194 (Feb. 7, 2012); 77 FR 40459 (July 10, 2012); 77 
FR 50244 (Aug. 20, 2012); 78 FR 6025 (Jan. 29, 2013); 78 FR 30662 
(May 22, 2013); 78 FR 49365 (Aug. 14, 2013) (codified at 12 CFR part 
1005, subpart B).
    \29\ Public Law 111-203, Sec.  1073(a)(4). 124 Stat. 1376, 2060 
(2010) (codified at 15 U.S.C. 1693o-1(a)); 12 CFR 1005.31-.32.
    \30\ Public Law 111-203, Sec.  1073(a)(4), 124 Stat. 1376, 2060 
(2010) (codified at 15 U.S.C. 1693o-1(d)(3)); 12 CFR 1005.34.
    \31\ Public Law 111-203, Sec.  1073(a)(4), 124 Stat. 1376, 2060 
(2010) (codified at 15 U.S.C. 1693o-1(d)); 12 CFR 1005.33.
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    Finalization of this Proposed Rule would bring nonbanks that are 
larger participants of the international money transfer market \32\ 
within the Bureau's supervisory jurisdiction, thereby promoting the 
Bureau's objective of enforcing Federal consumer financial law 
consistently without regard to whether a person is a depository 
institution.\33\ Supervision of larger participants of the 
international money transfer market would help to ensure that nonbank 
entities that provide a significant portion of the transactions to 
which the Remittance Rule applies are complying with these new and 
important consumer protections, as well as with other applicable 
requirements of Federal consumer financial law, including the 
prohibition on unfair, deceptive, or abusive acts or practices.
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    \32\ International money transfers are consumer financial 
products or services pursuant to the Dodd-Frank Act. See 12 U.S.C. 
5481(15)(A)(iv) (defining ``financial product or service'' to 
include ``engaging in deposit-taking activities, transmitting or 
exchanging funds, or otherwise acting as a custodian of funds or any 
financial instrument for use by or on behalf of a consumer''); 12 
U.S.C. 5481(5)(A) (defining ``consumer financial product or 
service'' to include financial products or services that are offered 
or provided for use by consumers primarily for personal, family, or 
household purposes); see also 12 U.S.C. 5481(15)(A)(v) (defining 
``financial product or service'' to include generally ``selling, 
providing, or issuing stored value or payment instruments,'' with 
specific exclusions); 12 U.S.C. 5481(15)(A)(vii) (defining 
``financial product or service'' to include generally ``providing 
payments or other financial data processing products or services to 
a consumer by any technological means,'' with specific exclusions).
    \33\ 12 U.S.C. 5511(b)(4).
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    The Bureau lacks precise data on the international money transfer 
market. However, available data sources, including public information 
and confidential State supervisory data provided by three States,\34\ 
enabled the

[[Page 5306]]

Bureau to conduct three analyses to gain a general understanding of the 
basic contours of this nonbank market. These analyses produced rough 
estimates of (1) the overall number of nonbanks that provide 
international money transfers; (2) the dollar volume and number of 
international money transfers market-wide; and (3) the dollar volume 
and number of international money transfers provided by nonbanks that 
provide at least 500,000, one million, or three million transactions 
per year.\35\
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    \34\ The Bureau based its market estimates primarily on 
confidential State supervisory data for the year 2012 that it 
received from California, New York, and Ohio pursuant to memoranda 
of understanding. From New York and Ohio, the Bureau received 
national figures for per-licensee dollar volume and number of 
transfers that aggregate international transfers, domestic 
transfers, and some other regulated transactions. The data received 
from California on per-licensee dollar volume and number of 
transfers include only outbound international transfers. Therefore, 
the type of data that California provided most closely matches the 
market activity defined in the Proposed Rule. However, the 
California data do not include national figures for individual 
entities; instead, the data only include transfers initiated in 
California. None of the data sets obtained from the States 
distinguish between transfers initiated by consumers and those 
initiated by businesses.
    In addition to the State data, the Bureau used the following 
sources: The FinCEN Money Services Business Registration List; 
public Web sites; CFPB market research; and the licensee lists from 
regulatory agencies in 47 States and the District of Columbia 
described below. The Bureau also used data on nonbank remittance use 
from the 2011 CPS's June 2011 Unbanked/Underbanked Supplement, which 
is available at http://thedataweb.rm.census.gov/ftp/cps_ftp.html 
and described at http://www.census.gov/prod/techdoc/cps/cpsjun11.pdf. The Bureau looked specifically at data for respondents 
who reported that they or someone in their household had gone to a 
nonbank to give or send money to relatives or friends living outside 
the United States at least once in the past 30 days (i.e., 
respondents who answered questions 20-22 positively and reported one 
or more instances in response to question 23). The Bureau sorted the 
responses by State using the Census State code (GESTCEN) and 
adjusted them to reflect each State's population using the CPS 
Supplement Person Weight (PWSUPWGT). The Bureau used the resulting 
figures to generate the following estimates of each State's share of 
all U.S. consumers living in households that had sent nonbank 
remittances in the last 30 days (``relative CPS shares''): Arkansas 
(0.17%); Alabama (0.89%); Arkansas (0.52%); Arizona (3.31%); 
California (22.70%); Colorado (0.97%); Connecticut (1.17%); District 
of Columbia (0.30%); Delaware (0.19%); Florida (8.37%); Georgia 
(3.73%); Hawaii (0.52%); Iowa (0.73%); Idaho (0.27%); Illinois 
(6.00%); Indiana (0.28%); Kansas (0.46%); Kentucky (0.16%); 
Louisiana (0.75%); Massachusetts (1.85%); Maryland (1.51%); Maine 
(0.08%); Michigan (0.21%); Minnesota (0.41%); Missouri (0.82%); 
Mississippi (0.10%); Montana (0.06%); North Carolina (2.91%); North 
Dakota (0.06%); Nebraska (0.25%); New Hampshire (0.04%); New Jersey 
(3.81%); New Mexico (0.62%); Nevada (1.35%); New York (8.49%); Ohio 
(1.48%); Oklahoma (1.30%); Oregon (0.51%); Pennsylvania (1.00%); 
Rhode Island (0.59%); South Carolina (0.25%); South Dakota (0.14%); 
Tennessee (0.44%); Texas (15.61%); Utah (0.57%); Virginia (1.20%); 
Vermont (0.03%); Washington (0.90%); Wisconsin (1.78%); West 
Virginia (0.03%); and Wyoming (0.08%). Thus, according to the 
Bureau's estimates, the three States from which it obtained 
confidential supervisory data (California, New York, and Ohio) 
together accounted for 32.7 percent of U.S. consumers who reported 
that their households had sent nonbank remittances in the last 30 
days in the 2011 CPS.
    \35\ The Bureau conducted entity-level analysis and produced 
highly approximated entity-by-entity estimates to inform its general 
understanding of the market and of the likely market coverage 
associated with potential activity thresholds. These entity-level 
approximations of dollar volume and number of transfers are not 
dispositive of whether the Bureau would ever seek to initiate 
supervisory activity or whether, in the event of a person's 
assertion that it is not a larger participant, the person would be 
found to be a larger participant under 12 CFR 1090.103.
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    For its first analysis, the Bureau reviewed State licensing 
information and estimated that approximately 340 nonbanks provide 
international money transfers.\36\ The Bureau's second analysis, an 
extrapolation of confidential supervisory data from California to 
generate nationwide estimates, indicates that the nonbank market of 
international money transfers, as defined here, accounted for roughly 
$50 billion transferred and 150 million individual transfers in 
2012.\37\
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    \36\ The following analysis will hereinafter be cited as ``State 
License Review.'' To arrive at the estimate that 340 nonbanks are 
international money transfer providers, the Bureau reviewed lists of 
licensees from 47 States and the District of Columbia. Most of the 
lists were publicly available online at the following addresses: 
Alaska Department of Commerce, Community, and Economic Development, 
http://www.dced.state.ak.us/bsc/money_service_businesses.html; 
Arizona Department of Financial Institutions, http://azdfi.gov/Consumers/Licensees/licenses.asp?list=MT&name=Money%20Transmitters; 
Arkansas Securities Department, http://www.securities.arkansas.gov/page/339/money-services; California Department of Business 
Oversight, http://www.dbo.ca.gov/Licensees/money_transmitters/money_transmitters_directory.asp; Colorado Division of Banking, 
http://www.dora.state.co.us/pls/real/bidS_Search.Search_Page; 
Connecticut Department of Banking, http://www.ct.gov/dob/cwp/view.asp?a=2233&q=297862&dobNAV_GID=1663; Delaware Office of the 
State Bank Commissioner, http://banking.delaware.gov/information/nondepsearch.shtml; Georgia Department of Banking and Finance, 
https://dbfweb.dbf.state.ga.us/WebCCData.html; Hawaii Department of 
Commerce and Consumer Affairs, http://cca.hawaii.gov/dfi/; Idaho 
Department of Finance, http://finance.idaho.gov/MoneyTransmitter/MoneyTransmitterLicense.aspx; Illinois Department of Financial and 
Profession Regulation, http://www.idfpr.com/dfi/ccd/ccd_licensees.asp#trans; Indiana Department of Financial Institutions, 
http://extranet.dfi.in.gov/dfidb/nondepcalist.aspx; Iowa Division of 
Banking, http://www.idob.state.ia.us/; State Bank Commissioner of 
Kansas, http://www.osbckansas.org/; Kentucky Department of Financial 
Institutions, http://www.kfi.ky.gov/Pages/default.aspx; Louisiana 
Office of Financial Institutions, http://www.ofi.state.la.us/soclist.htm; Maine Department of Professional and Financial 
Regulation, http://www.maine.gov/pfr/consumercredit/rosters/index.htm; Massachusetts Division of Banks, http://license.dob.state.ma.us/licenseelist.asp; Michigan Department of 
Insurance and Financial Services, http://www.dleg.state.mi.us/fis/ind_srch/ConsumerFinance/Search.asp; Minnesota Department of 
Commerce, http://www.commerce.state.mn.us/LicenseLookupMain.html; 
Mississippi Department of Banking and Consumer Finance, http://www.dbcf.state.ms.us/documents/lists/moneytransmitter.pdf; Missouri 
Division of Finance, http://finance.mo.gov/licenseesearch/; Nebraska 
Department of Banking and Finance, http://www.ndbf.ne.gov/soc/soclicensees.shtml; New Hampshire Banking Department, http://www.nh.gov/banking/consumer-credit/information.htm; New Jersey 
Department of Banking and Insurance, https://www20.state.nj.us/DOBI_LicSearch/bnkSearch.jsp; New York Department of Financial 
Services, http://www.dfs.ny.gov/banking/moneytransmitter.htm; North 
Carolina Commissioner of Banks, https://www.nccob.org/Online/MTS/MTSCompanyListing.aspx; North Dakota Department of Financial 
Institutions, http://www.nd.gov/dfi/regulate/reg/consumer.asp?list1=MT&sort2=city&city3=&name4=&Submit=Search; Ohio 
Department of Commerce, http://www.com.state.oh.us/default.aspx; 
Oklahoma Banking Department, http://www.ok.gov/banking/Money_Transmitter_Listing.html; Oregon Division of Finance and Corporate 
Securities, http://www4.cbs.state.or.us/ex/all/mylicsearch/index.cfm?fuseaction=main.show_main&group_id=20&profession_id=23&profession_sub_id=23000%20; Rhode Island Department of 
Business Regulation, http://www.dbr.state.ri.us/documents/divisions/banking/program_operations/List_of_Electronic_Money_Transfers.pdf; South Dakota Department of Labor and Regulation, 
http://dlr.sd.gov/banking/money_transmitters.aspx; Tennessee 
Department of Financial Institutions, http://www.tennessee.gov/tdfi/banking/Lic_MT.shtml; Texas Department of Banking, http://www.banking.state.tx.us/supreglic_ent.asp; Utah Department of 
Financial Institutions, http://www.dfi.state.ut.us/MonTrans.htm; 
Vermont Department of Financial Regulation, http://www.dfr.vermont.gov/banking/verify-license; Virginia Bureau of 
Financial Institutions, http://www.scc.virginia.gov/bfi/reg_inst/trans.pdf; Wisconsin Department of Financial Institutions, http://www.wdfi.org/fi/lfs/licensee_lists/Default.asp?Browse=SOC; Wyoming 
Division of Banking, https://sites.google.com/a/wyo.gov/banking/home/areas-of-regulation/money-transmitters/licensee-list. The 
Bureau obtained lists upon request from State agencies that do not 
publish this data but did not receive lists from Montana, New 
Mexico, or South Carolina because those States do not require 
licenses for money transmission. Approximately 500 entities were 
identified on these lists. Based on company-specific research 
regarding every entity identified in the lists, the Bureau estimated 
that about 340 entities either offered international money transfers 
to consumers in the United States or might offer such transfers. As 
with its other market estimates for this rulemaking, the Bureau 
emphasizes that the estimate of 340 international money transfer 
providers could be either high or low due to limitations in the 
available data. For instance, the estimate does not account for 
entities that may be operating without a license in any State. On 
the other hand, the estimate includes entities that the Bureau could 
not rule out as possible international money transfer providers, but 
some of these entities might not actually provide international 
money transfers.
    \37\ The analysis in this footnote will hereinafter be cited as 
``CA Extrapolation.'' The Bureau used the information from 
California in estimating market size because it includes only 
outbound international transfers. In conducting the extrapolation, 
the Bureau included entities that are among the 340 entities 
identified by the State License Review and that do not have a 
significant number of business-initiated transfers and aggregated 
their total reported transfers and dollars transmitted. The Bureau 
used the relative CPS share for California calculated in the manner 
described above to estimate the percentage of international money 
transfers from the United States that originate in California. The 
Bureau thus divided the California totals by California's relative 
CPS share (0.227) to obtain estimates of the total size of the 
nationwide international money transfer market. This extrapolation 
was augmented by substituting for one entity the estimate it 
provided of its remittance transfers in a comment letter submitted 
in response to a prior Bureau rulemaking because the definition of 
``remittance transfer'' closely aligns with the definition of 
``international money transfer'' in the Proposed Rule. These 
calculations resulted in the Bureau's estimate that the 
international money transfer market transferred $49 billion through 
152 million individual transfers in 2012.
    Using the 2011 CPS data to estimate market size may result in 
some imprecision. For instance, the questions in the 2011 CPS 
related to remittance use ask about transactions that differ 
somewhat from the definition of ``international money transfer'' in 
this Proposed Rule. Additionally, the Bureau's relative CPS share 
calculations are based on CPS questions that asked whether consumers 
in each State had used nonbank remittances, not how many such 
transactions were sent from a State or how much money was sent from 
a State. Thus, the Bureau's market size figures assume that 
California's share of transfers and dollar volume sent from the 
United States is the same as California's share of U.S. consumers 
who live in households that send such transfers.
    The data that the Bureau received from California also do not 
match perfectly the Proposed Rule's definition of ``international 
money transfers.'' Most significantly, the California data include 
some transactions initiated by businesses. The Bureau identified a 
few entities that the Bureau believes provide a significant number 
of business-initiated transfers, in addition to providing 
international money transfers initiated by consumers. The Bureau 
could not delineate between consumer-initiated and business-
initiated transfers for these entities and has excluded figures 
attributable to those entities from the California data because 
including them could result in a large overstatement of the volume 
of dollars transmitted in the international money transfer market. 
This exclusion does not, however, have a significant effect on the 
Bureau's estimate of total market transfers because even when all of 
these entities' transfers are included, the total nationwide 
transfer estimate stills round to roughly 150 million transfers. The 
Bureau notes that even with this exclusion of entities that send a 
significant amount of business-initiated transfers, the estimates of 
market size may be inflated by business-initiated transfers sent by 
other entities.
    Outside estimates suggest that the Bureau's estimate of total 
dollar volume, $49 billion, is reasonable. The Bureau of Economic 
Analysis estimates that the foreign-born population resident in the 
United States sent $36.5 billion in ``personal transfers'' to 
households abroad in 2012. Bureau of Econ. Analysis, Personal 
Transfers, 1992:I-2013:II, available at http://www.bea.gov/international/supplemental_statistics.htm. A private consulting 
firm estimates that in 2005, $42 billion in international transfers 
were made by money transmitters in the United States. KPMG LLP Econ. 
& Valuation Servs., 2005 Money Services Business Industry Survey 
Study for Financial Crimes Enforcement Network 5 (Sept. 26, 2005), 
available at http://www.fincen.gov/news_room/rp/reports/pdf/FinCEN_MSB_2005_Survey.pdf.
    A 2008 U.S. Census Bureau survey, in contrast, suggested that 
monetary transfers from U.S. households to family and friends abroad 
totaled approximately $12 billion in one year. Elizabeth M. Grieco 
et al., Who in the United States Sends and Receives Remittances? An 
Initial Analysis of the Monetary Transfer Data From the August 2008 
CPS Migration Supplement, U.S. Census Bureau Working Paper No. 87 
(Nov. 2010), available at http://www.census.gov/population/www/documentation/twps0087/twps0087.html. All of these estimates, like 
the Bureau's estimates here, are based on assumptions that could 
limit their accuracy. Further, the transfers that were considered in 
each of the estimates do not match the Bureau's proposed definition 
of ``international money transfer.'' Therefore, variation in the 
estimates should be expected.

