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Wednesday, October 1, 2003
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
    The committee met, pursuant to call, at 10:05 a.m., in Room 2128, Rayburn House Office Building, Hon. Spencer Bachus [acting chairman of the committee] presiding.
    Present: Representatives Bachus, Royce, Lucas of Oklahoma, Gillmor, Ose, Biggert, Green, Shays, Shadegg, Capito, Tiberi, Kennedy, Feeney, Hensarling, Garrett, Brown-Waite, Waters, Maloney, Gutierrez, Watt, Sherman, Lee, Inslee, Moore, Gonzalez, Lucas of Kentucky, Clay, McCarthy, Baca, Matheson, Miller and Emanuel.
    Mr. BACHUS. [Presiding.] Good morning. The Committee on Financial Services will come to order.
    This hearing today is entitled ''Remittances: Reducing Costs, Increasing Competition, and Broadening Access to the Market.'' Today, the committee meets to learn more about a growing business line that was long dominated by a few players. Remittances describe the funds sent from U.S. residents to friends and loved ones in other countries. Wire transfer companies now compete with banks, credit unions and other small businesses in the remittance market. Because of this competition, access to these services has increased, prices have fallen, and innovative products have been developed.
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    It has long been my belief that competition in the free market is the best way to increase quality and improve services. The average cost of remittances has fallen approximately 50 percent over the past four years. In some areas, it currently only costs about $13 to send $300 to Mexico. Money transfers by individuals living and working in the U.S. to Latin America are currently estimated at $10 billion annually, and should more than double to $25 billion by 2010.
    Every year, millions of people come to our great country to find good paying jobs and embark on the quest for the American Dream. Many must leave their family and loved ones at home when they come to the U.S., but they are able to share a measure of prosperity through remittances. It is important that we ensure an environment that enables people to have access to safe and low-cost remittance services and that any abusive operators seeking to prey upon unsophisticated consumers are subject to rigorous enforcement action.
    Remittances have grown from just a wire transfer of funds. Products such as debit cards and shared accounts have increased the ways in which funds can move more easily to other countries. Some have called for increased government oversight of the remittance industry. Others have expressed concern that excessive disclosures, artificially reduced fees and other intrusive regulations will only stifle improvements and increase costs.
    The purpose of today's hearing is to hear from proponents of these viewpoints and to highlight those innovations in the remittance market that hold the promise of making these vital products available to more consumers at lower cost. I want to especially thank Ranking Member Frank and Representative Gutierrez for bringing this issue to the committee's attention, and want to welcome the witnesses. I look forward to your testimony.
    At this time, I will recognize the gentleman from Illinois, Mr. Gutierrez, who actually spearheaded the move to hold this hearing today. I commend your concern and watchfulness over this issue.
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    Mr. GUTIERREZ. Thank you very much, Acting Chairman Bachus. It is a great pleasure to be here today to talk about this important issue. I would like to start by thanking the majority for agreeing to hold this hearing. I would also like to thank Ranking Member Frank, a steadfast supporter of the remittance legislation throughout the years.
    During the past 20 years, remittances to Latin American countries have increased not only in volume, but also as a share of income and total imports. Last week, President Fox announced that remittances sent from Mexican workers in the United States to their families back home reached a record $12 billion, representing Mexico's largest source of income, more than oil, tourism or foreign investment. However, such transfers can be unnecessarily costly for consumers in the U.S. due to a range of fees, many of them hidden.
    Wire transfer companies aggressively target audiences in immigrant communities with ads promising low rates for international transfers. However, such promises are often grossly misleading because the companies do not always clearly disclose extra fees charged for converting dollars into local currency. That is why I, along with Representative Frank, introduced H.R. 2074, the International Money Transfer Disclosure Act. My bill requires financial institutions and money transmitting businesses to, (A) disclose any fees to be charged to the recipient, including exchange rate or currency conversion fees, a final itemization of all costs, including all fees charged, and the exact amounts of foreign currency to be received by the recipient in the foreign country.
    Finally, the bill requires that disclosures of information be made in English and in the same language if other than English as the language principally used by financial institutions in the recipient country. For those of you who think I might be simply adding another language to our money markets, let me tell you that financial institutions involved iin the money transfer business already spend millions of dollars advertising on Univision and Telemundo, so simply making sure everyone understands converting the language once again is pretty simple. You get it on the front end when you get the business; you get it on the back end when they show up to your store.
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    Over three-quarters of all remittances that come to Latin America, approximately $25 billion, originate in the United States. Almost 70 percent of Latin American immigrants in the U.S. send remittances back home on a regular basis. That means approximately 12 million workers are sending money to their families back home. The money sent out to the families abroad was money earned upon hours of hard work and it was saved with great sacrifice from some very low-income taxpaying workers here in this country.
    For those living abroad, this money is vital to help pay for food and housing and education. This help enriches communities in other countries, creating a steady income and jobs for those who might otherwise migrate to the United States to find work. But a sizable portion of these savings never makes it to these countries. Instead, it is claimed as fees, most in the form of punishing exchange rates that remittance services levy on immigrants who wire money home. The fees accompanying remittances made through the wire transfer companies can sometimes reach as high as a 20 percent difference between the benchmark established here in the United States and the exchange rate.
    Money transfers have grown significantly since the increased acceptance of the matricula consular by financial institutions. I want to take this opportunity to commend the Department of the Treasury for their recently released rules on section 326 of the PATRIOT Act and for the decision to keep the rules unchanged as far as the matricula consular. Allowing financial institutions to accept the use of matricula consular represents an important step in reducing the number of unbanked and reducing the cost of transferring money, and also brings safety to that money. A study recently conducted by the Pew Hispanic Center indicates that reducing the cost to 5 percent of the amount remitted would free up more than $1 billion to some of the poorest households in the United States, Mexico and Central America.
    In conclusion, I hope we could agree, Mr. Chairman, that offering basic transparency for these services will provide consumers with the ability to make informed and educated decisions regarding the services they choose. I look forward to the testimony today, and will just end by saying, Mr. Chairman, I came about this when I was in Acapulco and I used my ATM card. Then I checked the exchange rate that I, a tourist in a hotel in Acapulco received, with what I received using my ATM card here in the United States, with the exchange rate established by MoneyGram and Western Union. On that particular date, the difference was 14 percent. That is, I got 14 percent more pesos for my dollar than a poor immigrant worker working long hours sending money back to their families. I obviously did not need it as much, being a tourist on vacation, as a hard-working person in the United States. So if that is what's going on, we want transparency. We want clarity, so that there can be true competition for that huge number of people who want to help their families back home.
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    Thank you very much, Mr. Chairman.
    [The prepared statement of Hon. Luis V. Gutierrez can be found on page 58 in the appendix.]
    Mr. BACHUS. Thank you, Mr. Gutierrez.
    At this time, are there other members that wish to make an opening statement? Mr. Hensarling? The gentleman from Texas is recognized.
    Mr. HENSARLING. Thank you, Mr. Chairman.
    Mr. Chairman, the title of this hearing is ''Remittances: Reducing Cost, Increasing Competition and Broadening Access to the Market.'' It seems to me that these three things exemplify what has been occurring in the remittance industry in recent years. So it is my opinion that as we examine the role of the federal government with regard to remittances, we should also celebrate the triumph of free enterprise and competition in providing consumers with readily available low-cost access to money transfer services.
    According to an article from yesterday's Dallas Morning News, my hometown newspaper, remittances from the U.S. to Mexico are somewhere in the neighborhood of $1 billion a month. As a direct result of competition among banks and credit unions and traditional money transfer service providers, commissions on these remittances have dropped from approximately 20 percent to as low as 4 percent in the last decade. To date, more than 200 credit unions in the United States have partnered with Mexican credit unions to offer money transfer services, granting access to parts of Western Mexico that had previously been unreachable. Banks continue to form partnerships to help them compete with the traditional money transfer companies like Western Union and MoneyGram, who alone operate tens of thousands of outlets throughout North America.
    In addition, to help serve consumers more efficiently and effectively, larger banks like Bank of America and Wells Fargo are promoting the use of ATM cards that can be used to withdraw money that has been transmitted from the U.S. All of this gives the appearance of a fairly robust marketplace. The end product of this increase in competition and innovation is what is most important to consumers, more choices at lower cost. The free market, not the government, has brought about this result.
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    Some maintain that price differentials are unseemly and perhaps border on fraud, but if I can use an analogy, as the father of two small children, I am often asked by my wife to go and buy a gallon of milk. Now, sometimes I can drive five miles to the local Tom Thumb grocery store, park a long way away from the grocery store, and wait in a long line to get my gallon of milk. Or I can go to the neighborhood 7-11 where there is one on about every other street corner, park right in front of the store, wait in no line, but pay 30 cents more for my gallon of milk. Often, I choose the convenience of going to the 7-11.
    The point is that a simply higher price for what one may view as a commodity should not necessarily be the subject of a congressional inquiry. One brand name could be stronger than another. One could offer more convenient locations or more convenient hours than another. So concerning the federal government's involvement in this industry, I have to ask myself what could Congress possibly do at this point to benefit consumers choosing to use these services. We should be very careful, because additional regulatory burdens placed upon these companies in this business could limit access for consumers to these services, and would almost assuredly result in an increased cost in these transfers. To me, the best consumer protection is a competitive marketplace, and from what I see of the evidence that I have gathered so far, a competitive marketplace does exist in this industry.
    Some have used the term ''fraud'' in connection with some players in this industry. I take every accusation of fraud quite seriously. There is no doubt that the large bulk of the population that uses remittances are recent immigrants to America and perhaps more susceptible to fraud than others. I look forward to hearing the evidence of these charges, and should the evidence be persuasive, I will help lead the charge in ending any abusive or fraudulent practices in the industry. But at the end, Mr. Chairman, we should be very, very careful where a competitive industry already exists, that we do not make it less competitive.
    I thank the chairman and yield back the balance of my time.
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    Mr. BACHUS. Thank you. I appreciate that statement, Mr. Hensarling.
    At this time, we want to welcome our first panel, which consists of our good friend, Honorable Wayne Abernathy, Assistant Secretary for financial institutions at the Department of the Treasury. We know that this is an extremely important issue for the Department of the Treasury and one that you all have been spending time on, so we very much look forward to your comments, Mr. Secretary. Without objection, your written statement will be made a part of the record. At this time, you will be recognized to give a summary of your testimony.
    Mr. ABERNATHY. Thank you very much, Mr. Chairman. It is a pleasure to be here before you again. I appreciate the invitation from you and the members of this committee to discuss this important issue of the remittance of the hard earnings of people who work here in this country to their homes and families.
    People working in the United States and elsewhere have been sending money back home for centuries. According to some estimates, people all around the world send $72 billion to their homelands, far exceeding the total amount of official development assistance that is provided to poor countries. Mexican Americans will send an estimated $13 billion to their families in Mexico this year, the largest remittance market.
    For many countries, remittances are a substantial share of national income. In Nicaragua, for example, it equals something in the neighborhood of 16.2 percent of gross domestic product. There is a rather paternalistic view that remittances are used for so-called ''non-productive'' purposes. This idea is wrong. Remittances are used for the same variety of purposes that people here in this country use their income. They are used first and foremost for improving the living standards of their own families. One study has shown that families in El Salvador that receive remittances keep their children in school longer than families that do not receive remittances.
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    Whatever the natural barriers to remittances, our experience has shown that market forces are remarkably adept at surmounting these barriers. More stubborn to surmount are governmental barriers. A significant element in the progressive improvement in service and reduction in cost of remittances to Mexico has been the removal of barriers to financial commerce under the North American Free Trade Agreement. Our focus at Treasury has been on promoting competition in remittances as the most effective means of reducing costs, while at the same time improving services.
    There are three main components to this effort. First of all, promoting competition in the United States; second, promoting competition in the recipient countries; and third, where appropriate, improving the links between the U.S. financial system and the financial system in recipient countries. In addition, we encourage investments in the financial infrastructure that supports each of these three goals.
    Promoting competition in the United States has been the easiest of the three. There are often many artificial barriers in the recipient markets. To cite one example, a country in South America forbids credit unions from receiving remittances, forcing credit unions in that country to convert to banks in order to be a recipient of remittances. We are working to identify such barriers and to persuade these governments to lower these barriers.
    It is also important to understand the fundamental value of good banking policy in the recipient countries. For example, Mexico's prompt action to resolve failed banks, Mexico's openness to foreign ownership of banks, and other pro-competitive policies in Mexico are widely credited for the relatively low cost of remittances there, and the continuing decline in the cost of those remittances. The Federal Reserve has been working on extending the International Automated Clearinghouse services to several countries. This will make available a channel for every bank to send remittances and other payments at very low cost. The Treasury Department has financial advisers in several countries throughout Africa to assist strengthening financial regulatory and supervisory practices.
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    The goal is to ensure that the flow of remittances is handled in a trustworthy and transparent manner, and thereby boost the confidence in their banking system and protect against fraud and money laundering and the flow of funds into the hands of terrorists. Promoting competition works. Recently we have seen several major banks enter the remittance market, expand their product offerings, and reduce their fees.
    Remittances are quickly becoming the central source of new foreign capital for many countries. It is funding that almost by definition gets into the hands of those who need it most, the families of those whose hard work earned the money. We will continue to promote competition and the linkages that facilitate it. It is just as important, however, not to kill remittances with kindness. Well-intentioned, but ill-advised mandates and regulation can raise costs and force suppliers out of the market. That, in turn, would likely reduce remittance flows, not increase them. Let us build upon our successes that we have already achieved and make it easier for families to build financial security here at home and abroad.
    Thank you again for the opportunity to discuss this issue with you today and for the support that members of this committee have given to this important effort to improving this important flow of financing. I am available to answer any questions that you may have.
    [The prepared statement of Hon. Wayne Abernathy can be found on page 61 in the appendix.]
    Mr. BACHUS. Thank you.
    At this time, I recognize Mr. Lucas for questions. No questions? Mr. Shays?
    Mr. SHAYS. Thank you very much for being here and for your testimony. With regard to remittances, I would like to just ask, when the Treasury Department established its rules under the PATRIOT Act as it related to the identification of individuals who had accounts. Could you explain to me why the rule would allow government-issued documents evidencing nationality or residence and bearing a photo or similar safeguard?
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    Mr. ABERNATHY. We discussed that issue with a number of law enforcement experts to find out, is there any particular value to be gained by retaining actual photocopies of these particular identification documents, or the regulation as written, would that be enough? Particularly the feedback we got from the local law enforcement people indicated to us that the way we have outlined it in the regulation captures what is needed for law enforcement purposes, without imposing any increased costs on financial services providers.
    Mr. SHAYS. How is that accurate, when what you are basically saying is you can be an illegal alien in the United States, get a document from their national government, and then we are allowing them to have transactions in the United States. Isn't that what you are basically concluding? Wasn't the PATRIOT Act attempting to not allow that to happen?
