Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Pub. L. No , 1021, 124 Stat [hereinafter Dodd-Frank].

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1 Comment to the Bureau of Consumer Financial Protection Docket No. CFPB RIN 3170-AA25 Defining Larger Participants of the International Money Transfer Market April 1, 2014 Appleseed and the ten Appleseed Centers 1 listed below appreciate the opportunity to respond to the request of the Bureau of Consumer Financial Protection ( Bureau ) for comments on the proposed regulation (the Proposed Rule ) defining larger participants in the international money transfers market. Section 1024 of the Dodd-Frank Act provides that the Bureau may supervise nonbank covered persons in the residential mortgage, private education lending, and payday lending markets; for other markets, the Bureau may only supervise a larger participant. 2 We commented on the Bureau s Notice seeking comment on development of a rule for supervision of larger participants. 3 We were delighted to see some of our thoughts incorporated into the Proposed Rule. Financial access for low-income individuals has been an important part of Appleseed s work. In particular, Appleseed has taken a leading role on consumer protections for remittance transactions in the United States. To that end, we have supported the passage of state 4 and federal laws 5 regulating the money transmission industry as well as conducted research and issued reports on the money transmission industry. 6 In the Proposed Rule, 7 only international money transfers would be covered, and larger participants in the international money 1 Appleseed is a network of 17 public interest justice centers in the United States and Mexico that uncovers and corrects social injustices through legal, legislative, and market-based, structural reform. These comments are submitted on behalf of Appleseed headquarters and each individual Appleseed Center listed below. 2 Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Pub. L. No , 1021, 124 Stat [hereinafter Dodd-Frank] Fed. Reg (June 29, 2011). Appleseed s comment may be viewed at Protection-Bureau1.pdf 4 Tex. Fin. Code Ann Dodd-Frank See Appleseed s Financial Access Program: Publications and Resources, available at 7 Proposed 12 C.F.R th Street, NW, 11th Floor Washington, DC

2 transfer market are defined as nonbank covered persons that have at least one million aggregate annual international money transfers. Aggregate annual international money transfers would be calculated by adding the annual international money transfers of the nonbank covered person and each of the nonbank covered person s affiliated companies. Annual would be an annual average over the most recent three years of business and if the covered nonbank person has been in business less than three years, then annual would be defined as the average weekly number of transfers while the person has been in business, multiplied by 52. The proposed rule also sets out a formula for calculating the business volume of affiliates of the covered person. The covered person would no longer be subject to the rule until two years from the first day of the tax year in which the person last met the million aggregate transfer threshold. 8 A proposed covered person would be given the opportunity to submit information to the Bureau that the proposed covered person believes demonstrates that it does not fall within the definition of a larger participant. 9 According to its research, the Bureau estimates that 25 money transfer companies would be covered. While we generally support the proposed rule, we still have concerns that using only one criterion for defining larger participants in the international money transfer market (i.e., the number of transfers) does not take into account regional and local markets that may have international money transfer companies with transaction amounts below the threshold yet, for that region and locality, they capture a large percentage of the market share of the transfers in that community. We also believe that all publicly traded money transfer companies should be subject to Bureau supervision, regardless of transaction volume. In addition, we believe that any final rule should cover all money transfers, not just international transfers. I. Appleseed believes that all money transfers should be included, not just international money transfers. Appleseed has been a long-time advocate of greater transparency in international money transfers, as well as a system of oversight and remedies, and was honored to be consulted during the debate on what became section 1073 of the Dodd Frank Act that required more transparency and greater uniformity of disclosures for international money transmitters. However, this Proposed Rule is derived from a different authority of the Bureau that of instituting federal oversight over persons offering certain specified consumer financial products or services. The Bureau has been given the important task of seeking to further consumer financial protection for all U.S. consumers C.F.R C.F.R

