Rethinking Remittances
When Changing a Little Changes a Lot
The United States is one of the top sources of remittances in the world, with $79.15 billion in remittances sent to family and friends outside the country in 2022 alone. Despite this huge volume, the costs of remittances remain alarmingly high. In the last three years, some of the most financially vulnerable people in the United States, mostly lower-income immigrant workers, lost $15.4 billion in hidden exchange rate markups – about 20 percent of the value of total transfers – when they sent money home to support their families.
These hidden markups – a surreptitious form of junk fees – represent a real financial hit for families. A recent UnidosUS survey of 1,200 Latines found that 94 percent of remittance users paid a fee in the past year; nearly half paid $50 or more and 8 percent paid $300 or more in fees annually. And these fees are rising. A January report by Wise found that foreign exchange transaction fees in the United States increased by 41 percent between 2018 and 2023. An August study by the Financial Health Network reported that remittance fees increased by 8 percent from 2022 to 2023 to a total of $13.1 billion.
Why are remittance costs so high in the United States?
The companies that impose these international money transfer fees can get away with these junk fees because they are hidden among a flurry of charges within the total cost, making it nearly impossible to understand the costs. It is another all-too-common example of predatory financial service providers gouging lower-income families and immigrant populations. There are simply too many variables in the remittance disclosures for most consumers to evaluate the relevant factors and comparison shop.
There is a solution to this complex, opaque, and unfair price gouging that will provide real relief to families. A dozen civil rights, consumer advocacy, community-based organizations, and even industry groups jointly petitioned the Consumer Financial Protection Bureau (CFPB) to curb the use of hidden remittance fee mark-ups and junk fees and to reverse a Trump-era loophole that lets banks and depository institutions charge some of the highest, least transparent remittance fees.
The petition urges the CFPB to issue rules that would require remittance to clearly disclose a consumer’s total cost — a figure that includes any transaction fees, exchange rate margins, and other hidden costs or fees, in one upfront amount. Parties on both ends of the remittance transaction should see the total amount of remittance and the total amount received by the recipient.Without these simple, common-sense disclosures, high remittance fees, like junk fees, will continue to disproportionately gouge working-class people and people of color.
“Our proposed changes will improve transparency, enhance competition, allow consumers to comparison shop, and make remittance transfers safer,” said Santiago Sueiro, senior policy analyst at UnidosUS. “The economic impact of such changes would be significant as working-class consumers and immigrants would save billions of dollars per year and be better positioned to help their families abroad.”
The administration and the CFPB must continue to curb hidden junk fees, including for remittances that make it harder for working families to make ends meet. These common-sense remittance fee disclosure improvements can go a long way to help some of the most vulnerable populations in the United States and make a big difference to communities around the world. You can help.
Join us today by taking a moment to share your own experience with remittances and endorse this critical petition to reform remittance disclosures and return these junk remittance fees to the people.
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