Remittances Increase from USA, Progress on Disclosures, and Pushback from MTOs

New Orleans  I badly want to say that there is finally progress in the United States on remittances, which are financial transfers from immigrant families, migrant workers, and others to their families and communities back in their home countries.  The Wall Street Journal reported that the volume of money being remitted has in fact gone up based on the numbers available for 2010.  Our colleague, Manuel Orozco, the foremost US expert on remittances, even predicts an increase of 7% to 8% to Latin America and the Caribbean this year, which is also good news for developing countries.  The toothless World Bank says that the 215 million migrants it estimates around the world are moving $372 billion to developing countries in 2011 and they expect it to hit $399 in 2012 and $467 billion in 2013.  These are huge numbers, especially when one country after another continues to look the other way as migrants and immigrants are gouged by the costs of sending the money through the various money transfer organizations (MTOs).

The much heralded Consumer Financial Protection Bureau (CFPB) that was the brainchild of Elizabeth Warren, now running for the U.S. Senate in Massachusetts took up the matter this year and has promulgated regulations.  Unfortunately, they gummed the problem as well, possibly because of the limits on their authority.  Rather than addressing the predatory nature of the pricing, the final rule which takes effect in February 2013 simply puts forward the standard liberal palliative of better disclosure.  I’ve often shared the limited value of the disclosures in the tax preparation industry for predatory refund anticipation loans (RALs), where the companies (H&R Block, Liberty, Jackson-Hewitt) were all too willing to flaunt their 250% on computer screens and big posters, knowing that the marks (clients?) were so desperate for their money they had no choice but to suck down the charges.  This is the same song now with remittances, simply another verse.

To quote their own website summary, the CFPB rule says the following:

The rules require companies to give a disclosure to a consumer before the consumer pays for a remittance transfer. The disclosure must list:

  • The exchange rate,
  • Fees, and taxes,
  • The amount of money to be delivered abroad.

Companies must also provide a receipt or proof of payment that repeats the information in the first disclosure. The receipt must also tell consumers the date when the money will arrive.

Companies must provide the disclosures in English. Sometimes companies must also provide the disclosures in other languages.

I’ll read the whole 113 pages of the rule in coming days in hopes of finding something more helpful, but I’m afraid that’s the deal.

Outrageously, Miriam Jordan of the Journal reports this new rule “could raise costs for consumers…some experts said.”  She then quotes someone from Wells Fargo, which is an embarrassment of a bank on almost every count,

Daniel Ayala, head of global remittance services at Wells Fargo, praised the rule for creating a level playing field.  But he cautioned that, ‘there are details that could…ultimately result in limiting access, higher costs and confusion.’

Are you kidding me?!?  Finally having a wee bit of transparency (in English which doesn’t necessarily help!) and a receipt is going to raise costs.   Wells Fargo and their banking and MTO buddies simply have no shame.  I hope these hypocrites made a big fat contribution to Clinton’s Global Initiative, because they certainly don’t mind exploiting the living bejesus out of these immigrant and migrant families.

In Canada the bill to cap costs at 5% (remember that is the World Bank and G-8 goal!) is making progress.  More endorsements have come forward from the Canadian Union of Postal Workers (CUPW) and the University of Toronto Student Union.  There are also encouraging discussions with the Liberals, who may actually join with the NDP in a joint bill.  I’m holding my breath.  Somewhere developing countries and the workers trying to help their families have to get a real break on costs, not just a piece of paper with some numbers on it.

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Western Union and Money Mart Lobby Up to Fight Remittance Justice

New Orleans   Finally, the big-time money transfer organizations and the gazillions in predatory profits for moving money for migrant workers and immigrant families are at least hearing our footprints coming after them in the distance.

Several months ago Ontario NDP Member of Parliament Jagmeet Singh introduced a bill we had collaborated in writing under the provincial consumer protection statutes that would achieve the 5% ceiling on costs related to transfers supported by all of the G-8 countries and the World Bank.  Realistically, since the NDP is the minority party, it is hard to get a bill passed.  In Ontario lobby registration rules require lobbyists to register expressly on which bill or bills they are retained.  Bells and whistles went off for all of us in recent days when two lobbyists, jointly employed by Western Union and Money Mart, registered specifically on our 5% cap bill.

