Schumer, Senators Launch New Plan To Bring Down Remittance Costs- NY Immigrants Pay Millions In Fees To Send Money Home
Immigrants living in the US send $30 billion home annually via wire transfers but fees reach 30% in some cases and are not always disclosed to consumers
New measure requires companies to disclose service fees, commissions, surcharges, prevailing exchange rates and the exact amount of money the recipient will receive in the foreign currency
US Senators Charles E. Schumer joined a coalition of Senators lead by Paul Sarbanes of Maryland to unveil a new plan to require the companies that provide international money wire transfer services to disclose the hidden costs they charge for those transactions. Immigrants living in the United States send an estimated $30 billion home every year via wire transfer and up to $4 billion of that money is syphoned off in fees and transaction costs. Many money wire companies charge high fees for their services, and many do not disclose these fees to the users of the service.
"Immigrants sending money back home is in the best tradition of the United States, and as much of this money as possible should be available to support families," said Schumer, a leading member of the Senate Banking Committee. "Hardworking immigrants are losing meaningful amounts of money from high fees that they weren't even told about. Immigrants should know that their hardearned dollars are going to support their relatives and not into the pockets of remittance operators."
The majority of Latin American and Caribbean immigrants residing in the United States send remittances to their families and communities to assist with financial hardships at home. The majority of the individuals who send monthly remittances earn less than $25,000 a year and send an average of $200 a month, or nearly ten percent of their income. These immigrants pay fees to send money, fees to receive money, and commissions and rate variations in the currency exchange process. The result is that the amount wired from the United States may lose 1520 percent and up to 30 percent of its original value.
The International Remittance Consumer Protection Act, which is being sponsored by Senator Paul Sarbanes of Maryland and cosponsored by Schumer, requires money wire companies to disclose to consumers the true costs of sending money back home. It protects consumers in the event of transfer error and is designed to increase options and information available to those sending money. Specifically, the International Remittance Consumer Protection Act of 2004 would:
" Require money wire transmitters to disclose total amount of currency tendered by the consumer; the total amount of currency that will be sent to the recipient in the foreign country (denominated in the foreign currency of the receiving country); and the total remittance transfer cost including all transfer and exchange rate fees in a single dollar amount; " Require money wire transmitters to disclose these items both in English and in the language principally used by the business to advertise its services if that language is other than English; " Require the US Department of Treasury to publish a daily exchange rate for all foreign currencies on the Treasury website to serve as the base exchange rate from which all remittance providers would calculate the exchange rate fee so that consumers are better informed when searching for a money wire transmitter; " Amends the Federal Credit Union Act to allow credit unions to provide remittance transfers and to cash checks and money orders for persons in the field of membership, whether or not they are actually members of the credit union. Credit unions often offer significantly lower costs for international money transfers, money orders and check cashing services; " Set up a system for the consumer to recover money lost in a transfer error. Available remedies include refunds and transferring the disputed amount with no additional cost. " Require the GAO to study and analyze fees, disclosures and other practices at money wire services. " Protect grocery stores, nonprofit and community groups who are host to money wire transmitters at their facilities from liability so that the transmitters are ultimately responsible for all of their transactions. This will make it easier for these groups to provide access to the money wire services for the community.
The Senators said that many wire transfer companies aggressively target immigrant communities, often advertising low fee or no fee rates for international transfers. But customers are often misled about the true costs they are charged and are unaware that they are paying excessive costs. Additionally, some money wire transfer providers not only charge consumers exorbitant upfront fees but also extract hidden costs when the dollars sent by the customer are converted to a foreign currency.
These costs occur despite the fact that large money wire transfer service companies typically obtain foreign currencies in bulk and at considerably lower rates than those they pass on. As a result, these companies make staggering profits, reaping billions of dollars on top of what they make in service charges for these transactions.
These practices are especially prevalent in Latin American and Caribbean countries, where many of these transactions occur. According to the Multilateral Investment Fund and the InterAmerican Development Bank, Latin American and Caribbean immigrants sent a record $32 billion to their home countries in 2002, compared with $23 billion in 2001. Many of these dollars were sent to help pay for basic needs such as food, medicine, and schooling.
"These remittance fees are not only high, they are confusing," Schumer said. "The rate structure may vary depending on whether money is sent in U.S. dollars or the home currency. Low upfront wiring fees may induce people to use a service that charges much higher currency exchange fees or uses unfavorable exchange rates. Hardworking immigrants need good, clear information, and this new bill will finally provide it."
Schumer first proposed the framework of this legislation to the President of the Dominican Republic during a working breakfast in Santo Domingo in February 2003.