Member's bill from Labour's Arena Williams seeks full disclosure of international money transfer costs

Labour Party MP Arena Williams says her bill drawn from the Member's Ballot on budget day would require full disclosure of all fees, commissions, and exchange rates before an international money transfer is made.

The Financial Markets (International Money Transfers) Amendment Bill comes after the Commerce Commission's  market study into competition for retail banking services raised concerns about international money transfers, even though they weren't part of its narrow terms of reference focused on deposit accounts and home loans.

"Too many families are losing money to hidden fees when they send remittances overseas. That’s not fair, especially with the cost of living rising," Williams says.

"My Financial Markets (International Money Transfers) Amendment Bill will require banks and other money transfer services to be upfront about their fees, exchange rates, and commissions. Consumers should know exactly what they’re paying, before they send a cent."

"Banks and finance companies charge for these services in a way most consumers won't understand. It’s not clear, it’s not fair, and it hits working families hardest," says Williams, Manurewa MP and Labour's commerce and consumer affairs spokesperson.

"This Bill is about making banking fairer for everyone, whether you're sending money home to support family or making a purchase online in a foreign currency...Everyone deserves to know what they’re paying."

The draft version of the Bill only runs to four pages. It says it would amend the Financial Markets Conduct Act, and require greater transparency for fees charged on international money transfer services by;

• requiring fair conduct programmes to include effective policies, processes, systems, and controls to ensure disclosure of international money transfer fees. And;

• providing for regulations to be made prescribing specific disclosure requirements for fees and charges for international money transfer services, including how information must be displayed at premises or on a webpage (if the transfer is made electronically online).

Its definition of an international money transfer service means the transfer of money from a person in NZ to an overseas recipient where, as part of the service, money is converted from NZ dollars into another currency.

The Bill also sets out that, in terms of international money transfers, consumers would be provided with enough information to enable them to be able to figure out the total cost of a transaction, inclusive of all fees and rates, before the transaction is initiated, with the total fee charged for international money transfer services displayed in a prominent location at the time and in the place the services are provided.

'There may be room to improve competition'

In the final report from its market study the Commerce Commission said it had received stakeholder feedback suggesting expanding its focus to include remittances, international payments and foreign exchange.

"We have not expanded the scope of our study in this way because these services do not appear to be relevant to understanding the wider competitive dynamics for personal banking services and focusing on them would take away from resources available to the rest of the study. However, during our exploratory research, we identified features of these services that suggest there may be room to improve competition, particularly around international money transfers," the Commission says.

It identified two issues that could impact competition; difficulty in opening or maintaining a bank account for smaller remittance providers, and a lack of transparency on pricing of international money transfer services.

"The magnitude of the issues around international money transfer pricing transparency is unclear. This issue would benefit from further investigation to understand the nature and size of the problem in New Zealand. If pricing transparency problems are found to be material and impacting competition, there are interventions that appear to have been successful in Australia that could be considered," says the Commission.

It says opaque international money transfer pricing may limit consumers’ ability to shop around and find the best value provider, noting the price of a money transfer can include; A fee charged by the provider, An exchange rate spread, and  other fees possibly including fees charged by intermediary banks that facilitate money transfers between the sending bank and the receiving bank, with the latter potentially also charging a fee for customers to withdraw the sent funds. 

"The existence of some of these price components and their significance may not be readily apparent without further work by the customer. For example, we’ve heard that many banks advertise headline exchange rates with a significant margin," the Commission says.

"Customers may be able to secure a more favourable exchange rate if they ask for one, but this can take time and effort. Time-limited quotes may also make it difficult for consumers to compare prices between providers. With the quotes constantly changing on each individual site, it becomes harder to accurately compare rates. We do not know how widespread this practice is, but it could further reduce the ability of consumers to effectively compare providers."

The terms of reference for Parliament’s banking inquiry, being undertaken by the Finance and Expenditure and Primary Production committees, don't specifically include international money transfers. However, the issue has come up there too.

Notably via international money transfer company Wise, which asked MPs to recommend the Government mandate price transparency for international money transfers.

Wise's Asia-Pacific Government Relations Lead Jack Pinczewski told MPs; "If you want competition-based solutions to banking problems, this is the low hanging fruit."

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