    Mr. ABERNATHY. The PATRIOT Act, with regard to the financial flows, was intended to prevent funding used for organized crime, terrorists and other types of activities. It was not intended to be an immigration document. We have other rules in place and other laws for dealing with immigration issues.
    Mr. SHAYS. I don't understand how you are responding to me. You are basically saying that an illegal alien will now be able to make financial transactions even though they are in the United States illegally. That is basically what you are saying.
    Mr. ABERNATHY. Almost. What I am saying is that illegal aliens in this country will be able to continue to have access to financial services, as they have had for the history of this country; that we did not see and saw no mandate from Congress to say that access to the financial services should be denied to people who are in this country illegally, or they are here without appropriate documents, the same way we do not put that barrier at the grocery store or any other vital services that are needed to conduct your day to day life.
    Mr. SHAYS. So basically it is the policy of the Treasury of the United States of America that it will allow for the facilitation of illegal aliens to make financial transactions, and the Treasury Department will, under its new regulations, in spite of the PATRIOT Act, allow this to continue.
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    Mr. ABERNATHY. Actually, we believe that the regulations are in full compliance with the PATRIOT Act, both the word and the legislative history that accompanied that statute.
    Mr. SHAYS. Okay. I just would conclude by saying that when I voted for the PATRIOT Act and I voted for this, I thought we were instructing the Treasury Department to crack down on an abuse that has happened for a long time. For you to suggest that because it has happened in the past, somehow makes it consistent, therefore you are going to be consistent. I thought when we passed the PATRIOT Act, we were going to begin to crack down on what we thought were illegal transactions.
    Mr. ABERNATHY. Yes, and I believe we do. The concept of the PATRIOT Act is to try to get as much of the financial flows that occur in this country to happen within the mainstream financial system so we can monitor them and so we can clamp down on the use of those funds for organized crime and terrorist purposes. In our view, pushing several millions of people into the financial black market would not achieve the purposes of that Act. We feel rather, by allowing people that are in this country, that are working hard, that are saving their money, who want to be able to engage in a financial transaction that is no more nefarious than wanting to pay their bills, ought to be able to have access to the financial services industry.
    Mr. SHAYS. Isn't it a fact, sir, that you just in a sense are facilitating the financial transactions of people who are here illegally? Is that not true?
    Mr. ABERNATHY. We are allowing those transactions to occur. That is correct.
    Mr. SHAYS. Right.
    Mr. ABERNATHY. Yes, sir.
    Mr. SHAYS. So when you say you are putting them in the light of day, what you are doing is you are facilitating those transactions.
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    Mr. ABERNATHY. We are getting them where we can see them; bringing them out of the black market.
    Mr. SHAYS. So is it your testimony by doing that you will be able to crack down on terrorist activities by those who are here illegally?
    Mr. ABERNATHY. We think it is easier to crack down on something you can see than it is on something that is hidden.
    Mr. SHAYS. But something that is hidden may not be able to take place. Let me just ask this. If it can happen and be hidden, that suggests that it is easy to do. Is that your testimony? And if it is easy to do, then why would we even need to pass an Act to make it easy?
    Mr. ABERNATHY. I think we are certainly on the record saying that the ability for organized crime and others to engage in financial transactions, in as much as it occurs, if it occurs, is too easy. We want to stop all of those types of illegal, nefarious transactions. But we do not think that we are achieving that goal by preventing a young worker from being able to open a bank account to pay his bills.
    Mr. SHAYS. Thank you very much.
    Mr. BACHUS. Mr. Gutierrez?
    Mr. GUTIERREZ. Mr. Abernathy, in your testimony you said that foreign countries possess barriers that often adversely affect transactions. For example, you said that one country did not allow credit unions. Can you give us other examples of barriers that foreign countries put in place that debilitate a transaction?
    Mr. ABERNATHY. I think one of the most significant problems is that their financial systems are opaque and hard to access across borders. The ability of financial transactions to occur across borders is impaired by a number of procedures and restrictions that make it difficult and raise the cost of any kind of cross-border transaction. In another country, for example, in order to engage in any kind of a cross-border transaction, it is considered to be a foreign currency transaction. All of those transactions have to be done through the central bank or the State-owned bank, in essence disenfranchising any other types of financial providers from the remittances business and decreasing the competition.
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    Mr. GUTIERREZ. Could you provide the committee with a list of those kinds of barriers so that we might look at them?
    Mr. ABERNATHY. I would be happy to do that. I would say, we do not yet have a comprehensive list.
    Mr. GUTIERREZ. I understand. But the list that you do have, I think it would be helpful. As I meet with the ambassadors of these countries when they come to visit me, and I am sure other members of the House do as well, we might discuss these issues with them so that we can suggest they can make the necessary reforms and changes.
    Mr. ABERNATHY. Sure. I would be happy to do that.
    Mr. GUTIERREZ. It seems to me that hard-working people spend a large portion of their salaries sending remittances back to their loved ones in their countries. You mentioned testimony that competition in the marketplace is a key component. How is a consumer able to find the best deal when information is often not disclosed? And how can a consumer negotiate the best price without proper information? And should we do anything so that there is proper disclosure, as we have when I buy a home, for instance, or when I buy a car, for instance? There are state and federal regulations that dictate what I need to know about the interest rate and the what fees are charged.
    Mr. ABERNATHY. As I mentioned, we are working on three aspects: promoting competition abroad, promoting competition in the United States, and working on removing barriers. I think the biggest challenge we have in this country is helping to educate people about the variety of financial services that are available to them. I recently made a visit to a financial institution in North Carolina. You will have the President of that organization testifying here later today. They are doing a wonderful job in educating the Latino community.
    Mr. GUTIERREZ. Mr. Abernathy, since I only have five minutes, what can we do? What do you propose that we do so that we can have disclosure? Do you agree that there is a difference in conversion fees, that is from dollars to pesos, that many times is not adequately disclosed when a consumer goes to transfer money?
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    Mr. ABERNATHY. I understand. I think the key thing is——
    Mr. GUTIERREZ. I know you understand. Do you agree that those conversion fees are not often clearly established and stipulated when a consumer walks in?
    Mr. ABERNATHY. I think there are a number of factors that go into the cost of any particular financial product, and there is continuing discussion about how much do you need to dissect all the pieces to give the consumer adequate understanding of what goes into a particular price.
    Mr. GUTIERREZ. Let me give you an example. There is a tragedy in Guadalajara, Mexico, an explosion. A company puts ads on Univision and Telemundo saying, send money free, we are waiving the fee, that is the $15 fee to send $300 to Mexico. But is it really free in your opinion is there is a 14 to 18 percent difference in the conversion fee from those dollars to pesos?
    Mr. ABERNATHY. In order to provide a financial service, the service provider needs to be compensated.
    Mr. GUTIERREZ. I understand, but if someone says, $15 is waived, and put that on the airways, waived, send money for free, but if it was 15 percent on $300, that would be a $45 fee for transferring it. So I made $45, and it really was not free. I received $45. What I waived was the $15 fee, but not the conversion fee.
    So, Mr. Abernathy, I want competition in the marketplace, and we have done that. I think it is part of the government's responsibility, even if we have a marketplace, because I think the marketplace in many instances is driven to competitiveness because of the actions of our judicial system and the actions of our executive branch, and the actions of our legislative branch. This is the Los Angeles Times, Wednesday, October 10, 2001, court clears cash wiring settlement, discount coupons for as much as $400 million. Western Union, MoneyGram and Orlande Volute agree to pay over $5 million to community organizations, and they said they would behave themselves. They saw a 10 percent decrease in their business after they began disclosing. So you see, the courts and the people did get involved and that is the way our system works. Sometimes when the executive or the legislative branch ignores the needs of the people they go to court.
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    I just want to commend you again because I think what we have is disclosure: As we use the matricula consular, we are allowing people to go to their bank, open up a bank account, that is FDIC-insured and regulated; I know how much money is sent to whom and when it was sent and by whom in the United States. I think that kind of transparency is good for this country.
    Ms. BROWN-WAITE. [Presiding.] The gentleman's time has expired.
    Mr. GUTIERREZ. Thank you very much. If I could just have one additional minute, by unanimous consent.
    Ms. BROWN-WAITE. Without objection.
    Mr. GUTIERREZ. Thank you.
    I just think that as we approach these issues, because I understand when the gentleman from Connecticut raises this issue, that he genuinely feels that there is an issue of national security here. I just want to work with members of the committee, not on the Banking Committee, but in another committee, simply to say if you ate a chicken recently, it was probably plucked by the hands of an undocumented worker. That is pretty much established. If you had apples or oranges or just about anything that we produce agriculturally, it was probably picked by undocumented workers. If you had a clean dish at your hotel or your bed was nicely made, it was probably cleaned by an undocumented worker.
    So we all understand, and I will yield to the gentleman, that there are eight to ten million undocumented workers in this country. We do not have a program or the political will to deport them, nor do we have a program or the assets to do it, and if we did it, we do not know what the impact on our economy would be. So why don't we integrate them fully so that they don't need the matricula consular. They are here. They are working. We receive their services. We should address the issue.
    Ms. BROWN-WAITE. The gentleman's time has expired, and because it has expired, you cannot yield your time.
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    Next, Mr. Hensarling?
    Mr. HENSARLING. Thank you, Madam Chair.
    Just for the record, as the son and grandson of chicken farmers, I can attest to the fact that a lot of chickens are plucked and a lot of eggs are hand-picked by those who are American citizens as well.
    I do thank the gentleman for bringing to our attention this anecdote about the company advertising free remittance services that perhaps are not free. I think that such charges are very serious and need to be examined very closely. My first question for you, Mr. Secretary, is, in your examination of this industry, are such practices which we would commonly view as fraudulent and misleading, is this widespread through this industry?
    Mr. ABERNATHY. We have not conducted a survey of the whole industry with regard to whether or not there are fraudulent practices, but we are aware that there are significant laws on the books to deal with fraudulent practices should they occur. FTC has resources. There are local laws in place. The federal financial regulators when dealing with regulated entities are constantly vigilant looking for fraudulent activities. We would join with you that where fraudulent activities occur, they need to be dealt with expeditiously. They need to be dealt with firmly and in a way that sets an example so that you do not have further fraudulent activities that spoil the reputation of the honest service providers.
    Mr. HENSARLING. In looking at this marketplace, then, I am trying to figure out what the shortcomings of the marketplace may be. For example, in your survey of the industry, is accessibility a challenge? Are there not sufficient locations and insufficient financial firms offering these services? Is accessibility a problem?
    Mr. ABERNATHY. Accessibility is not a major problem in this country. In some of the recipient countries, it is a huge problem. In fact, what accounts in many cases for the significant transfer costs is the cost not here at this end, but of providing the service at the other end in the recipient country.
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    Mr. HENSARLING. Continuing on this line of questioning, do you view perhaps financial literacy among, once again it appears to be an immigrant population that largely uses these services, is financial literacy a significant challenge? If so, do you see a role for the federal government in that?
    Mr. ABERNATHY. That is a major challenge. In my view, financial education is probably the number one most significant tool we can use to help immigrant populations in this country make the best and most efficient use of the financial services that we provide. That is one of the main tasks that I have in my office. We have a deputy Assistant Secretary for financial education who spends his whole time working on that issue. His job is to organize the resources of the federal government and the private sector to get at the need to helping people understand how they can make best use of financial services here.
    Mr. HENSARLING. Would you agree that some of this financial literacy is being handled by the marketplace? I alluded earlier to my hometown newspaper, the Dallas Morning News. An article yesterday states that Western Union is touting its phenomenal network in a new $300 million global ad campaign. Citigroup is advertising that it offers a lower transfer fee of $5 to Mexico, half the industry average of $10. Bank of America and Wells Fargo are advertising a Buddy Card whereby receivers in Mexico can use an ATM card to withdraw the money that is transmitted. Credit union are teaming with Caja Popular Mexicana, or CPM, Mexico's largest credit union. It appears to me that a lot of the knowledge as far as prices and services are already being disseminated by the players in the marketplace.
    Mr. ABERNATHY. The vast bulk of the resources that are available for financial education are private resources. One of the tasks that we have set for ourselves at Treasury is helping these people, these private sources, that want to invest their funds in helping educate populations, helping them recognize what is the most effective means of doing that, how they can best use their money. That is where most of the resources are.
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    Mr. HENSARLING. Finally, Mr. Secretary, you mention in your testimony that well-intentioned, but ill-advised government initiatives in the remittance market could hurt competition. Can you elaborate on the potential negative outcomes of increased regulation?
    Mr. ABERNATHY. I think the key is to understand that every element of regulation carries a cost with it. In some cases, we are willing to pay that cost because there is a greater good. One of the areas is with regard to fighting money laundering. Every financial service provider in this country has a certain significant regulatory burden with regard to fighting money laundering, but we have accepted that cost. We try to reduce it as much as we can, but it is an acceptable cost.
    But understand that each new regulation has a cost with it. Many of these remittance providers are small operations. Their margin, their ability to withstand costs, are not infinite. We need to be careful to ask that if we are going to impose a regulatory cost, is the value of what that regulation is bringing worth the service that we are obtaining, and might we be driving some people out of that market.
    Mr. HENSARLING. I am out of time. Thank you, Mr. Secretary.
    Mr. ABERNATHY. Thank you.
    Ms. BROWN-WAITE. The gentlelady from California, Ms. Lee, is recognized.
    Ms. LEE. Thank you, Madam Chair, and thank you, Mr. Secretary, for being here.
    Let me also thank Mr. Gutierrez for his very strong leadership on this very important, but often neglected issue of remittances.
    We all understand the nature of predatory lending, just on a domestic level. I think part of this disclosure effort with regard to H.R. 2637, and I am very proud to be a cosponsor of that bill, is to try to make sure that this predatory aspect of what we are dealing with domestically here in many of our communities is stopped in terms of the remittance industry. I would just like to get your take once again as a follow up to what Mr. Gutierrez asked with regard to disclosure and what we can do to protect our constituents and protect those who receive the remittances from this predatory type of practice.
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    Secondly, let me just ask you, and I think that this hearing rightfully so is focused on Mexico, Central and Latin America. But I am also interested in the character and nature of the remittance industry as it relates to Haiti and, of course, Cuba. That is a separate category because of the embargo. What is the nature and character of that financial structure? And finally, there are some countries in Africa such as Ethiopia where we know that there are huge dollar amounts of remittances taking place.
    Then I would like, Madam Chair, to yield the balance of my time to Mr. Gutierrez after the Assistant Secretary answers my questions. Thank you.
    Mr. ABERNATHY. Thank you for your questions. Information, of course, is very valuable. What is done with the information is equally as important. I think in any kind of consideration of what kind of information should be available to people who are deciding what kind of financial services they want to make use of, is making sure that the people getting that information understand it; that they know what they are doing with it; and that it is the information that they particularly need.