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[[Page 5307]]

    The Bureau's third analysis developed entity-specific estimates of 
the number of international money transfers sent in 2012. Estimates 
were mostly derived using confidential supervisory data obtained from 
California, New York, and Ohio pursuant to memoranda of understanding. 
Using this analysis, the Bureau generated the following highly 
approximated estimates for the year 2012: (1) The highest tier of the 
market consists of about 10 nonbanks that each sent over 3 million 
international money transfers and together accounted for about three-
fourths of all international money transfers; (2) The second tier of 
the market consists of about 15 nonbanks that each sent between 1 and 3 
million international money transfers, accounting collectively for 
about one-sixth of all international money transfers; (3) Very few 
nonbanks sent between 500,000 and 1 million international money 
transfers, accounting collectively for about 1.5 percent of all 
international money transfers; and (4) The limited remaining market 
share is divided among a few hundred nonbanks that each sent less than 
500,000 transfers in 2012.\38\ These estimates do not include providers 
that are not licensed in California, New York, or Ohio, but based on 
market research and a review of licensing data the Bureau believes that 
most entities that provide over 500,000 international money transfers 
per year are licensed in at least one of those three States.\39\
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    \38\ The analysis listed in this footnote will hereinafter be 
referred to as ``Analysis of State Supervisory Data.'' The Bureau 
used confidential State supervisory data and other sources to 
estimate the 2012 market share, dollars transferred, and number of 
transfers of entities in the proposed market that are licensed in 
California, New York, and Ohio. Two different methodologies were 
used to generate estimates for entities, depending on the States to 
which the entity reported and the nature of its business.
    First, the Bureau used national figures reported to New York and 
Ohio to estimate an entity's number of transfers if the Bureau 
believed that the transaction figure for the entity reflected in the 
New York or Ohio data was likely to reflect only international money 
transfers. The assessment of whether a New York or Ohio figure for a 
given entity was likely to include any transactions beyond 
international money transfers was made based on FinCEN registration 
information and market research.
    Second, where California data were available, the Bureau used 
the California data to extrapolate an estimate of the national 
number of transfers for entities for which (1) no New York or Ohio 
information was available or (2) the New York or Ohio data included 
product offerings that are not international money transfers. To 
scale up the California figures to nationwide estimates, the Bureau 
first determined the States in which each entity operated based on 
FinCEN registration information. The Bureau estimated the percentage 
of U.S. international money transfers that originated in each State 
by calculating the relative CPS shares described above, and for each 
entity aggregated the relative CPS shares for all of the States in 
which the entity operated to determine the entity's cumulative CPS 
share. The Bureau then multiplied the transfers reported to 
California for each entity by the ratio of the entity's cumulative 
CPS share to California's relative CPS share to get a nationwide 
estimate. For example, if California's relative CPS share made up 
half of an entity's cumulative CPS share, the California data for 
that entity would be multiplied by 2. Where the results of this 
process generated a figure for any one entity that exceeded the 
number that the entity had reported to New York or Ohio, the Bureau 
used the lower figure because the Bureau assumed that the entity's 
actual number and dollar volume of international money transfers did 
not exceed the inclusive figures reported to New York or Ohio. The 
Bureau recognizes that this methodology assumes that an entity's 
market share is constant in all States of operation, which is an 
assumption that may result in an over- or under-estimation of a 
particular entity's national volume or of the number of entities 
that provide a given number of international money transfers. 
Further, use of the FinCEN registration information to determine 
States of operation could lead to inaccuracies to the extent that a 
money services business provides international money transfers in 
some States but not in other States in which it operates.
    The Bureau derived its estimates for one firm using information 
from a comment received in response to a previous rulemaking, as in 
the CA Extrapolation above. Additionally, in order to account for 
data limitations for certain entities that provide transactions that 
are not international money transfers, the Bureau did not estimate 
figures for possible international money transfer providers 
identified in the State License Review in two circumstances: First, 
because the Bureau could not differentiate business-initiated 
transactions from consumer-initiated transactions in the State 
licensing data it received, the Bureau excluded entities that 
appeared to provide a significant amount of business-initiated 
transactions. (Conversely, if an entity did not provide a 
significant amount of business-initiated transfers, the Bureau 
assumed that all transfers it provided were consumer-initiated.) 
Second, as mentioned above, the Bureau did not derive an estimate 
for an entity if it was not licensed in California and the Bureau 
believed that the transaction figure for the entity in the New York 
and Ohio data mixed international money transfers with other 
transactions. In all, there are 6 entities excluded for these 
reasons that reported over 1 million transfers to New York or Ohio 
or that accounted for over 1 million transfers when the California 
figure was scaled up. Given the over-inclusive nature of the figures 
reported to the States for these 6 entities, the Bureau has not 
derived estimates for these entities or included them or their 
transactions in its analysis, although some of these entities may be 
larger participants under the proposed threshold.
    Aside from these 6 entities, the Bureau derived per-firm 
estimates for firms in the California, New York, and Ohio data and, 
in doing so, identified 10 entities that sent over 3 million 
international money transfers, 23 entities that sent over 1 million 
international money transfers, and 26 entities that sent over 
500,000 international money transfers. Using the per-firm estimates 
and the overall market size estimate from the CA Extrapolation, the 
Bureau then estimated that: (1) The 10 entities with over 3 million 
transfers account for approximately 77 percent of market 
transactions, (2) The 23 entities with over 1 million transactions 
per year account for approximately 93 percent of market 
transactions, and (3) The 26 entities with over 500,000 transfers 
account for approximately 94 percent of market transactions. The 
Bureau recognizes that 94 percent may overestimate the combined 
market share of entities with over 500,000 transactions. For 
instance, the State License Review identified about 310 other 
entities that operate or may operate as international money transfer 
providers and, based on this estimate, such entities would together 
account for only 6 percent of transactions in the market. Although 
the Bureau's market share estimates are very inexact, it is 
nevertheless clear from the Bureau's analysis that firms providing 
over one million international money transfers per year account for 
the vast majority of transactions in the market.
    \39\ One rough indicator of the likelihood that an entity 
provides more than 500,000 international money transfers is the 
number of States in which the entity is licensed. More than three-
fourths of the California, New York, and Ohio licensees that were 
found to provide over 500,000 international money transfers per year 
in the Analysis of State Supervisory Data are licensed in more than 
10 States. At the same time, licensure in more than 10 States does 
not necessarily indicate that the entity provides more than 500,000 
international money transfers. For instance, the Bureau estimates 
that less than three-fifths of the 42 entities that are both 
licensed in more than 10 States and licensed in California, New 
York, or Ohio provide more than 500,000 international money 
transfers. In contrast, the Bureau's State License Review indicates 
that only 6 entities are licensed in more than 10 States but not 
licensed in California, New York, or Ohio. This suggests that the 
data received from California, New York, and Ohio are likely to 
include most of the entities that send over 500,000 international 
money transfers per year.
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    The Bureau is proposing at this time to define a nonbank market 
consisting solely of international money transfers. As explained above, 
such transfers present challenges to providers and consumers that 
distinguish international money transfers from other transactions, such 
as domestic money transfers. These challenges may include, for example, 
foreign exchange rates, foreign taxes, and legal, administrative, and 
language complexities related to the fact that the funds are 
transferred to a foreign country. Many international money transfers 
are subject to new protections under the Dodd-Frank Act and the 
Remittance Rule.\40\ The

