Remittance Disclosures and Western Union Babble Speak

NeDSCN1016w Orleans ACORN International’s global Remittance Justice Campaign (www.remittancejustice.og) continues to confront new, amazing, and mysterious challenges as ACORN Canada pushes forward in Ottawa and British Columbia.

In a meeting won by actions at the ACORN Canada convention six weeks ago with top officials of the Finance Ministry our negotiators efforts to discuss the need for regulation of remittances to prevent predatory pricing and achieve needed equity, transparency, and fundamental fairness was greeted about the same way as if we had started cursing loudly at the front of the church.  We had offended fundamental, conservative Stephen Harper government dogma about so-called “free markets” and laissez faire rapacious capitalism by banks and money transfer organizations, especially if the rip-off occurred with migrant workers and immigrant, “new Canadians” as they are called.

The Finance Ministry turned the conversation to “disclosures” in a patty cake, kiss-your-cousin shot across the ACORN bow.  Disclosures just won’t get it done, but….  There are some critical things that could be achieved by some real disclosures that include:

  • simple language
  • base rate from remitting institution to country for bank customer
  • base rate from remitting institution to country for non-bank customer
  • transparent fees at receiving end if any or a guarantee that there are none.
  • disclosure of exchange rate at time of remittance transfer
  • disclosure of pricing regime compared other electronic transfer procedures to prove this is not discriminatory pricing

We might save billions just by letting that little light shine.IMG_1073-1

On the western side of Canada an action by ACORN British Columbia demanding remittance justice provoked an email response from Englwood, Colorado, a Denver suburb, and headquarters of Western Union.  Spokesman there told the Burnaby News-Leader:

“’Many people worldwide have no access to formal financial services. We invest in rural areas and urban locations alike to offer consumers an option to send and receive remittances and better manage their finances.’  Increased consumer choices for sending money have led to lower costs across the industry, the company said.”

Wow!  Here is what that statement translates to in normal everyday English:

“We enjoy near monopoly advantages in many global markets because there are no other financial service alternatives, so we charge whatever we damned well please to send and receive remittances, because we can.  The only reason we will lower costs is if a competitor crowds into our monopoly market and forces us to have to do so.”

DSCN1019At ACORN I guess Western Union thought it was important to remind us that with no regulations and little competition, rapacious corporate greed can pretty much stand on its hind legs and flip off its customers, their organizations, and entire limp wristed, uncaring governments at their whim and will.  Hello!

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A Corrupt Credit Business Model Travels to Chile and Brazil

New Orleans Cred

ODECU of Chile

ODECU of Chile

it card scams are the bad penny perfected in the United States that is turning up now elsewhere in the world.   These practices are not the foul play of bad actors as predatory lenders always claim, but intrinsic elements of corrupt, exploitive business models.  The economic success stories in Brazil and Chile now seem threatened by the avarice of casual corporate corruption matched as usual with light to non-existent regulation and consumer protection regimes.

In Brazil the debt to income ratio has risen from 22% to 40% in only five years from 2006 to 2011 according to a study quoted by Alexei Barrionuevo in The New York Times. In Chile in 7 years the ratio has goen to 70% according to the Central Bank.   There’s no question the model is predatory with interest annual interest rates reaching 220% in Brazil and no limits anywhere it seems.   The situation is especially intense at retail chain, freely issuing cards to working and moderate income customers to access basic consumer goods, and then routinely adjusting the terms and levels of the interest rates on the debt without any notice to the customer.

These cards were supported by transnational banking big boys like UK’s HSBC and Spain’s Santander and Itau-Unibanco, all of which, especially HSBC, absolutely knew better, but couldn’t resist the rip-off, knowing that they could get away with it.  When confronted by the prosecutor’s office in Brazil, the banks ignored appeals to fully compensate customers.

It was shocking to read that there are no only no limits to the level of interest rates in Chile, but also no way for an individual to be able to file for personal bankruptcy and get their act together.  Unfortunately, when ripped, there’s no way for them to run – or reorganize.  Stefan Larenas of the Organization of Consumers and Users of Chile, speaking about the Equifax-owned, unregulated Dicom credit score outfit in that country, was quoted ominously that, “If you are in Dicom, if you are not in hell, you are on the way there.  It is a true social stigma here.”  Seems a bad score not only bars you from any future loans, but is also seen as a legitimate reason to block you from future employment, creating a debtor’s prison without walls.

Predatory financial injustice is a global issue with most central banks simply burying their heads in the sand, just as our Remittance Justice Campaign has uncovered everywhere, and leaving workers and families nothing but fresh meet for corporate crime.

