Consumer Protections for International Remittances

Entrepreneur Garad Nor launched his first money transfer business in 1993 in Marshall, Minnesota. Ten years later, Garad Nor turned around Tawakal Express, an international remittance firm that handles millions of dollars each month. In addition to providing secure, reliable service, Tawakal Express operations follow all the laws and rules set forth by regulatory bodies such as the Consumer Financial Protection Bureau (CFPB).

Many consumer protections regarding electronically-transferred remittances are enshrined within the 2014 CFPB remittance rules. Before an international transaction is completed, remittance companies are required to clearly state the exchange rate, any additional fees, applicable taxes, and the amount directly wired to the receiver.

Recipients are also notified in writing of their rights and the company’s cancellation and dispute policies. Remittance agencies are also required to provide their clients with their privacy policy and a disclosure that includes the expected transaction date and ways to contact relevant regulators. Many companies translate these policies into the most common languages used by their customers.

Under these rules, consumers are protected against errors such as unequal exchange rates for senders and recipients or transfer delays caused by actions of the agency. Additionally, all errors have a reporting period of 180 days. Agencies can take up to 90 days to investigate any error claims and must resolve the error if the agency is found liable.

The Importance of Remittances on the East African Economy

Focusing on the money transfer needs of the African diaspora in Minnesota, entrepreneurial senior executive Garad Nor heads two successful international remittance operations, which process millions of dollars in transfers every year. As a reflection of the lucrative remittance market, Garad Nor’s latest venture, Banana Pay, handles over 10 million dollars in international transfers every month. 

The earnings of East Africans in Europe, Canada, and the U.S. are often sent back to relatives in their home countries. In Kenya, nearly four percent of the Gross Domestic Product comes from remittances. 

The billions of dollars infused into the economy helps boost flailing currencies and drives business growth. Moreover, the increased purchasing power of remittance recipients contributes to increased spending on education, healthcare, and other sectors that support economic development. 

Researchers have found that remittances can have ripple effects throughout a community. Recipients often use their extra income to buy more goods, which increases localized production and creates more jobs. 

However, remittances may deepen economic inequality and reduce participation in the workforce. In an attempt to democratize the benefits of remittances, the Kenyan government has enacted a series of policies to increase diaspora investment in nationwide projects.