    One of the challenges that we have with government mandates for information is there is a constant struggle to discover whether or not the information that is being provided is actually the information that is needed, in a form that is usable. As you know, there is a real struggle going on right now as we are looking at the Gramm-Leach-Bliley privacy notices. Congress made a decision, a very good one, that people ought to know what the privacy practices are of their financial institutions, but I do not think anybody is satisfied that the information that is provided subsequent to that law is very usable. It is heavily legalistic. It is long. It is provided in an inconvenient way, and it generally has just increased the costs of financial services without really benefiting consumers. The financial regulators are looking at that right now to find out if there is a way to put that into a usable form.
    I think that is the same thing when looking at any kind of financial service and trying to find out what is it that consumers are really interested in, and how can we make sure that that information is provided in a way that they can understand. We would be interested in continuing to have a dialogue with you on trying to discover just what are the answers to those questions, but I think those are the principles that govern, as well as making sure that any kind of information requirement can be done in a way that encourages and promotes competition, rather than increasing the cost of it.
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    Within those boundaries, I think we are happy to have a particularly detailed conversation with you to find the answers to those.
    Ms. LEE. How about as it relates to Cuba, the nature and character of the remittance industry, as well as countries in Africa and Haiti?
    Mr. ABERNATHY. As you mentioned, Cuba is a particularly special case because of the embargoes that we have in place. The ability to send U.S. dollars abroad and keep them out of the hands of a very repugnant regime is a challenging one. I do not think we have the right answer for that, frankly, in any kind of an ongoing basis. We had similar problems with regard to countries in Southeast Asia for a time, terrible stories of families that in essence were held hostage to try to get remittances from this country that would ostensibly be going to help the families abroad in these Southeast Asian countries, but that would be actually gobbled up by the government. That was not helping anybody.
    Ms. LEE. How about the countries in Africa, such as Ethiopia?
    Mr. ABERNATHY. Countries in Africa, what we are trying to do there is introduce a regulatory regime in those countries that will allow financial services to thrive. If we can develop financial services that reach the consumers, then we can get remittances into the hands of the families themselves. That is the biggest challenge there, and the success varies. In some countries we are having greater success than others. I would have to get back to you on Ethiopia. I just do not know exactly what the status is.
    Ms. LEE. Okay. Thank you. May I yield what time I have left to Mr. Gutierrez?
    Ms. BROWN-WAITE. Your time has expired.
    Ms. LEE. Oh. Sorry.
    Ms. BROWN-WAITE. The gentleman from Arizona, Mr. Shadegg, is recognized.
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    Mr. SHADEGG. Thank you, Madam Chairman, and thank you for this interesting hearing.
    Let me begin by asking, as I understand it there has been a substantial increase in competition in this market in the last few years. Is that your understanding?
    Mr. ABERNATHY. Very significant. It is almost each month we find a new product that is offering remittances at lower cost and increasing variety that meets the needs of people in this country and in the recipient countries.
    Mr. SHADEGG. There are companies that specialize in remittances, and then I take it these companies are getting into the business. Is that correct?
    Mr. ABERNATHY. You have some specialized companies that do little more than money transfers. Now, you are having an increase of regular mainstream financial institutions that are offering remittance products not only as a sideline, if you will, as a package of other financial products that they offer to consumers here.
    Mr. SHADEGG. Are there some small businesses getting into this market and doing just a niche market in various areas?
    Mr. ABERNATHY. There are a number of small businesses, a number of mom-and-pop operations that are providing services that I have to say must be meeting the need because they continue to thrive. Customers are using them.
    Mr. SHADEGG. I understand the gentleman's concern about competition. One of the concerns I have is, as you have pointed out, any regulation we might add could in fact be a barrier to entry and stifle competition. One of the concerns I would have about any legislation would be if we impose a regulatory burden which then drives out the small players, we are actually decreasing competition and perhaps driving up prices. Is that not correct?
    Mr. ABERNATHY. Yes, I believe that if we just had the major players in this market, you could see an increase in the costs prices going back up. I think it is the threat that there could be new entrants into the market that caused financial players at all levels to try to lower their costs to gain marketshare.
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    Mr. SHADEGG. To that point of driving up costs, you make the point in your testimony that remittances to some countries are easier and less expensive and could comply with a regulatory scheme, I would assume, more readily than remittances to other countries. For example, in your testimony you make the point that remitting money to Mexico, where there is a pretty established market in the exchange rate and knowing it and publishing it or disclosing it would be fairly easy, is much easier than making remittances to smaller countries. Could you elaborate on that point?
    Mr. ABERNATHY. The key is, you need to have a commercial relationship to get the costs down absolutely as far as they can be. One of the goals, I believe, of our effort to establish free trade agreements around the world is not only to deal with transfer of goods, but also transfer of services, and remittance services are an important part of that.
    Mr. SHADEGG. The gentleman made the point about this advertisement that disclosed they had waived their fee, and then they in fact did not use a very favorable exchange rate. Exchange rates are published for some countries, but are exchange rates published and is there a market for exchange rates for every country around the world?
    Mr. ABERNATHY. A lot of countries fix their exchange rates, so they do not float. They are not exchange rates that change from time to time. They are either pegged, or in some cases they are a hard exchange rate. The same exchange rate that prevails today will prevail tomorrow until there is a significant government change.
    Mr. SHADEGG. But aren't there also countries where it is difficult to establish the exchange rate because there is no ready market between the United States and that country?
    Mr. ABERNATHY. Certainly. Yes, there are some currencies that are just not convertible, and it is hard to figure out what kind of appropriate exchange rate there may be.
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    Mr. SHADEGG. One of the concerns I have is that some of the legislation that is being contemplated turns a kind of a blind eye to the differences between countries and says, well, you must publish in advance the exchange rate for every country in which you do business. As I understand it, that would be, if not impossible, at least difficult, maybe in fact impossible, and certainly would drive up costs for any business that was involved in doing remittances to smaller countries.
    Mr. ABERNATHY. Yes. I think what we need to be careful of is any kind of regulatory regime that has at its heart a model that does not apply in these countries. It may be a model that might apply better in financial transactions between the United States and Britain, than might be the case with a financial transaction between the United States and a Caribbean country or in a country that may have multiple exchange rates. Which one do you publish? There are several countries that have exchange rates for domestic transactions, another exchange rate for international transactions. The variances and the varieties are very wide and would be very difficult to capture by any one single rule.
    Mr. SHADEGG. Do you know if, for example, requiring the publication in advance of the exchange rate of every country you did business with would in fact cause some of the major players to quit doing remittances to certain small countries?
    Mr. ABERNATHY. You certainly do not know for sure which ones might, but certainly a company would have to ask this question: Are remittances a major part of my business or is it a sideline? A lot of companies offer it as a sideline. Convenience stores might offer it as a sideline. And they might consider, I am opening myself up now to a very significant regulatory cost by offering this service. Am I going to be a day late with my publication of exchange rates? Am I going to have the latest list? Am I putting it in the right place? They might decide, just forget about that.
    Mr. OSE. [Presiding.] The gentleman's time has expired.
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    Mr. SHADEGG. Thank you.
    Mr. OSE. The gentleman from Wrigley Field.
    Mr. EMANUEL. Thank you, Mr. Chairman. I would like to yield my time to my good friend and colleague from Chicago, with one caveat, that if I can also just start with a question about what we could do to encourage the credit unions and other financial institutions to get into this marketplace. What are the incentives we need to do that? And I yield the remaining part of my time to my friend, Congressman Gutierrez.
    Mr. ABERNATHY. There are a number of credit unions that are already getting involved. We are excited by the number of credit unions here in this country that are involved, because in many cases credit unions have had the greatest success in reaching out to immigrant populations. A lot of people that come to this country come from countries where banks were not friendly creatures. They were owned by governments or often used to expropriate their customers' resources, so these people are very reluctant to get into the banking system in this country. But they have been open to the mutual concept of a credit union and have been willing to join credit unions in increasing numbers.
    So the involvement of credit unions in this country is very important. We are working with the credit union associations to try to encourage that. Moreover, there is an international association of credit unions that is working not only with our credit unions, but credit unions abroad to increase the use of credit unions in recipient countries as recipient venues for remittances. I think that is important abroad because in many cases a credit union can operate at a lower cost than a larger mainstream financial institution can.
    Mr. GUTIERREZ. Thank you. I thank the gentleman from Illinois for yielding the time, and I was very happy with the outcome of last night's game.
    The issue is not that we want to curtail activity. The fact is that some might extrapolate from comments made here that there is this great community and there is all this competition and that it all happened in a vacuum. That is to say, everybody woke up one day and said, hey, let's be fair and competitive. I do not think that is what happened. I think there were lawsuits filed in the year 2000; millions of dollars paid out as a result of those lawsuits. Of course, as in many lawsuits, nobody claimed fault, just millions of dollars were paid. Up to $400 million in coupons were offered. There was a settlement reached.
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    I think what we want to do is have transparency. One of the problems is that immigrants do not trust the banking systems from the countries that they come from because of the lack of transparency. I would like to assure them and to guarantee them that in America there is transparency when you make some kind of financial transaction. So I look at it, and I say, look at our United States Postal Service. It is in the business. Now, they charge you a fee. They tell you what the fee is, and they partner with the Mexican bank, BancoMER, and they establish the exchange rate. The fact is that there are different exchange rates, and the public cannot know what it truly is costing them to send money.
    We have already established that this is a $1 billion industry to Mexico alone.
    Mr. ABERNATHY. Each month, each month. Yes.
    Mr. GUTIERREZ. $12 billion a year, a huge industry. I do not think anybody is going to walk away from it because we say you have to establish what the exchange rate is. What we want is for people to know what it is going to cost, because these workers make some of the lowest wages, work the longest hours, and then what do they do with their money? God, if we would all do it. They send it back to their mom, their dad, their brothers and sisters. So as you said, Mr. Secretary, they can stay in school, they can get healthcare.
    So, they are not investing it. The thing is, Mr. Secretary, all we want to do is figure out a way so that I or any member of this committee or any American tourist, when they visit Mexico, can understand the exchange rates. You don't need to have an MBA from the University of Chicago to understand exchange rates. You go to your hotel. It says pesos to dollars. You go to the local bank, it says pesos to dollars. They are posted everywhere and they are clearly available.
    Do they change on a day-to-day basis? Yes, they change on a day-to-day basis, and they are competitive. But the fact is, we should be able to reach some kind of way so that when I walk in and I say I want to send $300 to mom, and they say it is going to cost me $15, I should at least get somewhat the exchange rate that the tourist in the hotel in Acapulco or Cancun is getting. Don't you think we should try to get that kind of exchange rate?
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    Mr. OSE. The gentleman's time has expired. We are going to let the witness answer the question.
    Mr. ABERNATHY. I think there is no disagreement between you and the Treasury on the need to get these costs down, to make sure people understand what the costs are. I think the problem is extremely complex, however. I lived for two years in Spain, not terribly long ago. I was a missionary. I in essence lived by remittances, because each month I would get a check from my parents that would keep me going for the following month. I remember going around trying to find out what was the best exchange rate. I found on any given day I could find four or five different exchange rates depending on where I went, because there are different ways that a financial institution can be compensated. They can be compensated by just a regular fee. They can be compensated in the exchange rate that they offer you, or in the fee that they charge as a percentage of that exchange rate. I do not know that we want to be in a business of saying which is the best way for you to be compensated. But we are eager to continue to have this dialogue with you and to find out if there is a way to identify the best means of getting the right information into people's hands, so that we can promote these markets.
    Mr. OSE. The chair, having arrived early and not having claimed his time, is going to claim his time and yield to Mr. Shays.
    Mr. SHAYS. Thank you, Mr. Chairman. What I would do, though, I would love to be able to utilize your time after my other colleagues have spoken, with your permission.
    Mr. OSE. We will rescind my recognition of time.
    Mr. SHAYS. I hope you give it to me later, sir.
    Mr. OSE. I don't know.
    I will have to get back to you on that. I am going to recognize the gentleman from California, Mr. Royce.
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    Mr. ROYCE. Thank you, Chairman.
    Mr. Secretary, I want to thank you for your thoughtful testimony on the topic of remittances this morning. This is a very important subject to my district. I am pleased that this issue is being debated before this committee.
    Since we are fortunate, Mr. Abernathy, to have you here this morning, I wanted to ask you a few questions about GSE regulatory reform as well. Specifically, people engaged in the GSE debate seem very concerned right now about the topic of mission regulation, and specifically on product approval. I believe the new regulator should have the authority for product approval, but could you tell me the Treasury's position on where product approval authority should reside? And could you explain to me the rationale for that position?
    Mr. ABERNATHY. Certainly, Congressman, and thank you for asking that question. In essence, I will be just re-echoing the testimony that Secretary Snow presented here. In our view, we need to solve the problem. The problem today is that the regulators for our GSEs, they were never given enough authority and they have not grown in their authority, particularly not nearly as quickly as the agencies they regulate have grown in activities and significance in their markets.
    One of the most significant authorities that the GSE regulators currently do not have, and they suffer for not having it, is the ability to review and on occasion perhaps to say no to a new product or a new activity. If you ask a bank regulator, you might have a discussion with members of the OCC or the OTS, ask them how significant new activity authority, the ability to review new activities, is as part of their panoply of tools to properly regulate institutions. I think they would say it is essential. They could not do their job without it.
    We are concerned that we get this legislation right so we do not have to come back here a few years later and say we blew it. We had an opportunity to give the regulator full authorities that they need and we did not do it, and now we have to come and do it again.
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    Mr. ROYCE. Thank you. I have another question. I have been arguing for some time that the risk profile of the federal home loan bank system is changing. I would like to ask if you agree with me, and if so, if you could explain how the acquisition and the retention of mortgage assets has changed that system in terms of new types of interest rate risk and so forth.
    Mr. ABERNATHY. Certainly, the federal home loan bank system is an evolving one. It always has been, but I think the pace of evolution has increased over the last 10 years, partly as a result of new powers that were given to the federal home loan bank system under the Gramm-Leach-Bliley Act; partly just because of changes in the marketplace. In addition to the traditional role of providing liquidity to banks, there are a number of federal home loan banks that offer particular products with regard to mortgages. Certainly, that has to change the risk profile of these institutions. I do not know if it makes them more or less risky. That is really an issue for the regulators to evaluate, but it certainly changes the risk profile. The regulators need to have the authority and ability to adjust to those changes in risk.
    Mr. ROYCE. A last question, again on the issue of GSE reform. I put forward a proposal in which we constructed a new regulator with independence from the Treasury, and that would be along the same lines as the OCC and the OTS, the same concept. It seems to me that there are a number of similarities between my proposal and the Treasury's. However, the Treasury does not want the ability to review policy. I was going to ask you, why does the Treasury believe that this is an important component of the reforms you are putting forward?
    Mr. ABERNATHY. I think it would be impossible for me to overemphasize how important that responsibility would be, to place that responsibility with Treasury. While we are looking at the mission of the GSE regulator, an even more important mission that we have to keep in mind is, what is the mission of the Treasury? The Treasury has the responsibility for the cash flows, the in-comes and the out-goes of the entire federal government. An essential element of that is the role that Treasury plays in going into the marketplace, the Treasury bills, the Treasury notes, and other instruments that carry the full faith and credit of the federal government. We must do nothing that compromises the ability of Treasury to go into those markets clean and to preserve our reputation, our spotless reputation in those international marketplaces.