[[Page 5308]]

Proposed Rule would enable the Bureau to supervise nonbanks that are 
larger participants of the international money transfer market to 
assess compliance with these new protections and to evaluate risks that 
arise when consumers send money abroad.
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    \40\ In light of the close similarity between the Remittance 
Rule's definition of ``remittance transfer'' and the Proposed Rule's 
international money transfer market, the Bureau expects that most 
transfers in the international money transfer market would be 
subject to the Remittance Rule. However, some transfers that would 
be in the international money transfer market under the Proposed 
Rule would not be ``remittance transfers.'' For instance, transfers 
of $15 or less are not be covered by the Remittance Rule. 12 CFR 
1005.30(e)(2)(i).
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Section 1090.107(a)--Market-Related Definitions

    Unless otherwise specified, the definitions in Sec.  1090.101 
should be used when interpreting terms in this Proposed Rule. The 
Proposed Rule would define additional terms relevant to the proposed 
international money transfer market. These terms would include 
``international money transfer,'' which delineates the scope of the 
identified market; ``designated recipient,'' ``international money 
transfer provider,'' ``sender,'' and ``State''; and ``aggregate annual 
international money transfers,'' which the Proposed Rule would use as 
the criterion for assessing larger-participant status.
    In drafting definitions in the Proposed Rule, the Bureau has used 
the definition of ``remittance transfer'' and related definitions from 
the Remittance Rule as a model because remittance transfers make up a 
very substantial portion of the market activity in the international 
money transfer market the Bureau is seeking to define. Additionally, 
the Remittance Rule definitions are familiar to industry and the 
Bureau. The Bureau has made adjustments to the Remittance Rule 
definitions as discussed below to reflect the distinct needs of this 
larger-participant rulemaking. These adjustments stem in part from the 
fact that the Remittance Rule imposes substantive consumer protection 
requirements, while the larger-participant rule differentiates larger 
participants from other participants in the international money 
transfer market in order to establish a supervisory program. Thus, in 
some instances, the Proposed Rule's definitions diverge from those of 
the Remittance Rule to account for the different regulatory purposes.
    The Bureau seeks comment on each of the definitions set forth in 
the Proposed Rule and any suggested additions, clarifications, 
modifications, or alternatives.
    Aggregate annual international money transfers. The Bureau proposes 
to use aggregate annual international money transfers as the criterion 
that would be used in assessing whether an entity is a larger 
participant of the international money transfer market. The proposed 
definition of ``aggregate annual international money transfers'' was 
informed by the method of calculating ``annual receipts'' used by the 
Bureau in prior larger-participant rulemakings, which in turn is 
modeled in part on the method used by the U.S. Small Business 
Administration (SBA) in calculating ``annual receipts'' to determine 
whether an entity is a small business.\41\ Proposed Sec.  1090.107(a) 
would define the term ``aggregate annual international money 
transfers'' as the ``annual international money transfers'' of a 
nonbank covered person, aggregated with the ``annual international 
money transfers'' of its affiliated companies, as calculated according 
to instructions set forth in the definition and discussed below.
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    \41\ 12 CFR 1090.104(a) (Consumer Reporting Rule); 12 CFR 
1090.105(a) (Debt Collection Rule); 13 CFR 121.104 (SBA).
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    Calculating annual international money transfers. Similar to the 
calculations in the consumer reporting and consumer debt collection 
larger-participant rules, ``annual international money transfers'' of a 
nonbank covered person would be calculated in one of two ways depending 
on how long a person has been in business.\42\ If the nonbank covered 
person has been in business for three or more completed calendar years, 
the Bureau would divide the total number of international money 
transfers provided by the nonbank covered person over the last three 
completed calendar years by three. If the nonbank covered person has 
been in business for less than three completed calendar years, the 
Bureau would calculate the total number of international money 
transfers provided by the nonbank covered person during the time that 
the nonbank covered person has been in business, divide by the total 
number of weeks the nonbank covered person has been in business, and 
multiply by 52. This calculation would provide a prorated figure that 
is comparable to the approach used for entities that have been in 
business for the entire three-year period.
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    \42\ 12 CFR 1090.104(a) (Consumer Reporting Rule); 12 CFR 
1090.105(a) (Debt Collection Rule).
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    Transfers involving agents. The proposed definition specifies how 
to count transfers provided with the assistance of an agent. The Bureau 
believes that agents play an important role in the proposed market for 
international money transfers. Under the Proposed Rule, the annual 
international money transfers of a nonbank covered person would include 
international money transfers in which an agent acts on that person's 
behalf. The annual international money transfers of a nonbank covered 
person would not include international money transfers in which another 
person provided the international money transfers and the nonbank 
covered person performed activities as an agent on behalf of that other 
person.\43\ In other words, an international money transfer provided by 
an international money transfer provider with the help of an agent 
acting on the provider's behalf would count towards the annual 
international money transfers of the provider but not the agent.
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    \43\ However, a nonbank covered person's aggregate annual 
international money transfers may include transfers in which the 
nonbank covered person acted as an agent on behalf of an affiliated 
company that provided the transfer. This is because such transfers 
would be included in the annual international money transfers of the 
affiliated company and a nonbank covered person's aggregate annual 
international money transfers would include the annual international 
money transfers of each of its affiliated companies due to the 
affiliate aggregation requirement discussed below.
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    For purposes of this part of the definition, an ``agent'' would 
include an agent or authorized delegate, as defined under State or 
other applicable law, or an affiliated company of a person that 
provides international money transfers when such agent, authorized 
delegate, or affiliated company acts for that person. The definition of 
``affiliated company'' is found in 12 CFR 1090.101.
    Including transactions conducted by an agent in calculating a 
provider's annual international money transfers is consistent with the 
Remittance Rule, which places liability on the remittance transfer 
provider for violations by an agent when the agent is acting for the 
provider.\44\ Not counting transactions conducted solely as an agent 
for a provider in assessing the agent's annual international money 
transfers is also consistent with the Bureau's determination that, for 
purposes of the Remittance Rule, agents acting on behalf of a 
remittance transfer provider are not, in doing so, themselves acting as 
remittance transfer providers.\45\ Although entities that act solely as 
agents would not normally be larger participants of the market under 
the Proposed Rule, the Bureau would have the authority to supervise 
service providers to larger participants of the

[[Page 5309]]

market.\46\ Accordingly, where an agent acts as a service provider to a 
larger participant, the Bureau would have the authority to supervise 
the agent's performance of services for the larger participant.\47\ In 
light of these considerations, the Bureau proposes to count 
transactions in which an agent acts on behalf of a provider towards the 
annual international money transfers of that provider, and not towards 
the annual international money transfers of the agent itself.
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    \44\ 15 U.S.C. 1693o-1(f); 12 CFR 1005.35. This is also 
consistent with the data obtained by the Bureau, which generally 
include transactions conducted by agents on behalf of a provider in 
the transaction total for the provider.
    \45\ See Official Interpretations to Regulation E, 12 CFR part 
1005, Supp. I, comment 30(f)-1.
    \46\ 12 U.S.C. 5514(e); see also 12 U.S.C. 5481(26)(A) (defining 
service provider).
    \47\ The Bureau also has the authority to supervise any nonbank 
covered person that it ``has reasonable cause to determine, by 
order, after notice to the covered person and a reasonable 
opportunity . . . to respond . . . is engaging, or has engaged, in 
conduct that poses risks to consumers with regard to the offering or 
provision of consumer financial products or services.'' 12 U.S.C. 
5514(a)(1)(C).
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    Affiliate aggregation. Under the Dodd-Frank Act, the activities of 
affiliated companies are to be aggregated for purposes of computing 
activity levels for rules--like this Proposed Rule--under 12 U.S.C. 
5514(a)(1).\48\ The ``aggregate annual international money transfers'' 
for each nonbank covered person would be the sum of the annual 
international money transfers of the nonbank covered person and the 
annual international money transfers of all affiliated companies. The 
annual international money transfers of each affiliated company would 
be calculated separately. For purposes of this calculation, each 
affiliated company would be treated as if it were an independent 
nonbank covered person. Accordingly, if the period of measurement for 
two affiliated companies differs because one affiliate has not been in 
business for at least three calendar years, the annual international 
money transfers of each entity would be calculated using the applicable 
period of measurement for each.
---------------------------------------------------------------------------

    \48\ 12 U.S.C. 5514(a)(3)(B).
---------------------------------------------------------------------------

    Paragraph (iii)(B) of the proposed definition of aggregate annual 
international money transfers sets forth the method of aggregating the 
annual international money transfers of a nonbank covered person and 
its affiliated companies when affiliation has started or ended within 
the nonbank covered person's period of measurement. As proposed, once a 
person is acquired by or acquires an affiliated company, the annual 
international money transfers from each affiliated company would be 
calculated for the entire period of measurement that is applicable to 
each affiliate, and then aggregated. The annual international money 
transfers of a formerly affiliated company would not be included in a 
nonbank covered person's aggregate annual international money transfer 
calculation if the affiliation ceased before the nonbank covered 
person's applicable period of measurement, but would be included for 
the full period of measurement if the affiliation ceased during the 
applicable period of measurement.
    Designated recipient. Proposed Sec.  1090.107(a) would define 
``designated recipient'' to include any person specified by the sender 
as the authorized recipient of an international money transfer to be 
received at a location in a foreign country. This proposed definition 
is based on the definition of ``designated recipient'' in the 
Remittance Rule,\49\ but replaces ``remittance transfer'' with 
``international money transfer'' and incorporates the larger-
participant definition of ``person'' from 12 CFR 1090.101. The Bureau 
intends the term ``designated recipient'' to be interpreted based on 
the interpretation of the term in the Remittance Rule, including its 
commentary,\50\ to the extent appropriate given the definitions' 
different regulatory contexts. For example, the Official 
Interpretations to Regulation E provide that a remittance transfer is 
to be received at a location in a foreign country if funds are to be 
received at a location physically outside of any State.\51\ The Bureau 
intends the same interpretation to apply to an international money 
transfer.
---------------------------------------------------------------------------