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Disclosing Corporate Payments to Foreign Governments on Remittances

Newrethink-the-global-money-supply_1 Orleans There is some low-grade whining about some of the amendments that were added to the Dodd-Frank legislation last year which was intended to hold financial institutions more accountable.  Congressman Barney Frank successfully added an amendment requiring companies to disclose payments to foreign governments around oil and natural gas extraction.  Other companies are required to disclose whether companies manufacture products using “conflict” minerals from the Congo and other African countries.   As a general rule, we should ignore all whining on Wall Street.

In fact we need more disclosure on some issues that are part and parcel of Wall Street business, especially around money transfers and money transfer organizations, like Western Union, MoneyGram, and their imitators and wannabes.  In ACORN International’s first report released as part of the Remittance Justice Campaign, “Past Time for Remittance Justice” (available at www.acorninternational.org), we quoted directly from members of the banking community in Africa the fact that the single largest obstacle in lowering the cost of remittances in many African countries came down to what they called “exclusive agreements.”

An “exclusive agreement” is an agreement with a particular operation, like Western Union, that it will have preferential abilities to move money a particular country.   Many economists and banking officials told us directly that there would be no significant lowering of fees, particularly driven by central banks in Africa, given these exclusive agreements.

This adds up to billions of dollars in money siphoned away from immigrant families and migrant workers trying to assist their home countries at the grassroots level.  It would be nice if poor people in poor countries could find advocates in Congress for an issue that still lacks Hollywood attention.

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Lower Remittance Fees Now!

IMG_0529Ottawa In the final event of the first ACORN Canada Convention members gathered in front of the National Bank of Canada, assembling to raise the demand to lower bank and money transfer fees for remittances.  With Parliament looming over them car after car honked in support of lower bank fees.   Hardly a struggling immigrant driving a cab along the street didn’t lean on their horn, understanding the issue precisely.

A popular radio broadcast on politics on CBC had interviewed Kay Bisnath of ACORN Canada and ACORN International shortly after 8 AM in a national broadcast.  A piece had run in the daily paper, Ottawa Citizen, made the campaign clear.

The nearly 100 protests left the Bank of Canada, responsible for regulations, to make the same demand at the offices of the Finance Minister Michael Horgan.  We didn’t get far.  Police blocked the doors and locked them quickly, as the members chanted below and beat the plastic trash receptacles to a drum beat, calling on the Minister to “come down, meet the people!”

FIMG_0526inally using police as embassaries, Marva Burnett, outgoing president of ACORN Canada and other leaders were able to get their message up and get the answer down.  The deputy finance minister agreed to study the issue and issue a response.  The finance ministry communication director came down and parsed a few words indicating they had read the Citizen and heard the news, and would “study the matter.”

A mild response, but a step forward because truly this is an issue where there is every indication that the government is totally clueless of the issue despite the huge impact.  Back-of-the-envelope figuring had put the cost of excess fees, defined as fees above the G-8 and World Bank target of 5%, sent by immigrant and new Canadians back to families and communities in their home countries as being over $500,000,000 per year!

IMG_0532Members had prepared a “giant invoice” as chant leader, Pascal Apuwa, called it and after the Finance representative slinked away, a chant rose for the giant invoice to be left and collected.  Marva Burnett placed it pointing inside the locked doors of the ministry.  I am categorically clear that a small piece of history was made here, since I am confident that in the history of social movements over thousands of years, these members may have been the first to chant “GIANT INVOICE!”

Nonetheless, the chant makes the point.  This is a huge bill, now past due, that needs to be repaid to the poor and migrant works and immigrant families around the world, being exploited by money transfer organizations and banks on a daily basis at the price of billions.

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Banks Silently Step up on Remittances

24basic.1.600Atlanta On ACORN International’s Remittance Justice Campaign (www.remittancejustice.org) we have had difficulty getting any response from the big banks except in the most cursory terms.  Wells Fargo did finally reply and told us they were doing great within a small footprint of countries.  Bank of America and JP Morgan/Chase were stone silent.  Not surprisingly given the predatory nature of their pricing.

A story broke yesterday on the wire and NPR which might more clearly indicate that the big boys can actually hear the footprints coming up behind them even as they stick to stonefaced spinning.   These three banks got together on something called ClearXchange in order to try and retain some of their customers exhausted with the constant fee rip-offs and increasingly inventing other alternatives including hand-to-hand transfers through prepaid debit cards within families or utilization of the PayPal if folks are sophisticated.

Frankly, this is a Band-Aid the banks are applying when a tourniquet is called for.  They may keep a couple of their more inept and lazy customers, but folks are leaving this train station and demanding other tools that reflect modern technology, rather than ancient and pervasive greed.

