Published on People Move

Remittances and Consumer Protection

This page in:

The Consumer Financial Protection Bureau and the People of the State of New York has sued MoneyGram International, Inc. and MoneyGram Payment Systems, Inc. for violating the Remittances Rule. According to the Rule, “the provider tells the sender the date when a remittance transfer will be available to the designated recipient, as well as provide critical pricing information for that transfer: the exchange rate, applicable fees and taxes, and the amount of money that will be received by the recipient. The Rule also requires a provider to indicate how the consumer can report a problem.” The plaintiff states that “MoneyGram engaged in unfair acts and practices by failing to make timely remittance transfers available to recipients or timely refunds available to senders. MoneyGram unnecessarily delayed transactions.” 

It is worth noting that the lawsuit relates to transactions made during the 2014-2019 period. The situation got much worse during the COVID-19 crisis.

As a user of remittance services, I would like to share my personal experience. Before COVID-19, I used to go to Safeway (supermarket, which acts as an agent for several remittance companies) and send cash back home. The cash arrived in minutes. My family in Peru got the funds fast. When COVID-19 hit, I had to switch to online transfers. Even though I have a bank account and official IDs, sending remittances became a hassle. 

First, remittance companies preferred cash if I wanted to transfer the money immediately. Second, when I used my debit card, the remittance company debited my account immediately, but it took 4 days before they sent the money (and the money was available for pick up). When I called (and I did so several times) the companies, several of the largest remittance companies in the USA, their response was that the problem was on the other side. 

That was not true since I also called the bank in Peru and tracked the transactions. They received the funds only after 4 days. I spent several hours tracking the transactions each time since they were for people who urgently needed the funds during the COVID crisis. I complained several times that they were using my funds to earn interest, that the persons waiting for the funds were suffering hardship, and that the timing of the transfer was critical. Their only answer was: “transfer cash and ask your family to pick up cash.” I kept explaining to them that picking up cash was not convenient due to the lockdown and need for social distancing during COVID-19.

It seems that remittance companies were deliberately providing wrong information to the consumers about the speed of transactions. In the cases where higher fees are charged for faster transactions, delaying delivery of funds could amount to overcharging. Moreover, the consumer did not have any means to report a problem. 

If the non-compliance problem was bad pre-COVID19, it’d be important to assess whether it got worse during the COVID-19 pandemic.


Sonia Plaza

Senior Economist, Finance, Competitiveness and Innovation Global Practice, World Bank

Join the Conversation

The content of this field is kept private and will not be shown publicly
Remaining characters: 1000