    \49\ 12 CFR 1005.30(c).
    \50\ See Official Interpretations to Regulation E, comment 
30(c).
    \51\ See Official Interpretations to Regulation E, comment 
30(c)-2.
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    International money transfer. Proposed Sec.  1090.107(a) would 
define the term ``international money transfer'' to mean the electronic 
transfer of funds requested by a sender that is sent by an 
international money transfer provider to a designated recipient. The 
term would apply regardless of whether the sender holds an account with 
the international money transfer provider, and regardless of whether 
the transaction also is an ``electronic fund transfer,'' as defined in 
Regulation E, 12 CFR 1005.3(b). The term would not include certain 
transfers related to the purchase or sale of a security or commodity 
that are excluded from the definition of ``electronic fund transfer'' 
under 12 CFR 1005.3(c)(4).
    The proposed definition of ``international money transfer'' tracks 
the Remittance Rule's definition of ``remittance transfer,'' \52\ 
except for two deviations. First, the Bureau has replaced the term 
``remittance transfer provider'' where it appears in 12 CFR 1005.30(e) 
with the term ``international money transfer provider.'' \53\
---------------------------------------------------------------------------

    \52\ 12 CFR 1005.30(e).
    \53\ Because an international money transfer provider must be a 
nonbank covered person, transfers are not international money 
transfers unless they are sent by a nonbank.
---------------------------------------------------------------------------

    Second, the Bureau is proposing to define ``international money 
transfer'' without regard to the amount of the transfer. By contrast, 
the Remittance Rule includes an exclusion for transfers of $15 or less 
\54\ because the Dodd-Frank Act's definition of ``remittance transfer'' 
does not include transfers ``in an amount that is equal to or lesser 
than the amount of a small-value transaction determined, by rule, to be 
excluded from the requirements under section 906(a) [of the EFTA].'' 
\55\ While the Dodd-Frank Act's definition of ``remittance transfer'' 
is applicable to the Remittance Rule, it is not applicable to the 
Bureau's authority to supervise larger participants in markets for 
consumer financial products or services. The Bureau believes that 
small-value transactions comprise part of the same market as larger 
transactions and, as discussed below, the number of international money 
transfers provided by an international money transfer provider reflects 
the extent of a provider's market participation. Moreover, as defined 
in the Proposed Rule, international money transfers are consumer 
financial products or services regardless of the size of a particular 
transfer. The Bureau is not aware of substantial administrative 
challenges that would make it difficult to include small-value 
transactions when counting the total number of international money 
transfers provided by a nonbank covered person. Indeed, the State 
supervisory data obtained by the Bureau for this rulemaking do not 
exclude transfers of $15 or less. Accordingly, the Bureau believes that 
it would be appropriate to count all transactions regardless of dollar 
amount in the criterion for what constitutes a larger participant of 
the proposed market.
---------------------------------------------------------------------------

    \54\ 12 CFR 1005.30(e)(2)(i).
    \55\ 15 U.S.C. 1693o-1(g)(2)(B). The Board of Governors of the 
Federal Reserve System previously determined by rule that financial 
institutions are not subject to the EFTA section 906(a) requirement 
to provide electronic terminal receipts for small-value transfers of 
$15 or less. See 12 CFR 1005.9(e).
---------------------------------------------------------------------------

    The Bureau intends the term ``international money transfer'' to be 
interpreted in the same manner as the term ``remittance transfer,'' 
with the terms ``electronic transfer of funds'' and ``sent by an 
international money transfer provider'' interpreted based on the 
interpretation of parallel terms in

[[Page 5310]]

Regulation E,\56\ to the extent appropriate given the definitions' 
different regulatory contexts. For example, the Bureau intends to 
interpret the ``international money transfer'' definition consistently 
with the discussion in comment 30(e)-3 to Regulation E of transactions 
that are and are not included within the definition of ``remittance 
transfer.'' \57\
---------------------------------------------------------------------------

    \56\ See Official Interpretations to Regulation E, comment 
30(e)-1, -2.
    \57\ Official Interpretations to Regulation E, comment 30(e)-3.
---------------------------------------------------------------------------

    International money transfer provider. Proposed Sec.  1090.107(a) 
would define the term ``international money transfer provider'' to mean 
any nonbank covered person that provides international money transfers 
for a consumer, regardless of whether the consumer holds an account 
with such person. Consistent with the Proposed Rule's definition of 
``international money transfer,'' the proposed definition of 
``international money transfer provider'' tracks the definition of 
``remittance transfer provider'' in the Remittance Rule closely,\58\ 
with the following exceptions. First, the proposed definition replaces 
``remittance transfer'' with ``international money transfer.'' Second, 
for consistency with the rest of the larger-participant rule, the 
proposed definition replaces the first reference to ``person'' with 
``nonbank covered person'' \59\ and incorporates the larger-participant 
rule's definition of ``consumer'' rather than the Regulation E 
definition. Third, the Bureau has not incorporated from the 
``remittance transfer provider'' definition the requirement that 
transfers be provided ``in the normal course of business.'' \60\ The 
Bureau believes that such a limitation is unnecessary in the definition 
of ``international money transfer provider'' because the Proposed Rule 
would not impose any new business conduct obligations and would require 
that an international money transfer provider have at least one million 
aggregate annual international money transfers to be a larger 
participant.
---------------------------------------------------------------------------

    \58\ 12 CFR 1005.30(f).
    \59\ ``Nonbank covered person'' includes (1) any person that 
engages in offering or providing a consumer financial product or 
service; and (2) any affiliate of a person that engages in offering 
or providing a consumer product or service if such affiliate acts as 
a service provider to such person, but does not include any persons 
described in 12 U.S.C. 5515(a) and 5516(a). 12 CFR 1090.101.
    \60\ 12 CFR 1005.30(f).
---------------------------------------------------------------------------

    The Bureau intends the commentary to the Remittance Rule \61\ to be 
used to guide interpretation of the term ``international money transfer 
provider'' in proposed Sec.  1090.107(a), to the extent appropriate 
given the definitions' different regulatory contexts.
---------------------------------------------------------------------------

    \61\ Official Interpretations to Regulation E, comment 30(f).
---------------------------------------------------------------------------

    Sender. Proposed Sec.  1090.107(a) would define the term ``sender'' 
to mean a consumer in a State who primarily for personal, family, or 
household purposes requests an international money transfer provider to 
send an international money transfer to a designated recipient. This 
proposed definition largely tracks the definition of ``sender'' in the 
Remittance Rule, but replaces ``remittance transfer'' with 
``international money transfer'' and ``remittance transfer provider'' 
with ``international money transfer provider.'' \62\ For consistency 
with the rest of the larger-participant rule, the Proposed Rule also 
incorporates the definition of ``consumer'' from the larger-participant 
rule rather than the definition from Regulation E. The Bureau intends 
the term ``sender'' to be interpreted in the same manner as the term 
``sender'' in the Remittance Rule,\63\ to the extent appropriate given 
the definitions' different regulatory contexts.
---------------------------------------------------------------------------

    \62\ 12 CFR 1005.30(g).
    \63\ Official Interpretations to Regulation E, comment 30(g).
---------------------------------------------------------------------------

    State. Proposed Sec.  1090.107(a) would define the term ``State'' 
to mean any State, territory, or possession of the United States; the 
District of Columbia; the Commonwealth of Puerto Rico; or any political 
subdivision thereof. This proposed definition is drawn from the 
definition of ``State'' in Regulation E subpart A \64\ and is intended 
to be interpreted accordingly.
---------------------------------------------------------------------------

    \64\ The Bureau has proposed adopting the definition in 
Regulation E with minor stylistic changes to the last clause of the 
definition. Cf. 12 CFR 1005.2(l) (`` `State' means any State, 
territory, or possession of the United States; the District of 
Columbia; the Commonwealth of Puerto Rico; or any political 
subdivision of the thereof in this paragraph (l).'') (emphasis 
added).
---------------------------------------------------------------------------

1090.107(b)--Test To Define Larger Participants
    Criterion. The Bureau has broad discretion in choosing a criterion 
for assessing whether a nonbank covered person is a larger participant 
of a market. For any specific market, there might be several criteria, 
used alone or in combination, that could be viewed as reasonable 
alternatives. For the international money transfer market, the Bureau 
is considering a number of criteria, including aggregate annual 
international money transfers, annual receipts, and annual transmitted 
dollar volume. The Bureau invites comment on these three possible 
criteria as well as suggestions for other criteria that commenters 
believe might be superior.
    Among these three, the Bureau proposes to use aggregate annual 
international money transfers as the criterion that establishes which 
entities are larger participants of the international money transfer 
market. The definitions of ``international money transfers'' and 
``aggregate annual international money transfers'' are discussed above. 
Aggregate annual international money transfers is an appropriate 
criterion because it measures in several meaningful ways the nonbank 
provider's level of participation in the proposed market and impact on 
consumers. First, the number of transfers reflects the extent of 
interactions an international money transfer provider has with 
consumers. Each transfer represents a single interaction with at least 
one consumer. Second, the number of transfers is a relatively durable 
metric in the face of changing market conditions such as exchange rates 
or inflation. Third, because international money transfer providers 
often are paid, in part, on a per-transfer basis, the number of 
transfers is related to the revenue received, another indicator of 
market participation.
    The Bureau anticipates that aggregate annual international money 
transfers would be relatively straightforward and objective for an 
international money transfer provider to calculate, as the occasion to 
do so arises. The Bureau expects that many market participants already 
assemble data generally related to the number of international 
transactions that they provide for internal business purposes, 
particularly because many providers are compensated on a per-transfer 
basis. Moreover, many providers are required to report transaction data 
to State regulators. These existing practices will help providers to 
estimate their aggregate annual international money transfers. The 
Bureau expects that some market participants may choose to track the 
number of remittance transfers they provide each year, which could 
provide another source for estimates of aggregate annual international 
money transfers because the definition of the criterion roughly tracks 
the definition of ``remittance transfer'' used in the Remittance Rule. 
Accordingly, the Bureau believes that many market participants 
interested in doing so already would have sufficient data to estimate 
whether their aggregate annual international money transfers exceed a 
given transaction threshold.
    The Bureau does not have precise and comprehensive data on the 
number of international money transfers provided by international money 
transfer

[[Page 5311]]

providers, as defined in this Proposed Rule, or on any of the other 
criteria that are being considered. However, as described above, the 
Bureau obtained confidential supervisory data from California, New 
York, and Ohio regulators, and has used the 2011 CPS, U.S. Department 
of the Treasury's Financial Crimes Enforcement Network (FinCEN) data 
listing the States in which individual money services businesses 
operate, entity-level data from public Web sites, CFPB market research, 
and licensee lists from regulatory agencies in 47 States and the 
District of Columbia. The Bureau believes that these data sources can 
adequately inform the decision of setting a threshold using the 
criterion of aggregate annual international money transfers.\65\
---------------------------------------------------------------------------

    \65\ Analysis of State Supervisory Data.
---------------------------------------------------------------------------

    Threshold. Under the Proposed Rule, a nonbank covered person would 
be a larger participant of the international money transfer market if 
the nonbank covered person has at least one million aggregate annual 
international money transfers. As stated above, the Bureau estimates 
the proposed threshold of one million aggregate annual international 
money transfers would bring within the Bureau's supervisory authority 
approximately 25 international money transfer providers.\66\
---------------------------------------------------------------------------

    \66\ Id. As noted above, this estimate is based on the Bureau's 
review of confidential licensing data from California, New York, and 
Ohio and does not include entities that are not licensed in any of 
those States. In addition to the other possible sources of error 
identified in the Analysis of State Supervisory Data, the Bureau has 
not assessed affiliations of market participants. The Bureau's 
estimates therefore would not include entities that might have less 
than a threshold number of annual international money transfers on 
their own but that would meet the threshold when their transfers are 
aggregated with their affiliated companies' transfers.
---------------------------------------------------------------------------