The obvious question was whether or not these slick operators had already started putting the squeeze on the McGinty government on our bill?  In the question period in the Provincial Parliament, MPP Singh asked the questions.  The answer was a non-answer and a classic runaround response, that I will share here with all of you in case for your personal and political enjoyment.

It’s on!

CONSUMER PROTECTION

Mr. Jagmeet Singh: My question is to the Minister of Consumer Services. In May, I introduced Bill 98 to stop large companies from charging unfair international money transfer fees. Now we have learned that the two biggest money transfer companies operating in Canada, MoneyGram and Western Union, have registered to lobby both the Ministry of Consumer Services and the Ministry of Finance on this bill.

Has the minister met with these advocates for these powerful companies, and what are they saying to her?

Hon. Margarett R. Best: I thank the member for the question. Certainly, consumer protection is an important issue for our government, and we are reviewing the bill that the member has put forward. As always, we’re reviewing this bill with a view to improving consumer protection in the province of Ontario. It is important to note as well that the federal government has a role to play in protecting consumers with regard to federally regulated financial services.

The ministry continues to analyze the bill, and we continue to look at options to improve consumer protection for Ontario consumers with regard to remittance fees. This is an issue which certainly impacts a great number of people in the province of Ontario, including myself and many of us in this Legislature—I would no doubt think that—and it’s an issue that also impacts many people who are new Canadians, so this is an issue which we find very important to us.

The Speaker (Hon. Dave Levac): Supplementary?

Mr. Jagmeet Singh: Again to the Minister of Consumer Services: When Ontarians send their hard-earned money to relatives overseas, multinational companies should not be allowed to siphon off as much as they please. Now, powerful US-based companies are fighting against a bill that would protect Ontarians.

Ontarians need to know: Will the minister take action to protect Ontarians from predatory money transfer companies, or will she capitulate to the high-paid lobbyists for these US companies?

Hon. Margarett R. Best: I would like the member opposite to know that this is an issue on which we continue to listen to all the interested parties, all the interested stakeholders, and certainly our consumers in the province of Ontario.

This issue, as I said, is a very complicated issue. There are many complicated factors that require a very thorough review of the bill. Because of the complex nature of this issue, we continue to review this bill carefully, the proposed legislation that has been put forward by the member opposite.

We continue to look at other ways to protect consumers in the province of Ontario, which is an issue which is very important to me and to our government.

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A Break in the Remittance Campaign Comes from the Somalian Hawala Crisis!

Hawala in Minneapolis, St. Paul

New Orleans   ACORN International’s Remittance Justice Campaign has begun to pick up steam.  A private member’s bill to cap rates has now been introduced in Queen’s Park for the Ontario provincial government.  Similar efforts are being pushed in British Columbia and later this year legislators have committed to introducing measures in Honduras and perhaps even Mexico once the election fever settles down today.   The hardest nut to crack has been in the United States, but we may have a break from an unexpected quarter:  32,000 Somalians in Minnesota.

The failed state of Somalia in the wake of its civil war sent refugees around the world, including the United States, and particularly the Twin Cities area.  There is currently no banking system in Somalia which makes transmitting remittances from relatives in the USA back to desperate relatives in Somalia very difficult.  Somalians have been using the largely informal hawala system which is a critical piece of the money transfer system especially in India (where it is illegal), other south Asian countries, and some parts of Africa.  According to an excellent story by Miriam Jordan and Erica E. Phillips in the Wall Street Journal, about $100 million is moving through federally licensed US-based Somali hawalas.  ACORN International had done a report recommending the expansion of hawalas because their cost is usually less than 1.5% rather than the more predatory pricing of Western Union, MoneyGram, and of course the banks.  Most money transfer organizations (MTOs) are licensed at the state and provincial level, so it was a revelation to us to find that hawalas were under federal jurisdiction and licensing in the USA, contrary to our earlier research.

The crisis is that mainline US-based banks in the wake of the banking regulations implemented post-9/11 ostensibly in the name of homeland security, have increasingly been refusing to handle transactions for hawalas.   “U.S. banks are permitted to deal with hawals, typically small businesses that have anti-money laundering, reporting, and record keeping obligations in the U.S.”  This is unique since many hawalas have operated for centuries on the basis of trust and personal handling with no records.  U.S. banks are bridling now because of concerns that the money might be funneled to terrorist groups.  Families are demonstrating, especially in Minnesota because their families are “starving” without being able to receive the remittances.

Representative Keith Ellison (D-Minnesota) is drafting legislation to deal with this crisis.  Representative Carolyn Maloney (D-NY) has attempted to deal with this issue in the past.   Scott Rembrandt of the US Department of Treasury’s Office of Terrorist Financing and Financial Crimes has argued that the hawalas should not be shunned, which raises hopes as well.  According to the Journal he says that the Treasury “doesn’t assume money transmitters present a uniform or unacceptably high risk of money laundering, terrorist financing or sanctions violations.”  Such a position would seem to point, not surprisingly, at the larger banks like Wells Fargo and U.S. Bancorp as being overly cautious and therefore squeezing Somalians and others desperate for reasonable relief for high costs and for workable solutions.

Deborah Bortner, a regulator in Washington state, correctly notes that without a system that works legally to transmit money, “it’s going to go underground,” which is exactly what is happening with many hawalas around the world and precisely one of the arguments that ACORN International has made about the need for regulations in this area.   We can only hope that this crisis will finally force all of our voices to be heard and allow progress for immigrants families and migrant workers who are desperate for remittance justice.

Ad from Western Union steering folks away from hawalas

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Ontario Bill a Big Step Forward for Remittance Justice Campaign

ACORN members Amadeo Flores, left, regularly sends money to his elderly parents in Spain, while Rohan Jagroo has been wiring money to friends and family in Trinidad for 17 years.

New Orleans     After a year of stirring the pot in one country after another about the crime of predatory price gouging of migrant and immigrant workers through ACORN International’s Remittance Justice Campaign and our multiple reports exposing these abuses, ACORN Canada has led the way to the next step having secured a sponsor for legislation that would finally put a hard cap on money transfer organizations and the rates they charge.   A member’s bill is being introduced today in Toronto at Queen’s Park in the Provincial Parliament by NDP’s rising star, MPP Jagmeet Singh (Bramalea-Gore-Malton).

Simply put, the text of the bill indicates that it would amend the Consumer Protection Act in Ontario to require that MTO’s like Western Union, MoneyGram, and a host of others cannot exceed 5% in charges for remittances.  A Toronto Star article yesterday pictured one of the ACORN members, Amadeo Flores, originally from Spain, and Rohan Jagroo from Trinidad, and detailed the thousands of dollars that they were fleeced over many years of wiring money to friends and families in their home countries.  In their cases the charges to these established routes were more than 10%, though ACORN International studies have shown that the full package usually exceeds 20%.

Nonetheless the G-8, including Canada, the United States, United Kingdom, and others, joined by the World Bank, have called for a cap on the cost of such transfers of only 5% and that is what the Ontario legislation is demanding.  Many banks have even higher rates than some of the MTO’s but those are national banking matters subject to federal legislation in countries like Canada and the United States, so we will continue pushing on those fronts.

Similar legislation is planned for British Columbia and later in the year for Honduras.  ACORN Italy has this on its agenda for later in the year as well.  With research support from the Clinton School of Public Service in Little Rock, we are deepening our survey, research, and policy initiative currently in Mexico with the help of a full-time summer researcher on the ground with ACORN Mexico in la Neza right now.

What’s at stake?  Billions that could dwarf the collective foreign aid budgets of all the developed countries back to the developing world.

This campaign is entering a new and important stage and building momentum for huge changes that could make an amazing difference to lower income families and their communities around the world.

 

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