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    To place the regulator for government-sponsored enterprises that each year are into the marketplace for trillions of dollars, not billions, trillions of dollars, if you are to place that regulator within the Treasury, but not give the Secretary of the Treasury any authority over how that entity carries out its responsibility, is to place in jeopardy the ability of the United States to offer its own debt instruments and to protect them from contamination from whatever should happen to the GSEs.
    Do we want to be in a situation where the troubles of a GSE can flow into and affect the ability of the federal government to issue its own debt? We cannot be in that kind of a situation. That would be an intolerable situation. All we have asked is that the Treasury secretary be able to have responsibility for reviewing new regulations and when policy issues are presented to the Congress. I think that is the minimum that is needed to make sure that we can protect the Treasury from any kind of contamination in the regulatory efforts over the GSEs from Treasury's main responsibility.
    Mr. OSE. The gentleman's time has expired.
    Mr. ROYCE. Thank you, Mr. Chairman.
    Mr. OSE. The gentleman from California, Mr. Sherman.
    Mr. SHERMAN. We do not have enough time to deal with the GSEs. Let me just comment that you have state-regulated banks that are reviewed for safety and soundness by the federal government and federally insured. So the idea that the federal governments needs program oversight in order to provide for safety and soundness is one that you might respond to in the record.
    Mr. ABERNATHY. I would be happy to do that. Thank you.
    Mr. SHERMAN. The idea that someone's immigration status should cause us to not want to provide consumer protection seems relatively absurd. If we want to deal with our immigration laws, that is one thing. But when you sign up for the do-not-call list, we do not ask you what your immigration status is, nor has anyone suggested that we can reduce the number of undocumented workers in this country if we just afflict them with telemarketers, nor is afflicting them with lack of consumer protection and financial services likely to be an effective substitute for the immigration policy our country does not have.
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    I think it is important that we move forward with reform in this area for the terrorism control aspects. If we are successful in pretty much driving out of business the gray market operators, then they will be small enough so that law enforcement can concentrate on what they do, while using computers and cooperation to look at the big operators who will then have most of the business. Terrorists will always use the black and gray market operators, but when those operators are doing billions of dollars, it is going to be hard to find the needles in the haystack. If we can get all the hay out of the black market, then you will be able to find the needles.
    The question is, how do we get better consumer protection, lower prices, better exchange rates, as Mr. Gutierrez has pointed out the need for, to those who are sending money abroad? We need more information for people, and especially more competition. In the absence of competition and the absence of information, certain companies make outrageously high profits. Who is making the high profits now? Is it those who control the incoming, the U.S. branches, or those who control the branches in foreign countries?
    It occurs to me that there are dozens of companies in my district anxious to compete for this remittance business. But if the only way they can get that money to a village in Guatemala is contract with one company in Guatemala, then they all are competing for the opportunity to pay a very high fee to the Guatemalan side of the transactions. Perhaps, Mr. Secretary, you can tell us, if you are paying $20, how much of that is going to the U.S. side and how much of that is being paid to those who control the foreign side, whether it be a U.S. company or whether it be a Guatemalan company, or whatever. Do we know?
    Mr. ABERNATHY. I think you are demonstrating one of the tough challenges that we have. Just by looking at a price itself, you have no way of knowing how much of a profit is the particular company obtaining from that. We do know that in several countries, the recipient market, if you will, is so controlled that there you do have parties that are obtaining monopoly rates. You have to go through certain channels, and those people, they take advantage of that.
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    Mr. SHERMAN. What I would ask the Department of the Treasury to do is to issue a report, because this concerns us. It is one thing if a foreign country is inefficient in this or that transaction, but here it is a U.S.-foreign country transaction. To issue a report as to which countries are doing a good job of serving consumers on both ends of this transaction, and which countries are not, that could be a very powerful force in causing certain countries to get away from, sometimes they are tied to tradition; sometimes the government is making a fortune on this; sometimes, and I know it never happens here in the United States, powerful political interests are exercising some control as to how financial services are operating. A U.S. government report that said, here are some countries that could change in this or that area, so that both sides of this U.S.-initiated transaction could be treated fairly, could certainly open things up.
    I would like to shift to one other question. I see you nodding. Can we count on you to issue such a report?
    Mr. ABERNATHY. Yes. I would be happy to comment. I think that is an excellent idea. From time to time, the federal government has issued reports on the barriers to financial services. This is certainly an area where the barriers to financial services have some very real human welfare consequences to it. It is not just a matter of whether or not an American company has the opportunity to market its products abroad. We see here where the barriers are decreasing the ability to send livelihood to a family, to help them meet their daily needs or maybe even build for the future.
    Mr. SHERMAN. Yes.
    Mr. OSE. The gentleman's time has expired.
    Mr. SHERMAN. My time has expired.
    Mr. OSE. The gentleman from New Jersey.
    Mr. GARRETT. Good morning.
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    Mr. ABERNATHY. Good morning.
    Mr. GARRETT. I appreciate the testimony we have heard so far, and I am encouraged on the one hand, by the positive effects that the market forces have had in this area, basically driving down the cost to consumers who want to engage in these activities. I want to follow up with just one question along the lines that my colleague from Connecticut was raising.
    While we have the objective of trying to make it easier for immigrants to our country to be able to engage in this activity and send money back, as the Statement over here on this side of the aisle was, to mom and dad who are still living overseas and need the funds and benefit to the other countries, I think we can agree that we do not have the objective of providing this service for illegal immigrants to do so, whatever the noble causes they may have over there, where they are sending the money back.
    This committee has had the opportunity in past months to have hearings in the area of money laundering and terrorism use of funds that are sent back. My colleague raised some of those points. I was struck by your comment when they were raised, to say that, well, we do not do this in the area of checking for identification at the food store or what have you. And my colleague on the other side raised the interesting point as far as telemarketers. Maybe we should just say that the only people that telemarketers can call are illegal immigrants, and that might have an impact on immigration here.
    You raise a point in a serious note that we do not do this in other areas, but obviously in the financial area we are talking about something that is regulated by the federal government. The banks are chartered by the federal government. It is only in a banking situation where we already have the law, correct me if I am wrong, that if I want to go in and open up an account at my local bank that I have used for 20 years, I have to provide proof of identification now. Is that correct?
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    Mr. ABERNATHY. Yes.
    Mr. GARRETT. But I do not have to do that if I go to the food store or if I go to use a telemarketer. I do not have to do that in those areas. So we are regulating and provide for identification in these areas. So can't we in this committee be able to draw a distinction where there are certain areas where we need to provide identification and there are laws already on the books saying you have to provide identification, that that identification has to be a valid form of identification? And the other areas such as food stores, telemarketing companies, the dry cleaners, where we are not asking for identifications, we can draw a bright line between those two areas and say which ones we will regulate and which ones we won't.
    Mr. ABERNATHY. Yes, sir. I agree with that entirely. In fact, the regulation we put forward places an affirmative obligation on the part of financial institutions to be sure that the form of identification that they are receiving is a valid form of identification. That is the obligation that is placed upon the financial institution. It is enforced by the financial regulator. When they examine a bank, they ask the bank, what are your practices to make sure that your new accounts that are opened are being opened by people who present to you valid forms of identification? Frankly, the burden is on the financial institution to convince the regulator that their system is a bona fide system to verify that that person is who that person says he is.
    Mr. GARRETT. And would it be satisfactory to a regulator that the bank provides them with something as far as identification?
    Mr. ABERNATHY. Currently, most regulators do, yes. It is a bank-by-bank relationship, but as I understand it, bank regulators will rely upon ID cards, and there are a variety of different forms of identification that they use, in many cases multiple forms of identification where they think that additional forms are necessary.
    Mr. GARRETT. Why, then, should I feel satisfied that there is any legitimacy whatsoever to that form of identification if this state or this nation has no control over the adequacy of the documentation initially required to get that form of identification? Why should I feel satisfied that the regulators are doing a good job by accepting that identification?
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    Mr. ABERNATHY. I think really the proof would be in the pudding. If it turns out that the regulators are allowing forms of identification that are lending themselves to significant volumes of fraudulent identities, then they ought to look at those and say, that does not work for us.
    Mr. GARRETT. Let me ask you this question, then. Who would be using those forms of identification?
    Mr. ABERNATHY. The consular ID's?
    Mr. GARRETT. Yes.
    Mr. ABERNATHY. In many case in this country, probably the vast number of them are used by people who are otherwise undocumented here in this country.
    Mr. GARRETT. So can you think of anyone who is in this country, other than an illegal immigrant, that would be using one of those forms of identification?
    Mr. ABERNATHY. We have received information from the State Department and others that they are used by a lot of people here for valid reasons, so that they do not have to produce their passport frequently, for fear of losing their passport, or people who have lost their passport. People who come here from Canada, for example, they do not bring their passport with them. They use a driver's license as their form of identification. We do not require a passport to come from Canada.
    The question that the financial services regulator is supposed to ask is not are you here legally; the question is, are you the person that this form of identification claims that you are. That is the issue that I need to know as a financial service provider.
    Mr. OSE. The gentleman's time has expired.
    Mr. GARRETT. If I could just ask this final question?
    Mr. OSE. You are going to have to get it on the second round.
    Mr. GARRETT. Okay. Thank you.
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    Mr. OSE. The gentleman from North Carolina.
    Mr. MILLER OF NORTH CAROLINA. Mr. Chairman, I yield my time to Mr. Gutierrez.
    Mr. GUTIERREZ. Thank you very much.
    As you can see, I guess that is why we have two parties, differing opinions on how we see things. But I think there is some commonality that is being derived as I listen to my colleagues on both sides of the aisle. And that is that there is an optimism on one side of the aisle that things are pretty good and if we leave them alone, they will probably get better. There is a slightly more pessimistic look on this side of the aisle that things are getting better, and we need to make them better and we should do some things to make them better because there are still some problems out there.
    I think we can all agree there are still some problems out there; that we do not have a perfect system; that we have a $12 billion industry just to one country alone, and that country happens to be, what is it, our second trading partner in the world, Mexico?
    Mr. ABERNATHY. Second, and perhaps quickly becoming our first.
    Mr. GUTIERREZ. And quickly becoming our first, which means that when we send these dollars back to Mexico, and they are converted to pesos, the more pesos they have, the more they can buy American goods, so more American workers thrive and have jobs, because our economy is global. When one person has money and spends it, he buys goods and products.
    Secondly, immigration issues are raised. I think you were pretty clear, Secretary Abernathy, when you said their kids have more of a tendency to be in school. They will be better educated, less likely to emigrate to another country and stay in their country, and very, very important, probably, strengthen that country; strengthen the intellectual fortitude of that country so it can be stronger and provide a more robust economy that will provide jobs for their people. Because people do not wake up one day and say, I want to travel thousands of miles across a dangerous border to a country where I do not understand the culture, the mores or the language, simply because that is what I want to do as an adventure. They do it because they have very serious needs.
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    So I think that maybe if we could establish some kind of working force, because it seems to me, Mr. Secretary, that the President was very wise and very prudent in the very early months of his administration when he set forth, with President Fox of Mexico, to figure this out. Probably as the former governor of Texas, he had very good experience at understanding the relationship between the United States and Mexico. As I recall, he said he wanted to figure this out, figure out what we do with the undocumented workers here and how we provide for them to come across the border and work in industries where we do not have enough workers. He also wanted to establish some kind of sense of certainty about the money.
    I have listened to Secretary Colin Powell, state the same things, that we need to go back. Maybe we need to go back to that discussion and that debate so that we can take care, because I think that Mr. Shays' concerns and Mr. Garrett's concerns about issues of national security are prudent and reasonable and well-founded concerns, and we should address them. But I think we are going to need a holistic approach to address them, so that we can get at them.
    I, as a member of Congress, which last time I checked was among the number one percent of wage earners. Does $155,000 count for number one percent of wage earners?
    Mr. ABERNATHY. I would think so, probably yes.
    Mr. GUTIERREZ. We have Treasury to establish, the number one percent of wage earners in the United States. I pay $2 to get $300 exchanged. We need to look into this framework, so that I, a person among the number one percent of wage earners in the United States, go on vacation, use the money to rent a jet ski, then the person who makes minimum wage, who is sending money back home so that his mom, his wife, his children can be better fed and better educated, obviously a higher purpose than a jet ski, can get somewhere a better exchange rate or a similar exchange rate to the one I get. I think that there is probably no disagreement on either side of the aisle that that should be a goal.
    How can we work, because we will have this hearing. Everyone will go back home and things might not change. How do we get there, Mr. Secretary? What would you propose we do?
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    Mr. ABERNATHY. I can tell you, after this hearing I go back to work on these issues. These are issues that we deal with every day. I think we have had a lot of success. But you are correct, there is a lot more that needs to be done.
    I think it is not only the exchange costs that we want to reduce. There are a lot of other fees that we would like to get down. We would like to reduce the fees of just obtaining the kind of cards that allow the low-cost transactions to be executed. We are trying to get a lot more people in this country to establish savings accounts, checking accounts; to get their credit card so that they can take advantage of the products of some of these large banks that are establishing a system where people in Mexico can just have a card and go to a number of different merchants, and they avoid the exchange fees almost entirely.
    Mr. OSE. The gentleman's time has expired.
    The chair is going to claim his time now, and yield to the gentleman from New Jersey.
    Mr. GARRETT. Thank you. Just a clarification, you said there has not been a preponderance of evidence to indicate that the matricula consular cards are being used in this manner, and if it were, then maybe you wanted to have the regulators look into whether they should be accepting them or not.
    Mr. ABERNATHY. Used in a fraudulent manner.
    Mr. GARRETT. Right. My question then is, how can you make that statement since we do not have control over what documentation is necessary to prove who these people are? It is a foreign nation that is doing that. So how do you verify there is not illicit use of these cards, that the people really are who they are, then?
    Mr. ABERNATHY. Well, based upon law enforcement processes where you have people who are trying to engage in fraudulent transactions on the basis of a fraudulent ID, the same way that we would find out whether or not someone has a fraudulent Virginia driver's license or a fraudulent Canadian driver's license. We do not see that the incidence of fraudulent use of consular ID's is any higher than it is for domestic driver's licenses or many other foreign sources of identification.
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    Mr. GARRETT. Okay. Thank you.
    Mr. SHAYS. Thank you.
    When you talk about the whole issue of immigration, it gets touchy. So you watch your words carefully and Mr. Garrett does and all of us are trying to. But it gets more touchy when we try to deal with the issue of illegal immigration. I just want to say, I would double legal immigration, but I want us to crack down on illegal immigration. I am troubled that we have people who jump in line in front of the people I am trying to help. They range in thousands, who come to my office who are trying to get their parents here legally, their children here legally and so on.