    The Bureau anticipates that the proposed aggregate annual 
international money transfer threshold of one million would be 
consistent with the objective of supervising market participants that 
represent a substantial portion of the international money transfer 
market and have a significant impact on consumers. According to the 
Bureau's estimates, the approximately 25 international money transfer 
providers that meet the proposed threshold collectively provided about 
140 million transfers in 2012, with a total volume of about $40 
billion.\67\ The Bureau estimates that these nonbanks are responsible 
for approximately 90 percent of transfers in the nonbank market for 
international money transfers.\68\ They consist of both entities that 
send money to most of the countries in the world and entities that 
focus on sending money to particular recipient countries or regions. 
The proposed threshold would subject to the Bureau's supervisory 
authority only entities that can reasonably be considered larger 
participants of the proposed market.\69\
---------------------------------------------------------------------------

    \67\ Id.
    \68\ Id.
    \69\ According to Bureau estimates, less than 10 percent of 
market participants would be larger participants using the proposed 
threshold. See Analysis of State Supervisory Data (approximately 25 
larger participants); State License Review (approximately 340 market 
participants).
---------------------------------------------------------------------------

    The Bureau is also considering a lower or higher threshold. For 
example, the Bureau estimates that a lower aggregate annual 
international money transfer threshold of 500,000 would allow the 
Bureau to supervise about 3 additional entities that together account 
for about 1.5 percent of transfers in this market.\70\ Alternatively, 
the Bureau estimates that an aggregate annual international money 
transfer threshold of three million would likely allow the Bureau to 
supervise the 10 largest participants of the proposed market, which 
collectively provide approximately three-fourths of the transfers in 
this market.\71\
---------------------------------------------------------------------------

    \70\ Analysis of State Supervisory Data.
    \71\ Id.
---------------------------------------------------------------------------

    In proposing a threshold, the Bureau has used a global-market 
approach that would apply a single threshold regardless of destination. 
The Bureau is also considering, as an alternative, establishing 
different thresholds for different destination regions. Setting a 
threshold for each region would allow the Bureau to set lower 
thresholds for entities that transfer funds to regions where the 
overall number of international money transfers is lower and higher 
thresholds for destination regions for which the overall number of 
international money transfers is higher. Entities that dominate the 
market for transfers to lower-volume destination regions might be more 
likely to meet the larger-participant test if the Bureau used a 
regional approach in setting the threshold. However, the Bureau is not 
aware of data sources that would support regional segmentation of this 
nature at this time. Additionally, even if data were available to 
support regional segmentation, the Bureau is concerned that such an 
approach would be very difficult to administer over time, as regional 
boundaries and volumes could shift in response to any number of factors 
including market forces and geopolitical events, which could lead to 
frequent adjustments to the market definitions and corresponding 
thresholds.

V. Request for Comments

    The Bureau invites comment on all aspects of this notice of 
proposed rulemaking and on the specific issues on which comment is 
solicited elsewhere herein, including on any appropriate modifications 
or exceptions to the Proposed Rule.

VI. Section 1022(b)(2)(A) of the Dodd-Frank Act

A. Overview

    The Bureau is considering potential benefits, costs, and impacts of 
the Proposed Rule.\72\ The Bureau requests comment on the preliminary 
analysis presented below as well as submissions of additional data that 
could inform the Bureau's analysis of the costs, benefits, and impacts 
of the Proposed Rule. In developing the Proposed Rule, the Bureau has 
consulted with or offered to consult with the Federal Trade Commission, 
the Board of Governors of the Federal Reserve System, the Federal 
Deposit Insurance Corporation, the Office of the Comptroller of the 
Currency, and the National Credit Union Administration, regarding, 
among other things, consistency with any prudential, market, or 
systemic objectives administered by such agencies.
---------------------------------------------------------------------------

    \72\ Specifically, 12 U.S.C. 5512(b)(2)(A) calls for the Bureau 
to consider the potential benefits and costs of a regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services, the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in 12 U.S.C. 5516, and the 
impact on consumers in rural areas. In addition, 12 U.S.C. 
5512(b)(2)(B) directs the Bureau to consult, before and during the 
rulemaking, with appropriate prudential regulators or other Federal 
agencies, regarding consistency with objectives those agencies 
administer. The manner and extent to which the provisions of 12 
U.S.C. 5512(b)(2) apply to a rulemaking of this kind that does not 
establish standards of conduct are unclear. Nevertheless, to inform 
this rulemaking more fully, the Bureau performed the analysis and 
consultations described in those provisions of the Dodd-Frank Act.
---------------------------------------------------------------------------

    The Proposed Rule defines a category of nonbanks that would be 
subject to the Bureau's nonbank supervision program pursuant to 12 
U.S.C. 5514(a)(1)(B). The proposed category would include ``larger 
participants'' of a market for ``international money transfers'' 
described in the Proposed Rule. Participation in this market would be 
measured on the basis of aggregate annual international money 
transfers. If a nonbank covered person's aggregate annual international 
money transfers (measured as a three-year moving average of the number 
of annual international money transfers, aggregated with the annual 
international money transfers of affiliated companies)

[[Page 5312]]

equaled or exceeded one million, it would be a larger participant. If 
an entity has been in business for less than three completed calendar 
years, its annual international money transfers would be the average 
amount of international money transfers per year over the course of its 
time in business.

B. Potential Benefits and Costs to Consumers and Covered Persons

    This analysis considers the benefits, costs, and impacts of the key 
provisions of the Proposed Rule against a baseline that includes the 
Bureau's existing rules defining larger participants in certain 
markets.\73\ Many States have supervisory programs relating to money 
transfers, which may consider aspects of consumer financial protection 
law. However, at present, there is no Federal program for supervision 
of nonbanks that are international money transfer providers with 
respect to consumer financial protection law. The Proposed Rule extends 
the Bureau's supervisory authority over international money transfer 
providers that are larger participants of the international money 
transfer market. This includes the authority to supervise for 
compliance with the EFTA and the Remittance Rule.
---------------------------------------------------------------------------

    \73\ The Bureau has discretion in any rulemaking to choose an 
appropriate scope of analysis with respect to potential benefits and 
costs and an appropriate baseline. The Bureau, as a matter of 
discretion, has chosen to describe a broader range of potential 
effects to inform the rulemaking more fully.
---------------------------------------------------------------------------

    The Bureau notes at the outset that limited data are available with 
which to quantify the potential benefits, costs, and impacts of the 
Proposed Rule. For example, although the Bureau has confidential 
supervisory data from California, New York, and Ohio from which it can 
estimate the number and size of international money transfer providers, 
the Bureau lacks detailed or comprehensive information about their 
rates of compliance or noncompliance with Federal consumer financial 
law and about the range of, and costs of, compliance mechanisms used by 
market participants.
    In light of these data limitations, this analysis generally 
provides a qualitative discussion of the benefits, costs, and impacts 
of the Proposed Rule. General economic principles, together with the 
limited data that are available, provide insight into these benefits, 
costs, and impacts. Where possible, the Bureau has made quantitative 
estimates based on these principles and data as well as on its 
experience of undertaking supervision in other markets.
    The discussion below describes three categories of potential 
benefits and costs. First, the Proposed Rule, if adopted, would 
authorize the Bureau's supervision of larger participants of the 
international money transfer market. Larger participants of the 
proposed market might respond to the possibility of supervision by 
changing their systems and conduct, and those changes might result in 
costs, benefits, or other impacts. Second, if the Bureau undertakes 
supervisory activity at specific international money transfer 
providers, those entities would incur costs from responding to 
supervisory activity, and the results of these individual supervisory 
activities might also produce benefits and costs. Third, the Bureau 
analyzes the costs that might be associated with entities' efforts to 
assess whether they would qualify as larger participants under the 
rule.
1. Benefits and Costs of Responses to the Possibility of Supervision
    The Proposed Rule would subject larger participants of the 
international money transfer market to the possibility of Bureau 
supervision. That the Bureau would be authorized to undertake 
supervisory activities with respect to a nonbank covered person who 
qualified as a larger participant would not necessarily mean the Bureau 
would in fact undertake such activities regarding the covered person in 
the near future. Rather, supervision of any particular larger 
participant as a result of this rulemaking would be probabilistic in 
nature. For example, the Bureau would examine certain larger 
participants on a periodic or occasional basis. The Bureau's decisions 
about supervision would be informed, as applicable, by the factors set 
forth in 12 U.S.C. 5514(b)(2), relating to the size and transaction 
volume of individual participants, the risks their consumer financial 
products and services pose to consumers, the extent of State consumer 
protection oversight, and other factors the Bureau may determine are 
relevant. Each entity that believed it qualified as a larger 
participant would know that it might be supervised and might gauge, 
given its circumstances, the likelihood that the Bureau would initiate 
an examination or other supervisory activity.
    The prospect of potential supervisory activity could create an 
incentive for larger participants to allocate additional resources and 
attention to compliance with Federal consumer financial law, 
potentially leading to an increase in the level of compliance. They 
might anticipate that by doing so (and thereby decreasing risk to 
consumers), they could decrease the likelihood of their actually being 
subject to supervisory activities as the Bureau evaluated the factors 
outlined above. In addition, an actual examination would be likely to 
reveal any past or present noncompliance, which the Bureau could seek 
to correct through supervisory activity or, in some cases, enforcement 
actions. Larger participants might therefore judge that the prospect of 
supervision increases the potential consequences of noncompliance with 
Federal consumer financial law, and they might seek to decrease that 
risk by taking steps to identify and cure or mitigate any 
noncompliance.
    The Bureau believes it is likely that many market participants 
would increase compliance in response to the Bureau's supervisory 
activity authorized by the Proposed Rule. However, because finalization 
of the Proposed Rule itself would not require any international money 
transfer provider to alter its performance of international money 
transfers, any estimate of the amount of increased compliance would be 
both an estimate of current compliance levels and a prediction of 
market participants' behavior in response to a final rule. The data 
that the Bureau currently has do not support a specific quantitative 
estimate or prediction. But, to the extent that international money 
transfer providers allocate resources to increasing their compliance in 
response to the Proposed Rule, that response would result in both 
benefits and costs.\74\
---------------------------------------------------------------------------

    \74\ Another approach to considering the benefits, costs, and 
impacts of the Proposed Rule would be to focus almost entirely on 
the supervision-related costs for larger participants and omit a 
broader consideration of the benefits and costs of increased 
compliance. As noted above, the Bureau has, as a matter of 
discretion, chosen to describe a broader range of potential effects 
to inform the rulemaking more fully.
---------------------------------------------------------------------------

a. Benefits From Increased Compliance
    Increased compliance with consumer financial laws by larger 
participants in the international money transfer market would be 
beneficial to consumers who send international money transfers. The 
number of American consumers who could potentially be affected is 
significant. As noted above, data from the 2011 CPS show that more than 
4 million U.S. households had used nonbanks to send money abroad to 
friends and family in the preceding year.\75\ Increasing the rate of 
compliance with Federal consumer financial laws would benefit consumers 
and the consumer financial market by providing more of the protections 
mandated by those laws.
---------------------------------------------------------------------------

    \75\ 2011 CPS Report 32, 142-43.
---------------------------------------------------------------------------

