The Consumer Financial Protection Bureau issued a report to the President and congressional committees regarding remittance transfers and remittance exchange rates. The report covers transparency and disclosure to consumers of exchange rates used in remittance standards, and examines the potential for using remittance histories to enhance consumers’ credit scores. The report was required by Section 1073(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Remittance transfers are electronic funds transfers from senders in the United States to recipients in foreign countries. Each year, U.S. consumers send billions of dollars to family members and others through remittance transfers.
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Today, the Federal Reserve Board issued a final rule restricting certain fees and expiration dates applicable to gift certificates, store gift cards and other prepaid or stored value cards. The rule only applies to certificates and cards sold to consumers. Certain loyalty, award and promotional gift cards are exempt from the new restrictions.
- Limits on Fees: In general, the rule prohibits dormancy, inactivity or service fees unless three conditions are satisfied: (i) there must have been no activity under the certificate or card within the one-year period before imposition of the fee; (ii) only one such fee may be imposed in any calendar month; and (iii) the seller or issuer must clearly and conspicuously disclose such fees on the certificate or card itself, and must provide those disclosures to the purchaser prior to purchase. The rule also prohibits fees for replacing an expired certificate or card if the underlying funds have not expired.
- Limits on Expiration: The rule distinguishes between the expiration date of the certificate or card, on the one hand, and the expiration date of the underlying funds. The expiration date of any funds underlying the certificate or card must be at least five years after the issuance of a gift card or the last addition of funds to a stored value card. The Fed now requires issuers of gift certificates and cards to establish policies and procedures intended to provide consumers with a reasonable opportunity to purchase a card or certificate which expires, if at all, at least five years from purchase.
- Disclosures Required: The rule mandates clear and conspicuous disclosures on the certificate or card itself of (i) any expiration date of funds underlying a certificate or card, (ii) the difference between the expiration date for the underlying funds and the card or certificate itself, and (iii) any issuance or cash-out fees imposed on the certificate or card.
The new rule becomes effective August 22, 2010. It implements certain portions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 and amends the Federal Reserve Board’s existing Regulation E.
Yesterday, the Federal Reserve issued a simple guide explaining the new rules regarding ATM and debit overdrafts. Under the new rule, bank customers will have to opt in to have certain overdrafts covered.
Despite the efforts of banks and the government to get the word out on this change, you know there will be a lot of people who “don’t get the memo.” We expect to see many disgruntled consumers come August when the regulations take effect.
Rather than covering overdrafts, the banks will decline them and the consumer will be hit with bounce fees from his creditor and potential embarrassment from having an empty account. Look for the Law of Unintended Consequences to apply. In the meantime, study the guide and even the rules to make sure this does not happen to you.