Remittance Contract “Exclusivity” Costly, Restrictive to Recipients

CUNA/WOCCU Congressional Subcommittee Paper Urges Justice Department Review

June 03, 2009

WASHINGTON, D.C.—Exclusive one-way remittance contracts between financial institutions and money transfer organizations (MTOs) limit the competition necessary to keeping costs affordable for consumers. In an effort to change that, credit union trade groups CUNA & Affiliates and World Council of Credit Unions (WOCCU) recently issued a paper urging the U.S. Department of Justice to review such contracts in light of their ability to effectively limit or eliminate opportunities for low-cost remittance activity. The paper was issued for a hearing by the Congressional Subcommittee on Financial Institutions and Consumer Credit, which convened today in Washington.

Led by the subcommittee chair, Rep. Luis Gutierrez (D-IL), the group met to review current remittance regulation and disclosure activities. The CUNA/WOCCU paper was submitted in support of cost-effective remittance activities between U.S. credit unions and credit unions in developing countries, primarily in Latin America. Complex language couching exclusivity agreements is sometimes confusing and ultimately costly to small credit unions and microfinance institutions and their clients, which prompted allegations of deliberate attempts by large U.S.-based MTOs to limit or eliminate competition.

"Credit unions throughout the world are leading the way in ensuring that immigrants have access to affordable remittance and financial services," said Pete Crear, WOCCU president and CEO. "We want to work with Congress to encourage competition in the market and limit these troubling negotiation techniques employed internationally by a select group of money transfer organizations."

WOCCU has seen an uptick during recent years in remittance activities processed through IRnet®, the international credit union remittance service offered by WOCCU Services Group, the association's for-profit subsidiary. The network supports transactions between 330 U.S. credit union locations and more than 800 rural and urban credit unions in Bolivia, Ecuador, El Salvador, Guatemala, Kenya, Mexico, Nicaragua and Peru. Since IRnet's establishment in 2001, US$2.6 billion has been transmitted through the program, making it one of the largest remittance programs of any microfinance network.

Credit union remittance services offer the highest level of transparency and disclosure, efforts that CUNA has supported since 2003 through a set of best practices for wire transfers among U.S. credit unions. Exclusivity clauses and other restrictions reduce the credit unions' ability to offer affordable remittance services to developing countries, especially through large remittance corridors to countries such as Mexico and El Salvador. Excessive fees and penalties charged by MTOs are often passed on to remittance recipients, many of whom would live on less than US$1 per day without remittance support, the trade groups noted.

The CUNA/WOCCU paper urges Congress to consider the extent to which one-way exclusivity clauses are used by U.S. remittance firms, the degree to which monetary penalties affect business practices and remittance amounts and how pricing differs in countries where exclusivity contracts are prohibited by law.

"Because many of the money transfer organizations engaged in competition-limiting practices are U.S.-based companies, we believe it's both appropriate and necessary for Congress to inquire into this issue," Crear said. "Monopolistic techniques not only prevent credit unions from better serving their members, they also remove the free-market factors that keep remittance prices from rising."

World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.

World Council has implemented 300+ technical assistance programs in 89 countries. Worldwide, 68,882 credit unions in 109 countries serve 235 million people. Learn more about World Council's impact around the world at

Organization: World Council of Credit Unions
Phone: (608) 395-2000