    The EFTA and the Remittance Rule offer substantial consumer 
protections

[[Page 5313]]

for international money transfers that are also remittance transfers. 
Together, the EFTA and the Remittance Rule clarify the remittance 
process for consumers by requiring the provision of standardized 
disclosures about pricing as well as increased consumer protections 
when transfers do not go as planned. For consumers, this should 
increase the transparency of remittance prices and facilitate dispute 
resolution when errors occur.
    More broadly, the Bureau would be examining for compliance with 
other Federal consumer financial laws, which would include examining 
for whether larger participants of the international money transfer 
market engage in unfair, deceptive, or abusive acts or practices 
(UDAAPs).\76\ Conduct that does not violate an express prohibition of 
another Federal consumer financial law may nonetheless constitute a 
UDAAP.\77\ To the extent that any international money transfer provider 
is currently engaged in any UDAAPs, the cessation of the unlawful act 
or practice would benefit consumers. International money transfer 
providers might improve policies and procedures in response to possible 
supervision in order to avoid engaging in UDAAPs.
---------------------------------------------------------------------------

    \76\ 12 U.S.C. 5531.
    \77\ The CFPB Supervision and Examination Manual provides 
further guidance on how the UDAAP prohibition applies to supervised 
entities and is available at http://www.consumerfinance.gov/guidance/supervision/manual.
---------------------------------------------------------------------------

    The possibility of supervision also may help make incentives to 
comply with Federal consumer financial laws more consistent between the 
likely larger participants and banks, which are already subject to 
Federal supervision with respect to Federal consumer financial laws. 
Although some nonbanks are already subject to State supervision, 
introducing the possibility of Federal supervision could encourage 
nonbanks that are likely larger participants to devote additional 
resources to compliance. It could also help ensure that the benefits of 
Federal oversight reach consumers who do not have ready access to bank-
provided international transfers. In 2011, approximately one-sixth of 
individuals who sent money abroad to friends and family through a 
nonbank did not have a bank account.\78\
---------------------------------------------------------------------------

    \78\ Bureau estimate based on 2011 CPS data, which is available 
at http://thedataweb.rm.census.gov/ftp/cps_ftp.html and described 
at http://www.census.gov/prod/techdoc/cps/cpsjun11.pdf.
---------------------------------------------------------------------------

b. Costs of Increased Compliance
    To the extent that nonbank larger participants would decide to 
increase resources dedicated to compliance in response to the 
possibility of increased supervision, the entities would bear any 
direct cost of any changes to their systems, protocols, or personnel. 
Any such increase in costs could be passed on in part to consumers. 
Whether and to what extent entities would increase resources dedicated 
to compliance and/or pass those costs to consumers would depend not 
only on the entities' current practices and the changes they decide to 
make, but also on market conditions. The Bureau lacks detailed 
information with which to predict what portion of any cost of increased 
compliance would be borne by international money transfer providers or 
passed on to consumers. When or if such a cost were borne by consumers, 
consumers might respond by changing the frequency or amount of 
international money transfers sent.
    In considering any potential price effect of the Proposed Rule, it 
is important to take into account the fact that nonbanks below the 
larger-participant threshold would not be subject to supervision as a 
result of this rule. Because their costs would be unaffected by the 
Proposed Rule, their pricing should also not be affected. To the extent 
that nonbank larger participants raise their prices in response to this 
rule, small international money transfer providers could potentially 
seem attractive relative to larger participants. This potential effect 
could reduce the likelihood that larger participants would choose to 
increase their prices in response to the Proposed Rule.
2. Benefits and Costs of Individual Supervisory Activities
    In addition to the responses of market participants anticipating 
supervision, the possible consequences of the Proposed Rule would 
include the responses to and effects of individual examinations or 
other supervisory activity that the Bureau might conduct in the 
international money transfer market.
a. Benefits of Supervisory Activities
    Supervisory activity could provide several types of benefits. For 
example, as a result of supervisory activity, the Bureau and an entity 
might uncover deficiencies in the entity's policies and procedures. The 
Bureau's examination manual calls for the Bureau generally to prepare a 
report of each examination, to assess the strength of the entity's 
compliance mechanisms, and to assess the risks the entity poses to 
consumers, among other things. The Bureau would share examination 
findings with the entity because one purpose of supervision is to 
inform the entity of problems detected by examiners. Thus, for example, 
an examination might find evidence of widespread noncompliance with 
Federal consumer financial law, or it might identify specific areas 
where an entity has inadvertently failed to comply. These examples are 
only illustrative of the kinds of information an examination might 
uncover.
    Detecting and informing entities about such problems should be 
beneficial to consumers. When the Bureau notifies an entity about risks 
associated with an aspect of its activities, the entity is expected to 
adjust its practices to reduce those risks. That response may result in 
increased compliance with Federal consumer financial law, with benefits 
like those described above. Or it may avert a violation that would have 
occurred had Bureau supervision not detected the risk promptly. The 
Bureau may also inform entities about risks posed to consumers that 
fall short of violating the law. Action to reduce those risks would 
also be a benefit to consumers.
    Given the obligations international money transfer providers have 
under Federal consumer financial law and the existence of efforts to 
enforce such law, the results of supervision also may benefit 
international money transfer providers under supervision by detecting 
compliance problems early. When an entity's noncompliance results in 
litigation or an enforcement action, the entity must face both the 
costs of defending its actions and the penalties for noncompliance, 
including potential liability for damages to private plaintiffs. The 
entity must also adjust its systems to ensure future compliance. 
Changing practices that have been in place for long periods of time can 
be expected to be relatively difficult because they may be severe 
enough to represent a serious failing of an entity's systems. 
Supervision may detect flaws at a point when correcting them would be 
relatively inexpensive. Catching problems early can, in some 
situations, forestall costly litigation. To the extent early correction 
limits the amount of consumer harm caused by a violation, it can help 
limit the cost of redress. In short, supervision might benefit 
international money transfer providers under supervision by, in the 
aggregate, reducing the need for other more expensive activities to 
achieve compliance.\79\
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    \79\ Further potential benefits to consumers, covered persons, 
or both might arise from the Bureau's gathering of information 
during supervisory activities. The goals of supervision include 
informing the Bureau about activities of market participants and 
assessing risks to consumers and to markets for consumer financial 
products and services. The Bureau may use this information to 
improve regulation of consumer financial products and services and 
to improve enforcement of Federal consumer financial law, in order 
to better serve its mission of ensuring consumers' access to fair, 
transparent, and competitive markets for such products and services. 
Benefits of this type would depend on what the Bureau learns during 
supervision and how it uses that knowledge. For example, because the 
Bureau would examine a number of covered persons in the 
international money transfer market, the Bureau would build an 
understanding of how effective compliance systems and processes 
function in that market.

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[[Page 5314]]

b. Costs of Supervisory Activities
    The potential costs of actual supervisory activities would arise in 
two categories. The first would involve any costs to individual 
international money transfer providers of increasing compliance in 
response to the Bureau's findings during supervisory activity and to 
supervisory actions. These costs would be similar in nature to the 
possible compliance costs, described above, that larger participants in 
general might incur in anticipation of possible supervisory actions. 
This analysis will not repeat that discussion. The second category 
would be the cost of supporting supervisory activity.
    Supervisory activity may involve requests for information or 
records, on-site or off-site examinations, or some combination of these 
activities. For example, in an on-site examination, Bureau examiners 
generally contact the entity for an initial conference with management. 
That initial contact is often accompanied by a request for information 
or records. Based on the discussion with management and an initial 
review of the information received, examiners determine the scope of 
the on-site exam. While on-site, examiners spend some time in further 
conversation with management about the entity's policies, procedures, 
and processes. The examiners also review documents, records, and 
accounts to assess the entity's compliance and evaluate the entity's 
compliance management system. As with the Bureau's other examinations, 
examinations of nonbank larger participants in the international money 
transfer market could involve issuing confidential examination reports 
and compliance ratings. The Bureau's examination manual describes the 
supervision process and indicates what materials and information an 
entity could expect examiners to request and review, both before they 
arrive and during their time on-site.
    The primary cost an entity would face in connection with an 
examination would be the cost of employees' time to collect and provide 
the necessary information. If the Proposed Rule is adopted, the 
frequency and duration of examinations of any particular entity would 
depend on a number of factors, including the size of the entity, the 
compliance or other risks identified, whether the entity has been 
examined previously, and the demands on the Bureau's supervisory 
resources imposed by other entities and markets. Nevertheless, some 
rough estimates may be useful to provide a sense of the magnitude of 
potential staff costs that entities might incur.
    The cost of supporting supervisory activity may be calibrated using 
prior Bureau experience in supervision. The Bureau considers its 
nonbank payday lender examinations as a reasonable proxy for the 
duration and labor intensity of potential international money transfer 
provider examinations. Although there are many differences, the nonbank 
payday lending market is more like the nonbank market for international 
money transfers than other nonbank markets the Bureau currently 
supervises because both markets involve point-of-sale transactions 
involving similar dollar amounts.
    The average duration of the on-site portion of Bureau nonbank 
payday exams is approximately 8 weeks.\80\ Assuming that each exam 
requires 2 weeks of preparation time by international money transfer 
provider staff prior to the exam as well as on-site assistance by staff 
throughout the duration of the exam, the Bureau assumes that the 
typical examination in this nonbank market would require 10 weeks of 
staff time. The Bureau has not suggested that counsel or any particular 
staffing level is required during an examination. However, for purposes 
of this analysis, the Bureau assumes, conservatively, that an entity 
might dedicate the equivalent of one full-time compliance officer and 
one-tenth of a full-time attorney to the exam. The average hourly wage 
of a compliance officer in a nonbank entity that operates in activities 
related to credit intermediation is $31.53, and the average hourly wage 
of a lawyer in the same industry is $77.52.\81\ Assuming that wages 
account for 67.1 percent of total compensation,\82\ the total labor 
cost of an examination would be about $23,500.\83\ The Bureau estimates 
that the cost for an entity that sends 1 million transfers per year, 
with an average transfer amount of $200, would be approximately 0.18 
percent of total revenue from such transfers for that year.\84\ Note 
that this is a conservative estimate in several respects because it 
reflects revenue only from this line of business and uses a relatively 
small average international money transfer size as well as the minimum 
number of transactions that a larger participant would provide.\85\
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    \80\ This estimate was derived using confidential supervisory 
Bureau data on the duration of on-site payday loan examinations at 
nonbanks. For purposes of this calculation, the Bureau counted its 
payday loan examinations for which the on-site portion had been 
completed. The Bureau counted only the on-site portion of an 
examination, which included time during the on-site period of the 
examination that examiners spent examining the entity while off-site 
for holiday or other travel considerations. However, the Bureau did 
not count time spent scoping an examination before the on-site 
portion of the examination or summarizing findings or preparing 
reports of examination afterwards.
    \81\ Bureau of Labor Statistics Occupational Employment 
Statistics (OES) Survey, May 2012 estimates for NAICS code 522300, 
available at http://www.bls.gov/oes/current/naics4_522300.htm.
    \82\ Bureau of Labor Statistics series CMU2025220000000D, 
Quarters 2 and 3 2012, available at http://data.bls.gov/timeseries/CMU2025220000000D?data_tool=XGtable.
    \83\ Assuming that individuals are compensated for 40 hour work 
weeks, this is calculated as follows: [(0.1*77.52+31.53)/
0.671]*40*10.
    \84\ This assumption is based on research on remittances 
suggesting that the average price of sending money abroad from the 
United States is roughly 6.42 percent of the total amount sent. 
World Bank, Remittance Prices Worldwide, An Analysis of Trends in 
the Average Total Cost of Migrant Remittance Services (Sept. 2013) 
11 (percentage is average price of $200 transfers in Q3 2013), 
available at https://remittanceprices.worldbank.org/sites/default/files/RPW_Report_Sep2013.pdf. The Bureau measured proportion of 
revenues using the following equation: Proportion of 
revenues={[(0.1*77.52+31.53)/0.671]*40*10{time} /
{1,000,000*200*0.0642{time} .
    \85\ A $200 average transfer size is a conservative estimate. 
Review of the CA Extrapolation figures ($49 billion total market 
dollar volume and 152 million total market transfers) suggests that 
the average transaction size is just over $300. For entities 
reporting to California, New York, and Ohio that sent over 500,000 
transfers, the Analysis of State Supervisory Data suggests that the 
average transfer size is about $300. Using a $300 average transfer 
size, the cost of supervision would be approximately 0.12 percent of 
total revenues for an entity that sends 1 million transfers per 
year. Other sources from 2005 and 2008 also suggest a higher average 
transfer size. Ole E. Andreassen, Remittance Service Providers in 
the United States: How Remittance Firms Operate and How They 
Perceive Their Business Environment 15-16 (June 2006), available at 
http://siteresources.worldbank.org/INTPAYMENTREMMITTANCE/Resources/BusinessmodelsFSEseries.pdf ($550); Bendixen & Amandi, Survey of 
Latin American Immigrants in the United States 23 (Apr. 30, 2008), 
available at idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35063818 ($325).
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    The overall costs of supervision in the international money 
transfer market would depend on the frequency and extent of Bureau 
examinations. Neither the Dodd-Frank Act nor the Proposed Rule 
specifies a particular level or

