The US Bureau of Consumer Financial Protection (CFPB) has issued a Proposed Rule which would bring larger US-based nonbank participants of the international money transfer market  within the CFPB's supervisory jurisdiction. The Proposed Rule is available here and is open for comment until 1 April 2014.

The Rule proposes that providers transacting more than 1m aggregate annual international money transfers will come within the CFPB's supervisory authority. There are about 25 such firms.

Market demographics

According to the CFPB's estimates, approximately 340 nonbanks provide international money transfers, accounting for roughly $50 billion transferred and 150 million individual transfers in 2012. Their data is extrapolated from providers licensed in California, New York, or Ohio; most entities that provide over 500,000 international money transfers per year are licensed in at least one of those three States.

The top 25 international money transfer providers collectively processed about 140 million transfers in 2012, with a total aggregate transaction value of about $40 billion, approximately 90 percent of the nonbank international money transfers.

Costs of supervision

The CFPB assumes that the typical examination would require 10 weeks of staff time, based on  extrapolating its experience of supervising nonbank payday lender examinations as a reasonable proxy for international money transfer provider examinations.

The CSPB does not comment as to how many firms it may examine each year, nor how many times it may do so per year; nor does it say whether firms which are regulated and supervised in another jurisdiction (for example European based providers who fall under the broadly comparable regulatory jurisdiction of the EC Payments Services Directive) may require more, or less, scrutiny.

Is it necessary, transparent, sustainable proportionate…?

And all the other good tests against which regulations should be evaluated. Is there evidence of bad behaviour by the nonbank providers, or quantified and material increase in financial risk? DFS1073 was clearly intended to benefit the US consumer; will this build on that? No doubt someone will add a comment and let me know.