    It bugs the heck out of me that we have a government, the Department of the Treasury, that is facilitating illegal immigrants. That is why I raise these questions. It bugs me that we passed a PATRIOT Act that said you need to verify who is registering. I find it, Mr. Abernathy, extraordinarily disingenuous for you to suggest that these cards that are issued by foreign countries are valid identifications. We were trying to stop this stuff.
    Now, under the rules you adopted, you said a taxpayer identification number, Social Security number, individual taxpayer identification number, employer identification number and so on. Now, is it legal for a company to hire an illegal alien?
    Mr. ABERNATHY. I am no expert.
    Mr. SHAYS. You don't have to be an expert.
    Mr. ABERNATHY. I am not an expert on immigration laws, but I believe that there are rules governing that.
    Mr. SHAYS. The answer is no.
    Mr. ABERNATHY. Okay.
    Mr. SHAYS. The fact that you don't know that, and you would say you are not an expert and would not answer it, I find mind-boggling. You know it is illegal to hire illegal aliens, don't you?
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    Mr. ABERNATHY. I don't know the total details of how and under what circumstances.
    Mr. SHAYS. I am not asking the total details. Is it legal to hire an illegal alien?
    Mr. ABERNATHY. As a general proposition, no.
    Mr. SHAYS. Thank you.
    So then you get, in your numbers you say in one of the requirements, number and country of issuance of any other government-issued document evidencing nationality or residence, and bearing a photograph or similar safeguard. Isn't it true that this will allow people who are illegal aliens to be able to make financial transactions?
    Mr. ABERNATHY. It would allow financial institutions to accept identifications from people who are illegally here, yes.
    Mr. SHAYS. So how can you suggest otherwise, then you are enabling financial institutions to basically assist the financial transactions of people who are here illegally?
    Mr. ABERNATHY. I am not quibbling with that. I think they do. They allow people who are here illegally to engage in financial transactions.
    Mr. SHAYS. Then why would we do that if we make it illegal for someone to work here illegally? Isn't the money that they earn, earned illegally if they are working illegally?
    Mr. ABERNATHY. I presume that it is, but I wouldn't know. There are many people that might receive money from other sources.
    Mr. SHAYS. But the bottom line is, the answer is yes again.
    So we are left with the fact that our government, contrary to the PATRIOT Act, has decided to facilitate individuals who are here illegally, working illegally, and enabling them to make financial transactions. I find that a contradiction I cannot figure out.
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    Mr. ABERNATHY. Our regulations are not only fully compliant with the PATRIOT Act, but they carry out both the letter and the intent of the PATRIOT Act.
    Mr. SHAYS. No. I am going to dispute that, because the PATRIOT Act says we want verification. And you know and I know that this is the easiest way to have fraud, the easiest way to allow people who are here illegally to not disclose their true names, the easiest way to allow for the very thing we are trying to prevent, corruption and terrorism et cetera.
    Mr. ABERNATHY. I would have to disagree with that. I don't think the evidence demonstrates that.
    Mr. OSE. The gentleman from Texas, Mr. Gonzalez.
    Mr. GONZALEZ. Thank you very much, Mr. Chairman. I am going to try to be as quick as possible. I apologize for getting here late, Mr. Secretary, and missing your testimony. In reviewing your written submission, though, you indicate promoting competition in remittances, and what you feel are three main components of this efforts, one, promoting competition in the United States for the origination of remittances. Do you have any comments, does the department have a position regarding the proposed merger of First Data and Concord EFS?
    Mr. ABERNATHY. No, we do not have any particular view on that, not that I am aware of.
    Mr. GONZALEZ. Do you know if that is up for consideration, that you will be expressing any kind of opinion? Because we know that there is going to be some inquiry and certain groups may be opposing it and asking the Department of Justice to look at, which I would imagine that is appropriate. What would your department in essence be doing, if anything, that you know of?
    Mr. ABERNATHY. That is not something that is handled in my office, but I can certainly make inquiries with other parts of Treasury that would be dealing with that, and get back to you.
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    Mr. GONZALEZ. Yes, because some opinions are being expressed that it goes against what you are proposing in the way of increasing competition. That is all I am asking. I have not taken a formal position. We have discussed it with different representatives from both opposing sides to the argument. I was just wondering if anything had been done on that.
    I do want to touch on a couple of issues that have been brought up by my colleagues. I think we all respect one another's opinions. We just come from different perspectives and for different reasons. But in the whole scheme of things, when we are talking about remittances and we are talking about identification, and we think of the PATRIOT Act and what we are trying to accomplish, in the big scheme of things, when you think of terrorists, when you think of how they accomplish their goals, is truly what we are talking about here at this hearing today, remittances, does it really pose that great a danger?
    Everything is a danger, and we can only safeguard against some and better against others. Better against others should be we have a priority list, like anything else. But again, the terrorists of September 11, my understanding is the way they got around was using credit cards. The night before, they were even at Wal-Mart buying the most curious items, but nevertheless purchasing them. My understanding is that there are false identifications, rather appropriate ones, used to open accounts here in the United States with financial institutions. It is my understanding that we have third-parties, basic fraud, using those accounts of legitimate third parties, organizations, foundations and so on, to finance terrorism. Isn't that the greater concern that what we are trying to accomplish here regarding a remittance by anyone here in the United States, whether legal or illegal?
    Mr. ABERNATHY. The regulation squarely and clearly outlaws any fraudulent use of any form of identification, whether it is a U.S.-based form of identification or foreign-based form of identification. The question that the financial institution has to verify is, are you the person whose name and photo appears on that document. If you are not that person you are pretending to be, then that is a fraudulent use of the identification. It is not a question of, are you properly here in the United States. The question is, are you who you pretend to be. That is the question the financial institution has to ask.
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    Mr. GONZALEZ. But in your determination, when it comes to your responsibility under the PATRIOT Act, you feel that you are fulfilling that responsibility, both letter and the spirit. When we come to the spirit it is, what are we doing to safeguard ourselves from terrorist attacks from within, and how people get financed and how the terrorists operate and how they get their cash, their dollars, their credit and so on. But what you are proposing here does not go contrary to that mission or responsibility.
    Mr. ABERNATHY. In fact, Congressman, it is our view that were we to adopt a regulation that said to eight million or more people in this country, get out of our financial system, go into the black market, we think that would be a serious security risk.
    Mr. GONZALEZ. And I agree, because I think the criminal mind would welcome the opportunity to service a great segment of the population of the United States, whether they are here documented or not documented. That is another day, another committee, and it is called immigration policy in the United States.
    Mr. SHAYS. Will the gentleman yield for a question?
    Mr. GONZALEZ. Let me see if I can rush this last question.
    Mr. SHAYS. I am not really disagreeing with you. I just would like to ask one question that was just stated, if I could.
    Mr. GONZALEZ. Okay. The last thing on the GSEs. I know that was interjected in this, and we have to address it. The concern is, you are saying that Treasury should be looking at products. I think if you have a GSE that is responsible, imaginative, creative and innovative, they will remain competitive. The reason you have to do that is if you look at charter, mission, product. You start a product to allow you to accomplish your mission. You do your mission to allow you to do that which your charter dictates. If we give Treasury, which can be highly politicized, the ability to sanction or disapprove of certain products, you could accomplish changing mission and charter de facto because you really are going at the very lifeblood, and that is the product. Would you agree with that assessment?
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    Mr. OSE. The gentleman's time has expired. We are going to have you respond to the question.
    Mr. SHAYS. Sir, I interrupted him and I would like to give him a little more time. I am sorry.
    Mr. OSE. I have it under control here. Mr. Secretary, if you would respond to Mr. Gonzalez's question we would appreciate it.
    Mr. ABERNATHY. Yes, thank you, Mr. Chairman.
    In our view, the key issue is, if you are going to take a new agency that has responsibility for the government-sponsored enterprises, and the intention is to place that agency in the Treasury, which by the way Secretary Snow did not ask for. If you look at his testimony, he said we need to have a new agency and it needs to have all the powers to be able to do its full job. If the intention is to place that agency in Treasury, there are certain standards. We have to insist on those standards because of Treasury's main responsibility, which is with regard to the debt and the financial management of this country.
    If you want to place this new agency within the Treasury, you have to allow the Secretary of the Treasury to have some say over what that agency does, or else you end up worsening the current problem, the current perception in the country that the government stands behind the financial products of those government-sponsored enterprises. We cannot reinforce that. That is all that you would achieve if you took a new agency, put it in Treasury, and the Secretary had no say over the policy, all you will have achieved is reinforced that misperception that is already in the marketplace.
    Mr. OSE. The gentleman from California, Mr. Baca.
    Mr. BACA. Thank you very much, Mr. Chairman.
    Mr. Secretary, regulated credit unions in Mexico still do not have direct access to banks in Mexico's clearing settlement system. I believe that we need to reach out to Mexican communities that are served solely by credit unions. What can we do in Congress to ensure that safe and sound Mexican credit unions are afforded direct access to clearing and settlement systems?
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    Mr. ABERNATHY. I agree with you entirely, Congressman, that what we want to be able to have is the widest reach of financial service products to people not only in this country, but in Mexico as well. In many cases, particularly in low-income areas, credit unions may be the more successful financial institution to reach those people. That is the kind of conversation that we have with Mexico and other countries as well, trying to do what we can to encourage them to broaden their financial regulation to allow all of their financial institutions to be involved in the remittance business.
    Mr. BACA. Thank you. The next question that I have, Mr. Secretary, remittance senders are often unaware of the full costs they are paying for money transfer. According to the Pew Hispanic Center studies, about half did not know why additional costs were being paid; less than one-fifth knew the difference between published exchange rates and the rates used in the transfer process reduced the amount delivered. More than three-quarters described themselves as lacking knowledge of the available options for sending remittances. Given these statistics, how would you rate the effectiveness of existing financial literacy programs, which is question one, and what more can be done by the financial service industry or by the Treasury Department and/or by Congress?
    Mr. ABERNATHY. You have identified one of the biggest problems that we have with regard to consumer financial services in this country. I would say it is probably second only to the problem of identity theft. That is the problem of educating consumers on how they can best make use of the wide variety of financial services that are available to them. The financial literacy problem is huge. I liken it really to the State of literacy in general that was in this country 100 years ago. We have that large of a problem in the area of financial literacy, of reaching out to people and helping them understand what are the basic building blocks of just day-to-day financial services. How do I manage a checking account? What can a bank do for me? What can a credit union do for me? How do I best manage my debt? Should I borrow or shouldn't I borrow? What are the different fees that are charged and where do they come from?
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    We have made some good progress on addressing the issue of financial literacy, but there is a lot more work that needs to be done.
    Mr. BACA. Okay. Thank you. My final question would be in reference to responding to the question that Mr. Shays asked you. The responsibility of the Treasury Department or financial institutions, is clearly just to match the ID with that particular person. That is correct, right?
    Mr. ABERNATHY. Yes.
    Mr. BACA. It is not your responsibility to be an INS, to determine whether that person is illegal or legal. Is that correct?
    Mr. ABERNATHY. The responsibility is, are you who you pretend to be?
    Mr. BACA. Right. And it is normally the employer, who happens to be a non-minority normally, that ends up hiring the individual, where they are actually making the money, and the other individuals are just trying to send that money or whatever money they made by the illegal employer who actually hired him. Right? Is that correct?
    Mr. ABERNATHY. I certainly would not want to address the employment issues. I am just not an expert.
    Mr. BACA. I realize that, but as we were asking the question, I know that there had to be some kind of a transaction that happened before, which means that an employer happened to hire that person before the banking institution even transferred anything, and all you are doing is complying with the law.
    Mr. ABERNATHY. That could have been illegal, for all I know, in terms of the employment transaction. Sure.
    Mr. BACA. Thank you very much.
    Mr. OSE. Does the gentleman with to yield his remaining minute to Mr. Gutierrez?
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    Mr. BACA. Yes, I will yield to Mr. Gutierrez the remaining minute.
    Mr. GUTIERREZ. Thank you very much.
    I would like to yield to Mr. Shays.
    Mr. SHAYS. I would like to just ask unanimous consent that both sides could have two minutes each.
    Mr. OSE. Hearing no objection, so ordered. We will assign two minutes to you and two minutes to Mr. Gutierrez for allocation as he sees fit on the minority side. Mr. Shays?
    Mr. SHAYS. Thank you.
    Mr. Abernathy, I know you are a good man. My intensity is just listening to your answers, because I disagree with them and because I have worked on this issue for five years. I chair the National Security Subcommittee, and I know that these documents from other countries are a joke. We have had hearings on it. We know they are a joke.
    Now, I understand the logic of you saying we do not want eight million people underground, but now you have really answered the question that I had. In order to get those eight million people who are underground, we have basically put in our rules, in my judgment, a process that is not verifiable. A bank has no way to verify the authenticity of a document given to an illegal alien. They have no way to do that.
    So I want to ask you how you think you live both in the letter and the spirit of the law when you are allowing for a process that, one, is not verifiable? And I want to understand why I should have confidence in your answer when you were so reluctant to tell me something that should roll off your tongue. Is it illegal to hire illegal aliens? It is illegal to hire illegal aliens. The answer is yes, and you know that and I know it.
    So why should I be comfortable when you tell me that this is verifiable, when I have five years of hearings that say they are not? Help me out.
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    Mr. ABERNATHY. Certainly, Congressman. You are certainly focusing on a very key problem that we have as an entire society, and it is not just the United States. It is many countries, the problem of coming up with a system of fully, rigorously reliable identification documents. The criticisms that can be made of consular IDs, I hear the same criticisms made of driver's licenses. I hear, frankly, many similar criticisms made of passports.
    The ability to counterfeit identification documents has expanded tremendously, and we need to come up with measures that can get ahead of the counterfeiters. There is a lot of promising technology out there, but right now it is expensive.
    Mr. SHAYS. Okay. Let me just interrupt you there. But the one problem is, the one that is the easiest to have fraud in is the very issue of number and country of issuance of any government. When you say it is illegal for someone to lie when they come before the bank, that they have broken the law, it is almost humorous because you are making it legal for an illegal alien to do that. So you are an illegal alien, but you are going to tell the truth. It just does not buy. It doesn't meet the test.
    That is why I have a problem with your regulations. I thank the gentleman.
    Mr. OSE. The chair recognizes the gentleman from Illinois for three minutes.
    Mr. GUTIERREZ. I think that Mr. Shays is very passionate and very eloquent in stating his position, a position that has a lot of stature in the Congress of the United States. Let me just say that we are not going to resolve it by eliminating the matricula consular. People won't stop sending money back home. People won't say, God, they cancelled the matricula consular; I guess it is time for me to cross the border once again and go back home, because I am just not going to stay in the United States of America if I do not have a matricula consular to send money back.
    What is going to happen, I will go to Western Union. I will give them $300 in cash and they will send the money back to my family members. That is what is going to happen. We are going to increase the expense to people because there are legal ways for undocumented workers, which they used prior to the matricula consular to send the money back. And that is what we are simply going to do. We are going to turn the clock back.