[[Page 5315]]

frequency of examinations.\86\ The frequency of examinations would 
depend on a number of factors, including the Bureau's understanding of 
the conduct of market participants and the specific risks they pose to 
consumers; the responses of larger participants to prior examinations; 
and the demands that other markets make on the Bureau's supervisory 
resources. These factors can be expected to change over time, and the 
Bureau's understanding of these factors may change as it gathers more 
information about the market through its supervision and by other 
means. The Bureau therefore declines to predict, at this point, 
precisely how many examinations in the international money transfer 
market it would undertake in a given year.
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    \86\ The Bureau declines to predict at this time precisely how 
many examinations it would undertake at each international money 
transfer provider if the Proposed Rule is adopted. However, if the 
Bureau were to examine each entity that would be a larger 
participant of the international money transfer market under the 
Proposed Rule once every two years, the expected annual labor cost 
of supervision per larger participant would be approximately $11,750 
(the cost of one examination, divided by two). This would account 
for 0.09 percent of the international money transfer revenue of an 
entity that sends one million transfers in a year, assuming an 
average transaction amount of $200.
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3. Costs of Assessing Larger-Participant Status
    The larger-participant rule does not require nonbanks to assess 
whether they are larger participants. However, the Bureau acknowledges 
that in some cases international money transfer providers might decide 
to incur costs to assess whether they qualify as larger participants or 
potentially dispute their status.
    Larger-participant status would depend on a nonbank's aggregate 
annual international money transfers. As noted above, the Bureau 
expects that many market participants already assemble general data 
related to the number of international transactions that they provide 
for internal business purposes. Moreover, many providers are required 
to report transaction data to State regulators. Further, the definition 
of the criterion proposed in this rule roughly tracks the definition of 
``remittance transfer'' used in the Remittance Rule, and the Bureau 
expects that some market participants may choose to track the number of 
remittance transfers they provide each year. These preexisting 
activities could assist entities in estimating whether they are larger 
participants.
    To the extent that some international money transfer providers do 
not already know whether their transactions exceed the threshold, such 
nonbanks might, in response to the Proposed Rule, develop new systems 
to count their transactions in accordance with the proposed definition 
of ``international money transfer.'' The data that the Bureau currently 
has do not support a detailed estimate of how many international money 
transfer providers would engage in such development or how much they 
would spend. Regardless, international money transfer providers would 
be unlikely to spend significantly more on specialized systems to count 
transactions than it would cost to be supervised by the Bureau as 
larger participants. It bears emphasizing that even if expenditures on 
a counting system successfully proved that an international money 
transfer provider was not a larger participant, it would not 
necessarily follow that the entity could not be supervised. The Bureau 
can supervise specific international money transfer providers whose 
conduct the Bureau determines, pursuant to 12 U.S.C. 5514(a)(1)(C), 
poses risks to consumers. Thus, an international money transfer 
provider choosing to spend significant amounts on an accounting system 
directed toward the larger-participant test could not be sure it would 
not be subject to Bureau supervision notwithstanding those expenses. 
The Bureau therefore believes very few if any international money 
transfer providers would undertake such expenditures.
4. Consideration of Alternatives
    The Bureau is considering two major alternatives: Using a measure 
other than number of international money transfers to define the market 
and choosing a different threshold to define larger participants.
    First, the Bureau is considering various other criteria for 
assessing larger-participant status, including annual receipts from 
international money transfers and annual transmitted dollar volume. 
Calculating either of those metrics may be more involved than 
calculating the number of international money transfers. If so, a given 
nonbank might face greater costs for evaluating or disputing whether it 
qualified as a larger participant should the occasion to do so to 
arise. The Bureau expects that for both annual receipts and annual 
transmitted dollar volume it could choose a suitable threshold for 
which the number of larger participants, among those nonbanks 
participating in the market today, would be the same as the number of 
nonbanks expected to qualify under the Proposed Rule. Consequently, the 
costs, benefits, and impacts of supervisory activities should not 
depend on which criterion the Bureau uses.
    The second possible alternative the Bureau is considering is 
selecting a different threshold. One alternative would be to set the 
threshold substantially higher--for example at three million aggregate 
annual international money transfers--and cover only the very largest 
nonbanks in the market. Under such an alternative, the benefits of 
supervision to both consumers and covered persons would likely be 
reduced because entities impacting a substantial number of consumers 
and/or consumers in important market segments might be omitted. On the 
other hand, the potential costs to covered persons would of course be 
reduced if fewer entities were defined as larger participants and thus 
fewer were subject to the Bureau's supervisory authority on that basis. 
Conversely, lowering the threshold would subject more entities to the 
Bureau's supervisory authority, but the total direct costs for actual 
examination activity might not change substantially because the Bureau 
conducts exams on a risk basis and would not necessarily examine more 
entities even if the rule's coverage were broader.\87\
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    \87\ Another alternative under consideration is setting 
different thresholds for each region. As alluded to earlier, 
international money transfer submarkets tend to be segmented by 
corridor: Individuals wishing to send remittances to El Salvador, 
for example, cannot easily substitute transfers to Moldova. One 
could define a larger-participant threshold for different geographic 
regions so that the entities that provide the most transfers to a 
given region could be supervised. Given the paucity of data on 
region-specific transactions, however, any definition of these 
thresholds might be more difficult to establish and to administer 
over time.
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C. Potential Specific Impacts of the Proposed Rule

1. Depository Institutions and Credit Unions With $10 Billion or Less 
in Total Assets, As Described in Dodd-Frank Act Section 1026
    The Proposed Rule would not apply to depository institutions or 
credit unions of any size. However, it might have some impact on 
depository institutions or credit unions that provide international 
transfers. For example, if the relative price of nonbanks' 
international money transfers were to increase due to increased costs 
related to supervision, then depository institutions or credit unions 
of any size might benefit by the relative change in costs. These 
effects, if any, would likely be small.

[[Page 5316]]

2. Impact of the Provisions on Consumers in Rural Areas
    Because the rule applies uniformly to international money transfers 
of both rural and non-rural consumers, the rule should not have a 
unique impact on rural consumers. The Bureau is not aware of any 
evidence suggesting that rural consumers have been disproportionately 
harmed by international money transfer providers' failure to comply 
with Federal consumer financial law. The Bureau would welcome any 
comments that may provide information related to how international 
money transfers affect rural consumers.

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small not-for-profit organizations.\88\ The RFA defines a ``small 
business'' as a business that meets the size standard developed by the 
Small Business Administration pursuant to the Small Business Act.\89\
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    \88\ 5 U.S.C. 601 et seq. The term ```small organization' means 
any not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field, unless an agency 
establishes [an alternative definition after notice and comment].'' 
Id. at 601(4). The term ```small governmental jurisdiction' means 
governments of cities, counties, towns, townships, villages, school 
districts, or special districts, with a population of less than 
fifty thousand, unless an agency establishes [an alternative 
definition after notice and comment].'' Id. at 601(5). The Bureau is 
not aware of any small governmental units or small not-for-profit 
organizations to which the Proposed Rule would apply.
    \89\ 5 U.S.C. 601(3). The Bureau may establish an alternative 
definition after consultation with SBA and an opportunity for public 
comment.
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    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) of any proposed rule subject to 
notice-and-comment rulemaking requirements, unless the agency certifies 
that the proposed rule would not have a significant economic impact on 
a substantial number of small entities.\90\ The Bureau also is subject 
to certain additional procedures under the RFA involving the convening 
of a panel to consult with small entity representatives prior to 
proposing a rule for which an IRFA is required.\91\
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    \90\ 5 U.S.C. 605(b).
    \91\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    The undersigned certifies that the Proposed Rule, if adopted, would 
not have a significant economic impact on a substantial number of small 
entities and that an IRFA is therefore not required.
    The Proposed Rule would define a class of international money 
transfer providers as larger participants of the international money 
transfer market and thereby authorize the Bureau to undertake 
supervisory activities with respect to those nonbanks. The Proposed 
Rule adopts a threshold for larger-participant status of one million 
aggregate annual international money transfers. Under what the Bureau 
believes is the most relevant SBA threshold, an international money 
transfer provider is a small business only if its annual receipts are 
below $19 million.\92\ Of the approximately 25 potential larger 
participants identified by the Bureau among the California, New York, 
and Ohio licensees, the Bureau estimates there are approximately 10 
providers with annual receipts under $19 million.\93\
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    \92\ 13 CFR 121.201 (NAICS code 522390). The Bureau believes 
that larger participants in the proposed international money 
transfer market are likely to be classified in North American 
Industry Classification System (NAICS) code 522390, ``Other 
Activities Related to Credit Intermediation.'' NAICS lists ``[m]oney 
transmission services'' as an index entry corresponding to this 
code. See http://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=522390&search=2012NAICSSearch. The Bureau welcomes 
comment on whether this or any other NAICS code is most appropriate 
for this market. The Bureau is aware that a nonbank larger 
participant of the proposed international money transfer market 
might be classified in a NAICS code other than the one that includes 
money transmission services. For example, some larger participants 
may be classified under NAICS code 522320 for financial transactions 
processing, reserve, and clearing house activities. NAICS lists 
``[e]lectronic funds transfer services'' as an index entry 
corresponding to code 522320. See http://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=522320&search=2012.
    \93\ The Bureau was able to access revenue figures of potential 
larger participants from New York's confidential licensing data as 
well as the Nationwide Mortgage Licensing System & Registry (NMLS), 
a centralized licensing database used by many States to manage their 
license authorities with respect to various consumer financial 
industries, including money transmitters. The NMLS provided the 
Bureau with information regarding specific entities pursuant to a 
memorandum of understanding. The revenue figures that the Bureau 
used did not include annual receipts of affiliates, as those terms 
are defined by the SBA. 13 CFR 121.104 (annual receipts); 13 CFR 
121.103 (affiliation). As mentioned above, the Bureau identified 23 
entities among the California, New York, and Ohio licensees that it 
believes would be larger participants under the Proposed Rule. 9 of 
these entities had less than $19 million in receipts according to 
information from the NMLS and confidential licensing data from New 
York. As explained above in the Analysis of State Supervisory Data, 
there are an additional 6 entities for which the Bureau was not able 
to estimate international money transfers because the data received 
include a significant amount of business-initiated transactions or 
include other transactions that are not likely to constitute 
international money transfers. The Bureau believes it is possible 
that some of these 6 entities would be larger participants. Of the 6 
entities, the Bureau estimates that 1 has annual receipts under $19 
million based on data from the NMLS and New York. Although there may 
be additional larger participants that the Bureau has not identified 
because they are not licensed in California, New York, or Ohio, it 
is unlikely that there are many more small entities that would be 
subject to the Proposed Rule because as explained above the Bureau's 
market research suggests that most entities that provide one million 
or more transfers per year are licensed in at least one of those 
three States.
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    According to the 2007 Economic Census, there are more than 5,000 
small firms in the North American Industry Classification System 
(NAICS) industry the Bureau believes is applicable to most 
international money transfer providers.\94\ Therefore, according to the 
Bureau's analysis, this rule would impact less than one percent of the 
small businesses in the industry.\95\ For these reasons, the Proposed 
Rule would not have a significant impact on a substantial number of 
small entities.\96\
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    \94\ U.S. Census Bureau, 2007 Economic Census, American 
FactFinder, Finance and Insurance: Subject Series--Estab. and Firm 
Size: Summary Statistics by Revenue Size of Firms for the United 
States, available at http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2007_US_52SSSZ4&prodType=table (NAICS code 522390).
    \95\ The Bureau believes that this a conservative estimate for 
the most applicable NAICS code (522390) because the Bureau estimates 
that only about 10 larger participants licensed in California, New 
York, or Ohio would be small businesses, accounting for 
approximately 0.2 percent of the roughly 5,000 small firms within 
NAICS code 522390. Alternatively, the Bureau notes that the SBA's 
size standard for NAICS code 522320, ``Financial Transactions 
Processing, Reserve, and Clearing House Activities,'' is $35.5 
million in annual receipts. 13 CFR 121.201 (NAICS code 522320). 
Using that size standard, the Bureau estimates that 12 of the 23 
entities that the Bureau identified as potential larger participants 
among the California, New York, and Ohio licensees might be small 
businesses. Among the 6 additional entities mentioned above for 
which the Bureau could not estimate transaction amounts, the Bureau 
estimates that 2 would be small businesses under this standard based 
on receipts information from NMLS and New York. There could be 
additional small entities that are larger participants but were not 
included in the foregoing estimates because they are not licensed in 
California, New York, or Ohio, but as noted above it is unlikely 
that there would be many such entities. According to the 2007 
Economic Census, there are at least 1,800 small firms classified 
under NAICS code 522320. U.S. Census Bureau, 2007 Economic Census, 
American FactFinder, Finance and Insurance: Subject Series--Estab. 
and Firm Size: Summary Statistics by Revenue Size of Firms for the 
United States, available at http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2007_US_52SSSZ4&prodType=table (NAICS code 522320). Therefore, under the 
Bureau's analysis, this Proposed Rule would impact less than 1 
percent of the small businesses in the industry under that NAICS 
code.
    \96\ Because the Bureau has not assessed the affiliations of 
potential larger participants, the Bureau's estimate of small entity 
larger participants may include some larger participants that are 
not in fact small entities due to the receipts of their affiliates, 
which are counted towards an entity's annual receipts for purposes 
of assessing whether an entity is a small business concern under the 
SBA's definition. 13 CFR 121.104(d). Conversely, it is possible 
there are additional small firms that have less than one million 
annual international money transfers on their own, but that would 
meet the proposed threshold of one million transfers when their 
transfers are aggregated with their affiliated companies' transfers. 
However, the Bureau anticipates no more than a very few such cases, 
if any, in the international money transfer market.