3 Indeed, in its Vision Statement on its website the Bureau states: OUR VISION If we achieve our mission, then we will have encouraged the development of a consumer finance marketplace: Where customers can see prices and risks up front and where they can easily make product comparisons; In which no one can build a business model around unfair, deceptive, or abusive practices; That works for American consumers, responsible providers, and the economy as a whole. While Appleseed acknowledges that international money transfers present unique challenges not faced by those persons sending domestic transfers, such as exchange rate calculation, we respectfully submit that it is just as important to protect persons in the United States sending solely domestic transfers. Many of them also may be sending money home to their impoverished communities in the United States by working at a job out of town. Those persons no less deserve the benefit of the Bureau s federal oversight and including all U.S. consumers would be in keeping with the Bureau s Vision Statement. Moreover, even though the new federal remittance regulations do not apply to purely domestic transfers, in almost all states money transfer companies are required to be licensed and supervised by state regulatory authorities and must comply with applicable state regulations, on a state-by-state basis, as do money transfer companies that send international transfers. We thus recommend that the final rule cover all domestic funds transfers consistent with practices used in the international money transfer market and that domestic funds transfers be included in the calculation of larger participant. Domestic transfers often impact a similar population to international transfers. Let us give an example of the importance of this recommendation from Texas Appleseed s research. Texasbased migrant farm workers traveling outside of Texas to work the fields use domestic transfers to send money back to their families in the South Texas Rio Grande Valley and other parts of the state. And migrant fishing workers those who work on the fishing boats in Alaska in the summers use domestic transfers as well. From a pricing perspective, domestic money transfers can be more expensive than international transfers. II. Appleseed believes that criteria other than just straight transaction volume should govern the definition of larger participant. Appleseed appreciates that it was difficult to obtain precise data to determine the threshold for larger participant and the commentary accompanying the proposed rule sets out in great detail how you went about reaching the million annual transaction threshold. But, as is pointed

4 out in the commentary, market estimates were derived primarily from confidential supervisory information provided by California, New York and Ohio. Appleseed understands that it is difficult to arrive at the right balance in determining which companies would be subject to your supervision, and we agree that the top 25 that you have identified as having annual volume of a million or more transfers should be subject to supervision. However, we respectfully submit that two other categories of companies should be added. First, all publicly traded funds transfer companies, to the extent not already covered in the 25 that you identified, should be added to those subject to your supervision. We realize that there might not be any at this time outside of the 25 already designated to be supervised by the Bureau, but in the event that other new companies come on the publicly traded market, they should be included. Second, while we understand your reasoning for deciding on the annual million transaction threshold, we respectfully submit that dominance in regional and local markets should also be considered. In our comments to the June 29, 2011, notice we recommended that while the Bureau should supervise large, nationwide money transmitters, it also should supervise major regional/local money transmitters that dominate certain markets but lack a nationwide presence. An annual million transaction threshold may well be sufficient in the larger states as a line to draw in determining your supervisory reach. However, we believe that there are states, perhaps from where you could not obtain sufficient data, where the Bureau should take into account other factors in determining whether or not there are additional money transfer companies that also should come within your supervisory purview. We had recommended that the Bureau consider using criteria that represents a company s market share (e.g. revenues or volume of transactions) relative to the population density of the area in which it operates. For example, a money transfer company located in a highly urbanized area doing 300,000 transactions annually would not be considered a major participant in that market. But a money transfer company in a more rural area doing the same volume of transactions could be the predominant transmitter in the community; and the closer to a monopoly a company comes, the better the chance it has to control the market and charge high prices. Thus, the Bureau should account for relative market share when determining whether a money transmitter is a larger participant, subject to the Bureau s supervision.

5 III. Conclusion Thank you again for allowing us the opportunity to present these suggestions for your consideration. If you have any questions concerning these comments or if we may otherwise be of assistance in connection with this matter, please do not hesitate to contact Betsy Cavendish, Executive Director, at or or Annette LoVoi, Director of Financial Access and Asset Building, at or Sincerely, Betsy Cavendish, President Annette LoVoi, Director, Financial Access Alabama Appleseed Center for Law and Justice Chicago Appleseed Fund for Justice Connecticut Appleseed Georgia Appleseed Hawai i Appleseed Center for Law and Economic Justice Kansas Appleseed Massachusetts Appleseed Center for Law and Justice Nebraska Appleseed South Carolina Appleseed Legal Justice Center Texas Appleseed