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    I think what is at the crux of Mr. Shays issue here, at least I believe it as I listen to him, and I am trying to listen to him very carefully, is that of all these undocumented workers, millions of them, some of them could pose a threat to the United States of America. Well, they haven't posed a threat as of yet. Mexico is an ally, along with the rest of Central America in our war against terrorism.
    What is more, if we really want to eliminate them as a security issue for the United States, I would simply say, let's complete a process started by President Bush in the early months of his administration, to regularize or legalize their status here we must confront the issue that this country does not have a policy, nor does it have the political will, nor the requisite resources, to deport eight million people. Given that reality, isn't it better that we integrate them fully into our society because we eat from the plates that they wash. We all know it. We don't stop eating at the restaurant. We eat the fruit. We don't stop eating oranges, asking who picked this; or stop eating the chicken or stop staying in the hotel room. We all know this.
    So really, we are all part of this great conspiracy, because we all know they are here. We all benefit from their services. As a matter of fact, we all take in their services every day in common life that we live here. So I say, let's get their fingerprints. Let's get them checked by the CIA. Let's get them checked by the FBI. Let's get them checked by Interpol. Let's tax them. Let's incorporate them. And then those who remain, we can focus on them, because if they did not come forward, they must have something to hide.
    Thank you very much for your testimony, Mr. Secretary.
    Mr. ABERNATHY. Thank you.
    Mr. OSE. The chair thanks the members and the witnesses. The chair notes that some members may have additional questions for the panel, this witness, which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to this witness, so that we can place their response in the record.
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    Mr. Secretary, we appreciate your coming. It was a long panel. Your patience is noted.
    Mr. ABERNATHY. Thank you, Mr. Chairman. It is always a pleasure to come before this committee.
    Mr. OSE. Thank you.
    This panel is excused. If we could have the second panel come forward, that would be Mr. Roberto Suro, Dr. Manuel Orozco, Mr. David Valenzuela, Ms. Alice Perez, Mr. John Herrera, and Mr. Ezra Levine.
    Our second panel is composed of six witnesses. I am going to introduce them. Our first witness is Mr. Roberto Suro, Director of the Pew Hispanic Center. Welcome sir. We are also joined by Dr. Manuel Orozco, who is the Project Director for the Central America Inter-American Dialogue. Our third witness is Mr. David Valenzuela, who is President of the Inter-American Foundation. Welcome, sir.
    Our fourth witness is Ms. Alice Perez, who is the Vice President and Hispanic Market Manager for U.S. Bank. She is here on behalf of the Consumer Bankers Association. Welcome. Our fifth witness is Mr. John Herrera, who is the Board President of the Latino Community Credit Union. He is here on behalf of the Credit Union National Association and the World Council of Credit Unions. Welcome. And our sixth witness is Mr. Ezra Levine, who is a Partner with Howrey Simon Arnold and White, appearing on behalf of the Non-Bank Funds Transmitters Group.
    Welcome to all of you. Without objection, your written statements will be made a part of the record. You will each be recognized in turn for a five-minute summary of your testimony. So we are just going to go from my left to my write. So Mr. Suro, you are recognized for five minutes. Welcome.
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    Mr. SURO. Thank you, Mr. Chairman and members of the committee.
    Roughly seven million Latino immigrants to the United States send remittances to their home countries on a regular basis. According to the 2002 national survey of Latinos conducted jointly by the Pew Hispanic Center and the Kaiser Family Foundation, two-thirds of remittance senders are employed as unskilled laborers; about an equal share have not completed high school; about an equal share earn less than $30,000 a year. About half do not have either bank accounts or credit cards, and nearly three-quarters rent, rather than own, their homes. They are, however, both the generators of wealth in this industry and the prime consumers. Their decisions about how to manage their money will decide how the remittance flow evolves.
    In order to better understand how both remittance senders and receivers view the rapid changes taking place in the money transfer industry, the Pew Hispanic Center and the Multilateral Investment Fund at the Inter-American Development Bank have collaborated on a series of studies in the United States and Latin America. I have provided the committee with copies of our November 2002 report, Billions in Motion: Latino Immigrants Remittances and Banking, which explores how remitters choose the means to send money home. An upcoming report to be published this November will look at the process from the remittance receiver's point of view, with studies conducted in Ecuador, Guatemala, Honduras, El Salvador and Mexico.
    Through telephone surveys, focus groups and in-depth interviews, that have gathered information from some 10,000 individuals, I have tried to assess the senders' and receivers' understanding of the methods and costs involved in transferring money. Allow me to summarize a few of the key findings. First, both remittance senders and receivers are often unaware of the full cost they are paying for money transfers. Many complain that the money received is less than expected. Yet in a study of remittance senders in Miami and Los Angeles, about half said that they did not know why additional costs were being paid. This is the research that Congressman Baca referenced. Less than one-fifth, for example, knew that differences between published exchange rates and the rates used in the transfer process could reduce the amounts delivered.
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    It is tempting sometimes to think of this as a matter of ignorance or poor math skills, or even to assign it entirely to the realm of financial literacy. It is important to note that one of the results of a rapidly changing market is a very rapid multiplication of the types of products, and often very different types of pricing schemes. As a result, different remittance products have very different ways of packaging their fees, and it is not always transparent to somebody looking at two different vendors what the benefits are either way.
    Second, it is important to recognize that remittance senders are often passive consumers. More than three-quarters of the participants in our Los Angeles-Miami study described themselves as lacking knowledge of the available options for sending remittances and indicated they had done little to explore the market. Instead, they tend to rely on word-of-mouth recommendations. Familiarity and convenience are often deciding factors in choosing a means of transferring money, even when individuals are concerned that they are paying high fees.
    On the receiving end as well, our studies indicate that simple expediency and force of habit are powerful factors in determining the means for collecting remittances. To understand this better, perhaps you could all think back to that time not long ago when one went to a savings and loan or a bank in this country. There was a local institution staffed by familiar folk, and it was common enough to have a favorite teller.
    One way to achieve the committee's aims of increasing competition and improving consumer access would be to promote the entry of new players, such as banks and credit unions, into the marketplace for remittance services. In this regard, it is important to consider limitations posed by infrastructure, on the receiving end especially, but also on the sending end. Many of these consumers live in areas that are underserved by financial institutions. Over the last 20 years or so, wire transfer companies have created financial conduits which previously were nonexistent between many Hispanic immigrant communities here and the urban neighborhoods and rural villages they left behind in Latin America. New players in the remittance market will have to duplicate this infrastructure and compete on the level of location and convenience, even as they compete on the basis of price.
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    In pursuing the committee's goals in the existing market for remittance services, our study suggests that greater transparency in pricing and simplicity in procedures could have an impact. Obviously, one cannot oblige consumers to do comparison shopping, but these studies have revealed a sufficiently high level of confusion and dissatisfaction over the extent of information now available to suggest that the information flow can be improved. If consumers can make easy apples-to-apples comparisons about the cost of transfer services, they might be more likely to shop around. To be effective, such comparisons must cover all costs, including exchange rates and any fees charged on the receiving end.
    Mr. Chairman, again thank you for the opportunity to appear here. I will be happy to respond to any questions.
    [The prepared statement of Roberto Suro can be found on page 119 in the appendix.]
    Mr. OSE. Thank you for your testimony.
    Our next witness is Dr. Manuel Orozco, who is the Project Director for the Central America Inter-American Dialogue. Welcome, sir. You are recognized for five minutes.
    Mr. OROZCO. Thank you very much, Mr. Chairman and the members of the committee. And thank you to Congressman Gutierrez for sponsoring also this idea.
    I think the issue of family remittances has gained increased relevance in the past few years, partly because of the sheer volume of these transfers, but also by certain issues that have been raised. One of them deals with costs; the other one deals with the role of remittances potentially as a tool to bank the unbanked, and another one that is reflects the market preference of a significant group of individuals in the United States that relates to other issues like transportation, telecommunication, tourism or trade.
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    There are several challenges that have been identified with regard to these issues. One of them is that the cost continues to be significantly in many countries expensive, despite the fact that there has been a declining cost in some countries. The other issue that I think is so important to consider as a challenge is that there is a weak link between money transfers and access to other financial services. And finally, another challenge is the poor financial location of senders.
    I think in order to address these issues, we can identify several recommendations that can improve this series of challenges. One of them deals with competition. The report by Treasury expressed nicely that there has been an increase of competition and that is very important to identify and recognize. However, the quality of the competition is another matter. There is still need to improve the quality of competition at different levels.
    I think it is important to identify the stumbling blocks that are preventing a more efficient money transfer system and a competitive one. So one of the stumbling blocks deals with the presence of informality that controls certain monopolies in certain money transfer corridors, as well as issues related to agent control over the pricing of the fee. There are many parts of the United States in cities like New York where agents charge 75 percent of the commission of the fee of the transfer to be sent. That increases the cost of sending money abroad.
    Within that context, I think it is important to implement some sort of a report card, which I describe very clearly in the testimony, that basically looks at the different types of practices of money transfers and the quality of them, using several indicators. I think in addition to looking at the competition in the money transfer business, we also need to think of the role of remittances to bank the unbanked. The reason is very simple. We are talking about at least 20 million people sending remittances abroad, not only to Latin America, but many other places in the world. In a way, half at least of the senders are unbanked. That is particularly the case among Latino individuals. I think a strategy that will use remittances as a way to bank the unbanked will increase the savings rate of the country, as well as the quality of life of the sender.
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    There are three ways to deal with this issue specifically. One is the promotion of alliances between more remittance businesses and banks. This is a very important issue because by establishing that alliance, what you do is you actually reduce the intermediary, in this case the agent that charges, that prompts the money transfer businesses to increase charges. The alliance would also facilitate the ability of people to be banked into financial institutions. I think remittance transfers should be included as an indicator of service provisions under the CRA, the Community Reinvestment Act.
    And finally, I think another step in this direction with regard to money transfers deal with financial location. The financial location issue is very important at different levels. We need to educate the immigrants about the advantages of different economic opportunities that exist in this country, but we also need to inform customers about the best practices that exist in the market, and a situation that does not exist very much. I monitored somewhere around 120 money transfer businesses. I wish there was a way to make individuals aware of the different opportunities to look for different market types of services, and not be basically victims of exchange rates, for example, in many countries. I think the problem of the exchange rate is one issue that affects the sender, but there are other problems, too, that have not been addressed and I think it is important to pay attention to them by using some sort of report card.
    Thank you very much.
    [The prepared statement of Manuel Orozco can be found on page 85 in the appendix.]
    Mr. OSE. Thank you, Dr. Orozco.
    Our next witness is Mr. David Valenzuela, who is the President of the Inter-American Foundation. Welcome, sir, you are recognized for five minutes.
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    Mr. VALENZUELA. Thank you, Mr. Chairman. I am pleased to testify before this committee to share the experience and insight of the Inter-American Foundation regarding the potential impact of remittances to help improve the social and economic conditions of many poor communities in Latin America and the Caribbean.
    It is estimated that migrants from Mexico, Central America, South America and the Caribbean send approximately $32 billion each year to family members left behind. This flow of dollars represents a critical safety net for millions of people. Increasingly, organizations of migrants in the United States are also joining forces to invest in their communities of origin to promote sustainable development through improved production and job creation.
    The Inter-American Foundation, a small federal agency, was established by Congress in 1969 to support grassroots development led by local people in their own communities. Since that time, the Foundation has made over 4,400 grants throughout Latin America and the Caribbean to support the self-help efforts of poor communities to improve their productive capacity, their education, health and environment.
    The Foundation was among the first agencies to recognize the importance of the remittance flow to Latin America and the Caribbean. In March 2001, we sponsored a conference in Washington with the cooperation of the World Bank and the United Nations Economic Commission for Latin America and the Caribbean. This conference explored the issue of transaction costs, but it also introduced the potential development impact of remittances based on experiences of foundation grantees in Mexico and in Haiti. Since that time, the Foundation has broadened its effort to direct some of the flow of remittances to sustainable development in home communities.
    This work has led the Foundation to come into contact with organizations of migrants that have sprung up throughout the United States. Mexican migrants, for example, have over 600 hometown associations that are actively engaged in helping their home communities. Haitians, Salvadorans, Dominicans, Guatemalans, to name a few, also have similar organizations. Several recent grants awarded by the Inter-American Foundation to grassroots organizations in these countries rely on or are complemented by counterpart funds raised by these hometown associations in the United States.
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    Mr. Chairman, I would like to share two insights with the committee based on our experience with remittances. The first is that the resources that migrants send to family and the home communities are an important aspect. But potentially of greater significance are other non-monetary contributions. Here, I am referring to ideas, practices, know-how, values, entrepreneurial skill and business linkages that migrants acquire in the United States and transfer to their home countries.
    Secondly, a large number of migrants maintain active ties with their communities of origin to such an extent that they are becoming transnational communities. Transnationalism can be defined as a process in which human, financial and social capital flows back and forth between sending and receiving communities, thus greatly impacting the process of social and economic development in both sending and receiving communities. In this manner, we can no longer look at helping poor communities in many countries of Latin America and the Caribbean without taking into consideration the interaction between these communities and their brethren who have migrated to the United States.
    The Inter-American Foundation is pleased to testify at this committee and will provide any additional information that you might need. Thank you.
    [The prepared statement of David Valenzuela can be found on page 121 in the appendix.]
    Ms. BROWN-WAITE. [Presiding.] Next, we will hear from Ms. Alice Perez, Vice President and Hispanic Market Manager, U.S. Bank, on behalf of the Consumer Bankers Association. Welcome, Ms. Perez.
    Ms. PEREZ. Thank you. Good afternoon, members of the committee. My name is Alice Perez. I am the Hispanic Market Manager for U.S. Bank, the eighth-largest financial institution across 24 states in the U.S.
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    I would like to thank you for inviting us today to testify on behalf of the Consumer Bankers Association and U.S. Bank regarding expanding consumer access to mainstream financial institutions and reducing the costs and increasing the competition in remittance services.
    In my role at U.S. Bank, I lead the development of programs, products and services that will benefit the Hispanic market. U.S. Bank is striving to be the best bank of choice for Hispanic consumers. U.S. Bank is testifying today on behalf of the Consumer Bankers Association, which I will refer to as CBA. CBA has been actively involved in issues of financial access for many years. In 2000, CBA began to undertake a series of annual surveys to determine the level of financial literacy efforts of its member banks. In addition, CBA is currently developing a forum on Hispanic outreach to be held in the spring of 2004.
    Banks are increasingly offering low-cost alternatives to traditional wire transfers. Bank remittance services have proven to be of tremendous value to bank customers and non-customers, particularly in immigrant populations where many people send money to relatives in their country of origin and do not traditionally have a relationship with financial institutions.