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[[Page 5317]]

    Additionally, and in any event, the Bureau believes that the 
Proposed Rule would not result in a ``significant impact'' on any small 
entities that could be affected. The rule does not itself impose any 
business conduct obligations. As previously noted, when and how often 
the Bureau would in fact engage in supervisory activity, such as an 
examination, with respect to a larger participant (and, if so, the 
extent of such activity) would depend on a number of considerations, 
including the Bureau's allocation of resources and the application of 
the statutory factors set forth in 12 U.S.C. 5514(b)(2). Given the 
Bureau's finite supervisory resources, and the range of industries over 
which it has supervisory responsibility for consumer financial 
protection, when and how often a given international money transfer 
provider would be supervised is uncertain. Moreover, when supervisory 
activity occurred, the costs that would result from such activity are 
expected to be minimal in relation to the overall activities of an 
international money transfer provider.\97\
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    \97\ As discussed above, the Bureau estimates that the cost of 
participating in an examination would be approximately 0.18 percent 
of annual revenue from international money transfers for an entity 
at the threshold of 1 million aggregate annual international money 
transfers.
---------------------------------------------------------------------------

    Finally, 12 U.S.C. 5514(e) authorizes the Bureau to supervise 
service providers to nonbank covered persons encompassed by 12 U.S.C. 
5514(a)(1), which includes larger participants. Because the Proposed 
Rule would not address service providers, effects on service providers 
need not be discussed for purposes of this RFA analysis. Even were such 
effects relevant, the Bureau believes that it would be very unlikely 
that any supervisory activities with respect to the service providers 
to the approximately 25 larger participants of the proposed nonbank 
market for international money transfers would result in a significant 
economic impact on a substantial number of small entities.\98\
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    \98\ The Bureau is aware that there are likely thousands of 
service providers to potential larger participants of the 
international money transfer market. Many of these service providers 
might be considered to be in the industry with NAICS code 522390 for 
other activities related to credit intermediation. As discussed 
above, according to the 2007 Economics Census, there are more than 
5,000 small firms in the industry. Other service providers may be 
classified in NAICS code 522320 for financial transactions 
processing, reserve, and clearing house activities, which includes 
at least 1,800 small firms. Still other service providers, including 
many retail agents, are likely to be considered in other NAICS codes 
corresponding to the service provider's primary business activities. 
As noted above with respect to larger participants themselves, the 
frequency and duration of examinations that would be conducted at 
any particular service provider would depend on a variety of 
factors. However, it is implausible that in any given year the 
Bureau would conduct examinations of a substantial number of the 
more than 5,000 small firms in NAICS code 522390, the more than 
1,800 small firms in NAICS code 522320, or the small firm service 
providers that happen to be in any other NAICS code. Moreover, the 
impact of supervisory activities, including examinations, at such 
small firm service providers can be expected to be less, given the 
Bureau's exercise of its discretion in supervision, than at the 
larger participants themselves.
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    Accordingly, the undersigned certifies that the Proposed Rule would 
not have a significant economic impact on a substantial number of small 
entities.

VIII. Paperwork Reduction Act

    The Bureau has determined that this Proposed Rule would not impose 
any new recordkeeping, reporting, or disclosure requirements on covered 
entities or members of the public that would constitute collections of 
information requiring approval under the Paperwork Reduction Act, 44 
U.S.C. 3501, et seq.

List of Subjects in 12 CFR Part 1090

    Consumer protection, Credit.

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau proposes to 
amend 12 CFR Part 1090, subpart B, to read as follows:

PART 1090--DEFINING LARGER PARTICIPANTS OF CERTAIN CONSUMER 
FINANCIAL PRODUCT AND SERVICE MARKETS

0
1. The authority citation for part 1090 continues to read as follows:

    Authority: 12 U.S.C. 5514(a)(1)(B); 12 U.S.C. 5514(a)(2); 12 
U.S.C. 5514(b)(7)(A); and 12 U.S.C. 5512(b)(1).

0
2. Add a new Sec.  1090.107 to subpart B to read as follows:


Sec.  1090.107  International Money Transfer Market.

    (a) Market-related definitions. As used in this subpart:
    Aggregate annual international money transfers means the sum of the 
annual international money transfers of a nonbank covered person and 
the annual international money transfers of each of the nonbank covered 
person's affiliated companies.
    (i) Annual international money transfers. Annual international 
money transfers of a nonbank covered person are calculated as follows:
    (A) Annual international money transfers of a nonbank covered 
person that has been in business for three or more completed calendar 
years means the international money transfers provided by the nonbank 
covered person over its three most recently completed calendar years 
divided by three.
    (B) Annual international money transfers of a nonbank covered 
person that has been in business for less than three completed calendar 
years means the international money transfers provided by the nonbank 
covered person for the period the nonbank covered person has been in 
business divided by the number of weeks the nonbank covered person has 
been in business, multiplied by 52.
    (ii) Agents.
    (A) Annual international money transfers of a nonbank covered 
person include international money transfers in which another person 
acts as an agent on behalf of the nonbank covered person.
    (B) Annual international money transfers of a nonbank covered 
person do not include international money transfers in which another 
person provided the international money transfers and the nonbank 
covered person performed activities as an agent on behalf of that other 
person.
    (C) For purposes of this paragraph (ii), agent means an agent or 
authorized delegate, as defined under State or other applicable law, or 
affiliated company of a person that provides international money 
transfers when such agent, authorized delegate, or affiliated company 
acts for that person.
    (iii) Aggregating the annual international money transfers of 
affiliated companies.
    (A) The annual international money transfers of each affiliated 
company of a nonbank covered person are calculated separately in 
accordance with paragraphs (i) and (ii) of this definition, treating 
the affiliated company as if it were an independent nonbank covered 
person for purposes of the calculation. This may result in using a 
different period of measurement to calculate an affiliated company's 
annual international money transfers. Thus, for example, if an 
affiliated company has been in business for a period of less than three 
years, the affiliated company's international money transfers are to be 
annualized in accordance with paragraph (i)(B) of this definition even 
if the nonbank covered

[[Page 5318]]

person with which it is affiliated has been in business for three or 
more completed calendar years.
    (B) The annual international money transfers of a nonbank covered 
person and the annual international money transfers of its affiliated 
companies are aggregated as follows:
    (1) If a nonbank covered person has acquired an affiliated company 
or been acquired by an affiliated company during the applicable period 
of measurement, the annual international money transfers of the nonbank 
covered person and the affiliated company are aggregated for the entire 
period of measurement (not just the period after the affiliation 
arose).
    (2) The annual international money transfers of a formerly 
affiliated company are not included if affiliation ceased before the 
applicable period of measurement as set forth in paragraph (i) of this 
definition. The annual international money transfers of a formerly 
affiliated company are aggregated for the entire period of measurement 
if affiliation ceased during the applicable period of measurement as 
set forth in paragraph (i) of this definition.
    Designated recipient means any person specified by the sender as 
the authorized recipient of an international money transfer to be 
received at a location in a foreign country.
    International money transfer means the electronic transfer of funds 
requested by a sender to a designated recipient that is sent by an 
international money transfer provider. The term applies regardless of 
whether the sender holds an account with the international money 
transfer provider, and regardless of whether the transaction is also an 
electronic fund transfer, as defined in Sec.  1005.3(b) of this Title. 
The term does not include any transfer that is excluded from the 
definition of ``electronic fund transfer'' under Sec.  1005.3(c)(4) of 
this Title.
    International money transfer provider means any nonbank covered 
person that provides international money transfers for a consumer, 
regardless of whether the consumer holds an account with such person.
    Sender means a consumer in a State who primarily for personal, 
family, or household purposes requests an international money transfer 
provider to send an international money transfer to a designated 
recipient.
    State means any State, territory, or possession of the United 
States; the District of Columbia; the Commonwealth of Puerto Rico; or 
any political subdivision thereof.
    (b) Test to define larger participants. A nonbank covered person is 
a larger participant of the international money transfer market if the 
nonbank covered person has at least one million aggregate annual 
international money transfers.

    Dated: January 23, 2014.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2014-01606 Filed 1-30-14; 8:45 am]
BILLING CODE 4810-AM-P