Yesterday, CI reported on a new circular issued by the US Consumer Financial Protection Bureau (CFPB) warning international transfer firms to stop adding “junk fees” to the transfers and demanding greater transparency in the process.
Misinformation in the industry is frequent, and some providers abuse exchange rates to cloak the fees.
The warning issued by the CFPB specifically mentions:
- Falsely marketing “no fee” or “free” services
- Burying promotional conditions in fine print
- Deceptively advertising how long transfers will take
The agency states that “false advertising about the cost or speed of sending a remittance transfer can violate federal law.”
CI connected with Rina Wulfing, Senior Policy Lead for North America at Wise (WISE.L), a company that provides global transfers and payments services as well as certain neobank features. Based in the UK, Wise has pounded the table for years now about transparency in its services and today, the company reports having moved £57.4 billion with with the service in H1 FY24, an increase of 12% vs H1 FY23. Of note is the fact that 60% of payments moved by Wise were instant in Q2FY24, 81% within an hour, and 94% within 24 hours. Wulfing provided some feedback on the move by the CFBP while welcoming its intent to reign in these fees.
Our discussion is below.
What are Wise’s fees for international transfers/payments for US customers?
Rina Wulfing: For sending and converting money, fees vary by currency but start at as little as 0.43%. On average, Wise charges 0.67% in fees compared to the industry average of 3-5%.
Wise is fully transparent and uses the mid-market exchange rate – the same as what you see on Google. Customers can see exactly how much their transfer is going to cost them in fees, and exactly how much the recipient will receive, before they make the transfer.
Do you support the CFPB’s warning on these so-called junk fees?
Rina Wulfing: Wise welcomes the CFPB’s latest action to halt false claims of “free” international money transfers and call out the use of inflated exchange rates as a junk fee. This is a pivotal step forward to deliver true price transparency to all Americans sending money abroad. In fact, Americans have lost $15.4 billion in exchange rate markups over the last three years and 81% of Americans agree these are junk fees.
At Wise, we believe you should always know what you’re paying for. That’s why we are fully transparent with our customers on all fees they will incur by using our services and use the mid-market exchange rate. We have been advocating for price transparency across the industry since our founding and look forward to the millions of Americans who send money internationally to benefit from this important change.
As “Fees” can be buried in the exchange rate, isn’t it pretty challenging to manage these fees? And how will the CFPB be able to regulate these types of hidden fees?
Rina Wulfing: This action will address the advertising of ‘no fee’, ‘fee-free’ or ‘free’, so that if a provider inflates the exchange rate they will not be able to use this language.
This does not mean that banks and financial institutions cannot inflate the exchange rate – just controls how they can talk about their pricing.
If providers are marking up their exchange rates (which we don’t do at Wise) they should at a minimum be transparent with consumers about the charge they’re adding within the exchange rate.
It’s important the CFPB continues to monitor industry behavior and ensure providers are not exploiting loopholes to continue misleading consumers. Consumers can report these deceptive practices in remittances by visiting the CFPB’s website.
Should all international transfer firms just agree to a benchmark spot rate for transfers? Is that the best way?
Rina Wulfing: This isn’t a realistic expectation, given the fluctuations of exchange rates across different currency routes.
We believe the best path forward is price transparency so that customers can accurately compare providers and ensure they’re getting the best possible rate.
Inflated exchange rates disguised as “free” transfers preclude competition and deceive customers.
Should stablecoins be part of this discussion?
Rina Wulfing: When a stablecoin is being used to facilitate a cross-currency or international transfer then yes, it should be.
Providers globally using stablecoins to facilitate these transactions can still bury fees in the exchange rate while saying there are “no fees.” It’s the same issue regardless of how the transfer is enacted.
Today, what does Wise charge for a transfer or payment of USD to another currency?
Rina Wulfing: Today (March 27th), if you convert $1,000 USD, you will be charged a $6.93 transfer fee and receive a total of £785.91 GBP at a mid-market exchange rate of 1 USD to 0.791390 GBP.
As above, for sending and converting money, fees vary by currency but start at as little as 0.43%.