    At U.S. Bank, our vision is to become the best bank in America to Hispanics. To deliver on our commitment, we are providing product, services and support to the Hispanic market and we focus our strategy in four key areas. Those areas include: (1) staffing, we mirror the markets in which we do business; (2) Marketing, ensuring that our materials are available in a language that individuals can understand; (3) Products, ensuring that the products are the proper products to target the segment; and (4) community involvement, which means two-fold, providing financial literacy, education to different individuals on products and services that financial institutions offer in the U.S., as well as providing for and sponsoring different organizations.
    As part of this effort, in partnering with community organizations for financial literacy, we have developed a program to serve the needs of individuals that need access to remittance services. We refer to this as our secured money transfer service. What this does is offer low transfer fees and competitive foreign exchange rates that enable consumers to get more money into the hands of their family member. The program provides consumers the choice of how the beneficiary receives the funds, either cash at an ATM, cash at a bank branch, or funds deposited directly into a savings account.
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    The first program available across our 24-state footprint enables individuals to send funds within the United States and to Mexico via an ATM Visa-plus network system. Through the recommendation of the Mexican consul, as well as other entities in the U.S., they have encouraged us to provide this type of service to individuals through the use of an ATM card. The beneficiary can use this card to withdraw funds in any of the network ATMs in the U.S., as well as the 20,000 ATMs in Mexico. Not all funds need to be withdrawn at one time, providing an added level of safety for the sender and recipient. Remittance funds are immediately available to the beneficiary each time the money is spent.
    Realizing that alternatives need to be offered to individuals to receive funds, we decided to take on another venture, which is our partnership with L@Red de la Gente, which is currently being piloted in San Diego, Los Angeles and Chicago. This enables individuals to send money to any branch of the L@Red de la Gente network. It focuses not just on the remittance, but on providing access to financial services on both sides of the border, enabling consumers to build upon their economic status by utilizing financial services.
    The partnership was created to provide low-cost remittances and to encourage more people to become bank accountholders and savers on both sides of the border. This service is priced at $6 when the transfer is directed to an account at the L@Red de la Gente network, and $8 when the funds are picked up in cash. On our ATM product, the service is available for a transfer fee of $8 for accountholders, and if it is a non-accountholder, it is a $10 fee.
    Combined, the U.S. Bank remittance services allow individuals to reach friends or family in both metropolitan areas of Mexico, where many ATM networks are located, and in rural areas of Mexico where many of the L@Red de la Gente branches are located. Individuals who do not have a banking relationship are of high importance to us. U.S. Bank offers a variety of safe and convenient stored value cards for consumers who do not have a banking relationship. We have also created credit products to individuals without established credit. With our Secured Visa card and our Credit Builder secured loan, consumers enjoy the benefits of a credit card or an installment loan to begin building a credit history with a financial institution.
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    In conclusion, low-cost competitive alternatives to wire transfers are offered by many financial services institutions. Banks are increasingly recognizing that offering low-cost solutions for money transfers saves consumers money up front, and encourages them to begin other mainstream banking relationships that provide benefits in the long run. Providing safe, efficient and affordable money transfer service is the goal of U.S. Bank and our peers in the financial services industry. Our customers tell us that it is assuring to them to walk into one of our financial institutions, deposit funds with a secure money transfer, walk out the door, call their loved ones, and know that the money is already there, safely, quickly and affordable.
    On behalf of U.S. Bank and the Consumer Bankers Association, thank you for the opportunity to present our initiatives and our progress to date.
    [The prepared statement of Alice Perez can be found on page 100 in the appendix.]
    Ms. BROWN-WAITE. Thank you very much.
    Next, we will hear from John Herrera, Board President, Latino Community Credit Union, on behalf of the Credit Union National Association and the World Council of Credit Unions. Welcome, Mr. Herrera.
    Mr. HERRERA. Thank you and good afternoon, Madam Chair and distinguished members of this committee, and my congressman from North Carolina, Mr. Miller. Thank you, Congressman Gutierrez, for your leadership on putting this issue on the table.
    And thank you for the opportunity to provide comments on the developments of the remittance industry. My name is John Herrera. I am Vice President of Latino Hispanic affairs for Self-Help Credit Union. Also, I am a founding member and the current board chair of the Latino Community Credit Union based in Durham, North Carolina.
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    I appear before you today on behalf of the Credit Union National Association and the World Council of Credit Unions. We represent more than 10,000 state and federal credit unions and their 83 million credit union members in the United States and over 100 countries around the world.
    I would like to provide the committee with an overview of credit unions' efforts to reduce costs of remittances in the financial services market. First, a little bit about the Latino Community Credit Union. We started in 2000, because Latino immigrants did not have a safe place to bank and they were being robbed as they walked out of their check-cashing stores. When we started, we hoped to have 500 members in our first year. Today, three years later, we have 14,000 members, and 40 bilingual and bicultural branches.
    Remittances have been important for our growth. Today, CUNA and the World Council of Credit Unions have joined efforts to expand the credit union participation in the international remittances network, IRnet, partnering with both Vigo remittance and Travelex, the world's largest retail foreign exchange provider. IRnet has transferred millions of dollars and reduced rates to over 40 countries throughout our 850 credit union points of service throughout the United States.
    It is easy to understand why any Friday afternoon unbanked immigrants who have just received their paychecks, cash them at an informal finance company at a cost of 1 to 3 percent of the face value. Latino immigrants send home an average of $300 transferred to their families at a cost of about $15 plus the check-cashing fee and the remittance fee and the exchange rate difference, resulting in an average of about $42. The total cost of these transactions from the credit union IRnet service is $14, or one-third to one-half of the cost of the competitors. But there are many benefits to the consumer and to the U.S. economy.
    Once we get these folks into our credit union, we can help them learn what is available to them financially. They might start with a savings account, move to a checking account, a car loan, develop credit history, and eventually apply for a home mortgage and a small business loan. Fifty percent of all Mexicans in the United States are unbanked today. This is unacceptable. We offer these services to introduce them to having a banking account which is one of the most important factors in helping people accumulate assets to climb the ladder of financial security.
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    I believe strongly in bringing the power of market forces into all communities to benefit consumers. As is the case with most markets that credit unions enter, as competition increases, prices decrease. In fact, prices have dropped approximately 37 percent for transfers to Mexico since credit unions got involved with remittances in mid-2000. I recently spent several weeks in Mexico as an Eisenhower Fellow, studying economic development and migration, where I saw entire communities that had been developed by the money that the relatives in the United States had sent to them.
    Through our partnership with Mexican credit unions, we want to help these families save part of their remittances to start a small business and develop Mexico's economy, which would reduce the need for migration. A recent survey by the Inter-American Development Bank shows that the single largest reason many Latino immigrants do not have a bank account is because of the lack of awareness of the benefits of having an account. One program providing help in this area is the Treasury Department's First Accounts program from which my credit union received significant help to bring the unbanked people into the financial system. There are $4 million of appropriated funds for this program left unspent because the authorizing legislation to release this funding has not been passed by Congress. I urge the members of this committee to take action to release the funding.
    Credit union average efforts in this area could also be greatly helped by a policy change. Credit unions, as you know, may only serve in the regions of the members, and we applaud the efforts of this committee in including in the regulatory relief bill, the provision that will permit credit unions to provide check-cashing and remittance services to nonmembers within their field of membership.
    In closing, we would like to commend the Treasury's evenhandedness in its review of section 326 of the U.S. PATRIOT Act regarding account-opening procedures. We believe that providing financial institutions with the guidelines for the types of ID that can be accepted establishes the proper balance between national security and access to financial security.
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    Thank you for holding this important hearing.
    [The prepared statement of John A. Herrera can be found on page 67 in the appendix.]
    Ms. BROWN-WAITE. Thank you very much for being with us.
    Next, we will hear from Mr. Ezra Levine, who is a Partner in Howrey Simon Arnold and White. He is here on behalf of Non-Bank Funds Transmitters Group. Welcome
    Mr. LEVINE. Thank you, Madam Chairman.
    My name is Ezra Levine. I am a partner at Howrey Simon Arnold and White here in DC. I am counsel to the Non-Bank Funds Transmitters Group. The group has been in existence since 1989 and it is comprised of the leading national money transmitters. Travelex Americas, which was just mentioned, is one of the members. Western Union, American Express, MoneyGram, Comdata, and RIA Financial Services are the members. Each of these companies is licensed by the 45 largest states, the District of Columbia and Puerto Rico, to transmit funds and issue payment instruments such as money orders, travelers checks and drafts.
    Commonly-held perceptions are incorrect. The non-bank funds transmission industry is highly regulated. Traditionally, however, the States have regulated non-bank money transmitters for safety and soundness through comprehensive licensing laws. The laws impose a high degree of regulation. They are intended to assure safety and soundness. States conduct periodic on-site exams, require the filing of extensive reports, and the maintenance of 100 percent financial reserves. In fact, the State regulators are very often the very same individuals who regulate state-chartered credit unions, as well as state-chartered banks.
    In addition to the State laws, these non-bank money transmitters, the group members are subject to the federal anti-money laundering laws, including the preexisting Bank Secrecy Act, as well as the relatively new U.S. PATRIOT Act. The group members have developed and implemented comprehensive BSA anti-money laundering compliance programs for themselves, and importantly for their sales outlets. As somebody commented earlier, there are approximately, depending who you listen to, 150,000 or more sales outlets in the United States. They are independent businesses. One of the things the companies do as part of the compliance program, particularly with regard to remittances, is to check both the name of the sender and the recipient against the OFAC list. Of course, that is for anti-terrorism and blocked individuals.
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    The Wall Street Journal reported in November 2002 that approximately $14 billion of funds are remitted from the U.S. to Mexico and Central America. This represents a 28 percent increase from 2000 to 2001. It is expected to grow by at least 10 percent. I saw something in the papers the other day that it is something like 20 percent already in 2003. While the bulk of funds are sent to Mexico and Latin America, funds are also sent to locations throughout the world. We cited that.
    In the past several years, this high transaction volume has attracted both big and small entities which are eager to capture some of the funds transmission business by offering new service, new features, and different prices. For example, looking only a the traditional money transmission arena of non-bank funds transmitters, there are now over 50 licensed money transmitters in such states as California. Some years ago, there were only 12 or 13 in California. There are over 50 in Illinois; over 60 in Texas and New York; over 100 in Florida, just as an example. Each of these, of course, has thousands of independent sales outlets in every one of the States. These agent locations, these independent businesses like convenience stores, have the face-to-face contact with the customers. They are small businesses and they are located in the communities that they serve, particularly inner-cities.
    As I mentioned, these licensed non-bank entities range from small niche companies to the larger multi-state corporations. Some licensees focus on transmissions to only one or a select group of countries. Some provide only limited services. The extensive networks of the large companies, however, often reach areas that many banks, credit unions or other remittance providers do not serve. The large companies pioneered transmission services to the world, and the large ones now serve over 160 countries.
    The domestic market for remittance services is dynamic and competitive. I think we heard that from the Treasury Assistant Secretary. I think we have heard that from members of this panel. As an example of the positive effects of competition in the remittance arena, it has been estimated that the average cost of remittances to Mexico has decreased by over 60 percent since 1999. That is only a few years. The bottom line is that competition is alive and well in the transmission business. There has been a veritable explosion in the number of service providers. This explosion has presented consumers with an unprecedented array of choices. Again, we have heard some of them from this panel. The prices are reducing. The prices are continuing to fall. And who are the beneficiaries? The beneficiaries are the consumers of this explosion of competing service.
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    Some of the new competition comes from banks. They have been attracted to the growing market. Credit unions and the U.S. Postal Service provide remittance services aimed at Mexico. Competition also exists from courier services, which physically transport currency and payment instruments on behalf of consumers.
    I am about to wrap up. To sum up, customers are the winners as additional funds transmission services are offered. Customers reap the rewards of competition. The trend is continuing.
    Thank you.
    [The prepared statement of Ezra Levine can be found on page 76 in the appendix.]
    Ms. BROWN-WAITE. Thank you very much. I want to thank all the members of the panel.
    Mr. Levine, you indicated that the average cost of the remittances to Mexico have decreased by some 60 percent since 1999. Has the decrease in price led to an increase in remittances? Do you anticipate that with increased competition, the market price of sending remittances will continue to fall?
    Mr. LEVINE. I think it will continue to fall. I think from one of the individuals on this panel, and it may have been U.S. Bank, indicated that for certain of their customers, for example, the price, I do not want to misstate her testimony, was significantly lower than the $9.99 amount. The volume of transaction is going up and obviously I think that reflects immigration patterns. But there is transmission to all over the world. Mexico is clearly the single most competitive segment. I believe the trend will continue. It is continuing.
    Ms. BROWN-WAITE. Thank you.
    Ms. Perez, do you believe that greater government regulation would help or hinder competition? And how would the consumer ultimately be affected?
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    Ms. PEREZ. On behalf of U.S. Bank, I can state that we disclose to our customer, at the time that we offer them a product, what exchange rates and what the actual costs of the product are. I think in today's environment we do a very good job at that. My recommendation would be to allow us to continue to do it the way that we do it, because we are disclosing to the customer all fees associated with the service that we are providing.
    Ms. BROWN-WAITE. Thank you very much.
    Mr. Gutierrez?
    Mr. GUTIERREZ. I want to thank the panelists for their information, starting with Mr. Suro who explained to us that the people need more information. They need more information about the products. I think Dr. Orozco was very eloquent when he said, just because we have more people in the marketplace providing the service, that the quantity of people does not belie the fact that the quality has not improved. That is to say, if I have 10 grocery stores and they are all selling bad milk and eggs, and all of a sudden there are 20 and they are also selling bad eggs and milk, I have more grocery stores, but it does not mean I am getting better groceries because of the number of grocery stores in my neighborhood.
    I think that it is very clear from Mr. Valenzuela's testimony that we need to bring some diplomacy to the issues, not only Treasury, but the State Department, so that we can engage in the kind of conversations that have been conducted, dispassionate conversations about the growth of our hemisphere, the American hemisphere and Africa.
    Ms. Perez, I agree with you totally. I like the way banks do it, because that is the way I do my money transfers when I travel around the world. I like the security and the confidence that I have when I take out my ATM card and I travel across the world. I take it and I put it in and I know exactly what I am going to get, and I know it is a reliable service. So I can understand why, if you are meeting certain thresholds of openness and transparency, why you would say, why do we need to be regulated, we are going a good job.
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    To Mr. Herrera, thank you so much for all of the great work that you have done in North Carolina, in taking from 500 to 14,000 members you have now, and taking the un-banked and making them banked in a very sensitive manner. I know that many other institutions are following your lead, because you bring competition to the market. You make sure that the Bank of America and the others say, well, you know, there is somebody out there fighting for the dollars and the investments and the deposits of the people who are there. So I want to thank you for all of the great work that has come before, and we look forward to you coming again in the future and helping me, as I know you have helped many other members of this panel on both sides of the aisle, get better educated about the issues that we have before us.
    In terms of the industry, Mr. Levine, the fact is that the industry that you represent is the most costly industry that exists in the United States of America. That is just evident by all of the testimony that we have received today. Indeed, if there were a segment of the community that my legislation focuses on, I understand how you might feel targeted by it which is your industry targets my constituents by bombarding them with ads on Univision and Telemundo, telling them what a kinder and gentler institution you are. The fact remains that you are the institutions that have been sued in federal court and have received settlement issues in federal court. It is Western Union and MoneyGram that shelled out the $5 million in the settlement, along with Orlando Volute. If the plaintiffs in California had their way, I think we might have done better, and I say this with much chagrin, given the fact that it was the plaintiffs and the lawyers for the plaintiffs in Chicago that succeeded in settling the case, a case that I never really felt should have been settled at that point. It should not have been settled at that point.
    I know Mr. Levine is going to say, that they did not admit any culpability in this issue. But the issues were clear; they were transferring money and what disclosure is. All I ask, Mr. Levine, is that you go back to this industry. I want this industry to grow. I want it to do well. All I want them to do is this: when I walk into Western Union or MoneyGram, I just want them to say that it is $14.94, Mr. Gutierrez, to wire $300, and Mr. Gutierrez, here is how many pesos today the recipients back in Mexico are going to get, and write that on the receipt each and every time you do it. I know you are shaking your head because as part of the settlement in the lawsuit, as you are very well aware, those were part of the conditions of the lawsuit.
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    Mr. LEVINE. Not quite.
    Mr. GUTIERREZ. Then we are going to beg to disagree on that issue. That is what we want. We want transparency in the market. I do not quite understand why we cannot secure transparency in the market.
    Thank you very much, Madam Chairman.
    Ms. BROWN-WAITE. The gentleman's time has expired.
    Mr. Levine, would you like to respond to that?
    Mr. LEVINE. Sure I would. Thank you very much.
    Mr. Gutierrez, you were talking before about security and confidence. One of the reasons that immigrant populations use Western Union, MoneyGram, RIA, and Travelex is because they are secure, they are safe, and they do what they say. Even before the class action, and I have a view of the class action, but I will only repeat what the Seventh Circuit said about the class action. Even before the class action suit, each of the companies was giving out a receipt, and the receipt clearly states the amount of U.S. dollars paid by the sender, the foreign exchange rate applicable if it is a fixed-rate transaction, and the amount of fees, and the amount to be received in pesos by the recipient.
    You are absolutely correct, there were additional disclosures mandated as part of the settlement. Let me say one thing about the settlement. The whole lawsuit was not so clear. I did not defend the companies and I was not a lawyer for the companies in any of that litigation. However, I did read the Seventh Circuit opinion written by Judge Frank Estabrook, one of the most respected circuit court judges in the United States, with regard to the approval from the challenge of some class action lawyers of the settlement. What Judge Estabrook and the full panel of the Seventh Circuit said was that the case was frivolous; that the case amounted to commercial extortion, and these are not my words, these are the words of the Seventh Circuit, but that he understood the necessity from a public relations standpoint of companies needing to settle this class action, and with great reluctance the Seventh Circuit approved the settlement. That is in the opinion.
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    Mr. GUTIERREZ. Let me just respond, if I could have a unanimous consent for one additional minute since Mr. Levine went over and was given the additional time. I ask unanimous consent.
    Ms. BROWN-WAITE. Without objection, for one minute, Mr. Gutierrez.
    Mr. GUTIERREZ. Let me just say, they do provide the sender with the transaction dealing with the countries. Now, here is a fact, Mr. Levine. I saw the actual transmittal. I went to a Western Union and a MoneyGram. One of us is wrong. I don't know if you actually went personally to a Western Union, MoneyGram office at a currency exchange anywhere in a metropolitan area. Had you done that, I am going to tell you what you would have found. You would have found that they did not disclose those fees; that they were unaware of the exchange rate because it was nowhere on the form, Mr. Levine. I saw it personally before I ever engaged in this matter.
    Secondly, the fact is, Mr. Levine, it is curious process when only Mexico and Latin America are targeted, because although Mexico is the closest country to us, it is cheaper on the exchange rate to send money to Poland or the Philippines, thousands of miles away, than it is to send money across the Rio Grande.
    Thank you very much, Madam Chairman.
    Ms. BROWN-WAITE. The gentleman from Arizona, Mr. Shadegg, is recognized.
    Mr. SHADEGG. Thank you, Madam Chairman.
    Let me begin, Ms. Perez, with you. Does U.S. Bank do most of its business, did I hear you testify, with Mexico? Is that right? Most of the remittances?
    Ms. PEREZ. Currently, our remittance products are with Mexico.
    Mr. SHADEGG. And you do remittance products with other countries?
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    Ms. PEREZ. At this time, no. Both of our initiatives are very new as of this year.
    Mr. SHADEGG. I was not here, but I believe Dr. Orozco made the point that competition in fact exists in the market, but that does not necessarily mean there aren't people abusing the process in that competition. I think that makes sense.
    My question of you is, with regard to Mexico, do you believe there has been an increase in competition? Do you see abuse occurring or do you see the competition as assisting people who need to transfer money to Mexico?
    Ms. PEREZ. I see the competition increasing. I think it is positive competition because as a result of the competition, the pricing structure has decreased, which benefits the consumer.
    Mr. SHADEGG. Does U.S. Bank disclose the exchange rate when it does a transfer to Mexico?
    Ms. PEREZ. Yes, we do.
    Mr. SHADEGG. I think the gentleman who is the sponsor of the legislation, I guess he left the room. I think that is a valid request, at least when the exchange rate is known. One of the reasons I was interested in whether you do business in other countries is that I understand the very established market in the exchange rate between the United States dollar and the peso. We do not necessarily have the same established market for other currencies. So you do disclose the exchange rate when you do a transaction for a remittance to Mexico, is that right?
    Ms. PEREZ. At the time of the transaction, we disclose fully to the consumer.
    Mr. SHADEGG. And that goes in writing?
    Ms. PEREZ. Yes, it does.
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    Mr. SHADEGG. Do you know, is there also a disclosure in Spanish as well?
    Ms. PEREZ. Yes, we disclose in both.
    Mr. SHADEGG. I want to compliment you and Mr. Herrera for the education. I think at the end of the day, what we are really talking about here is education. We need to make sure that the consumers of these products are educated and we need to be sure that the industry is clean, not only that the big players are playing by the rules and fair, but small players do not come in and abuse people. Competition is one way to clarify that problem and to make sure that it does not occur.
    Mr. Levine, let's go to this point about countries where there is not an established exchange rate. First of all, let me begin by saying that the major players that you represent, they disclose the currency exchange rate when they have an established market. Is that correct?
    Mr. LEVINE. Yes, indeed. In fact, we would be pleased to provide to the committee subsequent to the hearing copies of the actual receipt forms that are used in every single state in the United States, which have a blank stop for the entry of the FX rate when in fact there is one. But Mr. Congressman, in certain countries there is no exchange rate. For example, Brazil is one of those countries where you can't quote an exchange rate because the Brazilian government bars it. They set the exchange rate at the time of receipt. You cannot know ahead, sir.
    Mr. SHADEGG. I read that in your testimony, and I was a little shocked. I had understood that in some countries that is not an established market, so you might not know it until you transmit it. But you are saying that in other countries, the government itself establishes the exchange rate after you send the money.
    Mr. LEVINE. Exactly. In some, the number of transactions is so small overall that in fact there really isn't an established exchange rate. You certainly will not see it published anywhere or even on the Internet.
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    Mr. SHADEGG. With regard to those countries where there is an established exchange rate, you would disclose that information, and that would include countries other than Mexico, I take it.
    Mr. LEVINE. Absolutely.
    Mr. SHADEGG. So for Poland or Russia or someplace like that, you would disclose the rate?
    Mr. LEVINE. Yes, and the companies also offer, Mr. Congressman, a floating rate option. So a consumer who decides, look, it may be that the dollar is going to go down or the foreign exchange is going to go down, we offer them the floating rate option, and that is disclosed, if they want that. Or a customer could say, it is called will-call, I am going to send money to my son or daughter who is traveling in Europe, but I don't know where they are going to pick it up. It might be France, it might be Germany, well, of course, they are euro countries, but it might be England, still on the pound. So you cannot quote an exchange rate when it is a will-call transaction.
    All I am saying is, there are many different kinds of services and one size does not fit all, basically.
    Mr. SHADEGG. So the large national players offer a service under which I have a child who is traveling in Europe; I put some money in, but I do not know where they are going to pick that up?
    Mr. LEVINE. Absolutely. They can go pick it up at any one of the recipient location outlets in any country of the 140 or 160 where the large companies maintain a presence.
    Mr. SHADEGG. That would create a problem both for the issue of disclosing exchange rate, and for the issue of what language in which to disclose that. Is that right?
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    Mr. LEVINE. Absolutely.
    Mr. SHADEGG. What is your sense, of course, as your testimony has indicated, the price of these remittances is coming down. Do they notice or are they concerned about somebody in the market who is playing with the exchange rate, the example that was given earlier where somebody says, well, we will waive our fee, but then they have an exchange rate that they don't disclose?
    Mr. LEVINE. Yes. Obviously, we want a level regulatory playing field, but we are also very, very sensitive to the competitive pressures. In fact, both companies now, I think it is Western Union will send to Mexico for $9.99 overnight, $300. I think MoneyGram, if my memory serves me, is $500 instantly at $9.99. These prices are way down from where they were before, and everybody is sensitive, and they are also sensitive about reducing the FX spread where they can. Again, some of that depends on which country you are sending it to. We really only here talk about Mexico. In fact, you are talking about the world.
    Mr. SHADEGG. My time has expired, but in light of the absence of other questioners over here, could I ask one last question?
    Ms. BROWN-WAITE. Without objection.
    Mr. SHADEGG. Is there any effort within the industry to set an internal set of standards? That is, for the players, U.S. Bank is now apparently becoming a big player, Mr. Herrera is representing the credit unions, to set an internal set of standards saying, well, all of us will voluntarily subscribe to this set of principles when we engage in a transaction? Has that been discussed or does that exist?
    Mr. LEVINE. No, it hasn't. On the non-bank money transmitter front, I cannot really speak to the banks, a number of the States have imposed, California for example; Illinois most recently, and we supported the Illinois effort; Texas; State of Washington; there are a couple of others I cannot remember, which have imposed, in fact, receipt requirements, requiring disclosure of FX rates, et cetera, and fees. So in fact, that is happening at the State level, even without industry agreement.
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    Mr. SHADEGG. I thank all the witnesses for their testimony and for their efforts in this area.
    Ms. BROWN-WAITE. Thank you very much.
    I would remind the members that we are supposed to be out of the room about 1:00 p.m., so we are going to have to closely adhere to the five-minute rule.
    Next, the gentleman from North Carolina, Mr. Watt, you are recognized.
    Mr. WATT. Thank you, Madam Chair. I will try not to take the full five minutes. I first want to welcome my friend John Herrera from North Carolina, and compliment him on the outstanding work that he and the credit unions have done there to make a major outreach into the Latino community, and to do what it is doing and what the banking community is now doing, to put a slightly different spin than Mr. Gutierrez has, which is push to provide a service that in some locations we have just not been able to take for granted. So you have had other providers step into the community to provide check-cashing and transmittal services. Sometimes they have not always lived up to the code of conduct or to the regulatory scheme that applies to credit unions and banks.
    That is kind of a back-handed compliment to Mr. Levine's industry, because some of those institutions that he represents were there providing a service, not necessarily at the standard that we would have wanted them to be providing the service, but pushing the banks and credit unions to be more responsive to the community. I think this evolution is taking place.
    Let me pick up on something Mr. Levine said, which is that there are a number of different providers coming into the marketplace now. There is more money out there that is being transmitted. There is more service to be provided, more profit to be made, more apparent need. That leads me to the question that I would like to pose to Mr. Levine and to Mr. Herrera and Ms. Perez, in particular, of whether in light of the proliferation of providers in the market, whether we might not need a more uniform set of standards, or some best practices guidelines. I do not have the sense that necessarily Western Union or maybe even all of the providers that members of your industry group, but some of these people who are proliferating out there are not necessarily looking at the same standards in this industry as we would want to have applied.
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    My question is, in light of the proliferation, in light of the increased use of these kind of services, is there a need for a more uniform regulatory structure, either at the State or Federal level, and since this is international stuff we are dealing with, whether that regulatory structure ought to be done more at the Federal level than at the State level. I would like to get the response at least from the three people on this end of the panel.
    Mr. LEVINE. I think that in fact the market is regulating things quite well right now. I think consumers are voting with their feet. They are voting with their feet by going to the credit unions. They are going to the money remitters. They are going to the U.S. Banks and the other banks like Bank of America, Wells Fargo. They are comparing products. They are looking at fees. They are looking at exchange rates. The migration among the folks, whether those people are Hispanics; whether those people, for example in Illinois there is a huge Polish community that wires money; there are people that wire money to Southeast Asia. They are looking, they are comparing. They are savvy. Maybe they are not savvy in the very first transaction they do, but when these folks are sending money week after week or month after month, they are comparing. They are talking to their friends. They are shopping. Often in these areas, particularly for example on the east side of L.A., other areas of Chicago and Texas, Arizona, and now in North Carolina.
    Mr. WATT. So you think the market is regulating.
    Mr. LEVINE. Yes, the market.
    Mr. WATT. I don't mean to rush you, but the red light is on.
    Mr. LEVINE. Go ahead.
    Mr. WATT. I am not asking another question. I am just trying to get a response to this question.
    Mr. HERRERA. Congressman Watt, I would say on behalf of CUNA and the World Council of Credit Unions that we need regulation relief rather than more regulation, to stimulate competition. For the chairman of a small community development credit union, you know credit unions are not-for-profit financial institutions, and we come in all kinds of size, shape and flavors. We are state regulated and federally regulated. So more regulation to force different standards, especially for community development credit unions, will really put an extra burden. I can see in community development credit unions, small size, are really struggling to comply with the current regulations.
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    We already have as a matter today the board of the Credit Union National Association is adopting a guideline of best practices for wire transfers. We want for our members, we are not-for-profit full service financial institutions, and we want for our members the same thing I want for myself. I want to know, if I am sending money, how much it is going to cost; how many pesos my family is going to get on the other side. You know, full disclosure. We have adopted and it is in the written testimony, the seven principles that all credit unions voluntarily will adopt and are already practicing.
    Ms. BROWN-WAITE. Ms. Perez, if you would submit your response in writing, that would be very helpful, or we are going to be running over here.
    Next, I will recognize the gentleman from Texas, Mr. Gonzalez.
    Mr. GONZALEZ. Thank you very much, Madam Chair.
    Quickly, I do not want to gloss over the situation we are trying to correct and improve on. We know people have been victimized, and we should not kid ourselves. If you come from San Antonio as I do, and from Texas, you would know exactly what I am talking about. I think many of you probably have had personal experiences. I know Congressman Gutierrez has witnessed it himself.
    Those are the sins of the past and everyone seeks redemption. Let's just make sure it is complete and total redemption, with a little help from the government. That is what we really would try to achieve here. