Watchdog takes on money transfers
The Consumer Financial Protection Bureau, or CFPB, doesn't roll off the tongue just yet, but now that it's officially open for business, it's coming out swinging for all the right causes.
In one of its new reports, it says money transfer services should clearly post their exchange rates on international money transfers and credit reporting firms should include money order remittance in their credit reports.
The CFPB seemingly has been a political punching bag for so long now that many have forgotten why it was created in the first place: to finally rein in the egregious behavior of America's financial institutions.
But architect and consumer advocate Elizabeth Warren and crew left no doubt last week that they mean business and have no qualms about kicking some well-tailored Brooks Brothers bottoms.
In its report, the CFPB focused on foreign money transfers, which account for tens of billions of dollars sent to family members, friends, businesses and others abroad each year, chiefly by foreign-born consumers.
Most of these wire transfers occur outside of banks and credit unions, although these institutions are increasingly getting into the game.
The problem, Warren observed, is that consumers find it difficult to shop for the best rates on money transfers when service providers don't post the exchange rate they plan to charge.
Financial reform mandated that those rates be posted but left the implementation up to the CFPB.
The bureau recommends that service providers design, test and use rate disclosures, maximize them for public comprehension and present them with other fees to give consumers a clear picture of how much they're paying to wire money.
It also wants to see follow-up studies done to determine if the disclosure is having sufficient impact on competition.
The CFPB also addressed a gaping hole in the credit scoring world, which does not routinely include international money transfers in a consumer's payment history.
Because of this oversight, the report found that some who frequently use foreign money transfers may lack sufficient credit history to generate a credit score and thus unfairly appear as a bigger credit risk to lenders.
Solution: Dive into this black hole with more research to figure out a way to give payment credit where it's due and eliminate those inaccurate credit scores.
Yes, the CFPB is just getting started. Much of what I see coming out of its machinery so far seems cloaked in the same bureaucratic banker-speak that it's trying to hack through.
Then again, maybe that's necessary.
After all, you discipline a child in their language, not yours.
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