The NPR report seemed to hint that Google was talking about moving into the space of money transfer utilizing phones and mobile devices.  Talking about “doing good” or something like that which used to be their motto, I could fall in love again!  I couldn’t track down the whole story on a Google search (sounds contradictory doesn’t it?) but I did find that it has been possible to move money between various Google accounts fairly seamlessly using something called Google Checkout for the last two or three years.  Obviously not widely recognized or publicized, but they could also be knocking on the right door.

In Citizen Wealth I argued that companies, even big bad boys like Wal-Mart and H&R Block could create business models with huge returns by delivering service that low-to-moderate income families need and demand.  Money transfer of remittances is precisely the service that will see the game change fundamentally in a short time.  The banks and credit unions are trying to hold on to old models that are predatory and not realizing that you can’t leave $22 billion in profits out there and not have other, easier and cheaper services eventually suck them dry.

It’s past time for remittance justice.

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Mobile Phone Money Transfers No Panacea Yet

M-PESA

M-PESA

New Orleans The bleeding edge hope for technology in handling finance is often seen as Africa and more specifically Kenya and very pointedly mobile phones.  To the degree a mobile phone system could obviate having bank accounts and ease the problems and costs of money transfer for remittances, this could be a good news except for all of the “ifs,” “ands,” and “buts.” In Nairobi last week ACORN International and the Paladin Partners spent some time trying to get our minds wrapped around all of this to sort out the hype from the hope.

The key system is Safricom’s M-Pesa which is ubiquitous in Nairobi and by far the wide leader in the current market.  We saw their outlets everywhere including in Korogocho where we were organizing in the mega-slums.  Talking to the ACORN Kenya organizers about whether and how they used the system we got more mixed reviews based on the costs involved and the need for specific phone and SIM card access.  Importantly they estimated that in Korogocho less than half had any mobile phone and most only used the phone to receive messages without cost and had phones that were simple for text and phone without being able to access M-Pesa on the more what sounded like a more expensive Safricom platform.  The fact that Sammy Ndirangu’s phone was a “dual-SIM” phone somehow seemed important because he could work multiple networks to move between them whenever one or the other was cheaper.  Looking in the mobile phone stores about the city, none of these options were cheap.

Safricom has the lion’s share of the market in Kenya with 13 million subscribers.  Importantly, the company is a joint venture of sorts with equal shares of about 35% owned by Vodafone (based in the UK) and the government of Kenya.  There may be problems with this relationship and expanding access to the platform.

A piece in www.mobilemoneyafrica.com was illuminating.   Safricom’s competitors approached the Central Bank of Kenya with a proposal to create a seamless system for money transfers between networks.

“Though it is possible to send money across the networks, the transfer process remains complex and costs 10 times more than the price of sending money within a network, adding new dimensions to the factors that preventing consumers from changing mobile phone service providers.

Currently, recipients of money from other networks receive a Short Text Message indicating that money has been sent to them and have to go with the message to an agent of the operator whose platform was used to send the money for withdrawal.

Under the proposed structure, the CBK is being asked to establish a form of clearing house that processes all transactions from the four mobile money platforms M-Pesa, Airtel’s Zap, Yucash or Orange money and sends it directly to the recipient’s phone.

That should help remove the high charges that the operators levy consumers sending or receiving money from one network to another.

Consumers sending Sh25,000 from M-Pesa to rival networks such as Airtel must for instance part with Sh400 in transaction fee while the cost of sending and receiving a similar amount of cash from Airtel to rival networks is Sh200

Safaricom’s rivals reckon that a seamless platform will loosen each operator’s grip on the mobile money platform pulling down the cost barriers and allowing free movement of money in the economy.”

The exchange rate is roughly 80 Kenya Shillings to 1 US Dollar if that helps in understanding all of this.  The notion that regular Kenyans would be transferring Sh 25,000 or more than $300 USD when the largely unenforced minimum wage in the country is about $80 USD in the city and half of that in the countryside is also preposterous as our remittance studies have shown (www.remittancejustice.org), but you get the point:  internetwork charges are choking off the tool and its access and applicability to average Kenyans.

The fact that Safricom has the governmental connection and now controls 76% of the mobile market in Kenya doesn’t bode well for a quick fix here anytime in the near future.  Two of the main competitors in Kenya, Airtel and Yucash are India-owned companies, which leads to a natural next question of why hasn’t the mobile money transfer system gotten farther in India where it could make a huge difference?

Let’s look into that question on a later day, but in the meantime this “hope” for African financial systems and for lower costs for remittances still seems farther in the future than any of us might have wanted to believe.

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