WASHINGTON – Advocacy groups applauded a Senate bill Thursday that would require money-transfer businesses to clearly disclose the cost of wiring payments abroad — fees that they said can eat up as much as 20 percent of a transfer.
The bill, introduced by Sen. Paul Sarbanes, D-Md., is designed to protect immigrants, often low-wage earners, who send money back home to family and loved ones in their native countries.
The Inter-American Development Bank estimated that immigrants in Maryland sent $500 million in such “remittances” to Latin America alone last year.
“We have a lot of people in Maryland who send remittances,” said Sarbanes, the ranking member of the Senate Banking, Housing and Urban Affairs Committee. “It’s a problem across the board.”
The International Remittance Consumer Protection Act of 2004 would require companies to fully and clearly reveal all fees and exchange rates, to set up a grievance process and to encourage federally insured financial institutions to make their services, including remittances, more available to immigrants.
The bill is co-sponsored by Sen. Barbara Mikulski, D-Md., and seven other senators. There is currently no companion bill in the House.
A prepared statement from Sarbanes’ office estimated that about 15-20 percent of remittances are “being lost in fees and other transaction costs.” He called his proposal “a remittance bill of rights” that financial institutions will have to follow.
But industry representatives said they are already doing all they can to ensure transparency in the fees they charge.
Danielle Pereira, spokeswoman for Western Union Money Transfer, said that not only are customers told about all associated costs for sending money before transactions, but the charges are also printed on all receipts.
“Western Union takes pride in having agent locations in neighborhoods where our customers work, shop and live” Pereira said. “We partner with agents who speak their language . . . so that our customers feel comfortable.”
But the executive director of Casa of Maryland said that message does not appear to be getting through to immigrant customers.
“Maryland has a very, very serious problem,” Gustavo Torres said. “From our experience, too many people (are) being abused and are charged by companies without knowing about it.”
Eighty percent of Hispanic immigrants in Maryland regularly send remittances home, according to the Inter-American Development Bank, which researches economic development in Latin American and the Caribbean. It said Maryland Hispanics sent money home at an average rate of 14.8 times per year, the highest number in the nation.
Sarbanes said that a main goal of his bill is to lower costs for financial services used by immigrants by forcing companies to fully disclose their fees to customers.
“If we get full disclosure, we think we can get some competition” among transfer firms, Sarbanes said. “It’s so lacking in transparency, and because exchange rates are involved, it can get very complicated.”
Brad Heavner, director of Maryland Public Interest Research Group, said that although the legislation is new, the problem is not.
“So many retail financiers like that charge exorbitant fees and finance rates,” he said. “People who want to use services like that don’t have any other option, so it’s not fair to gouge them.”
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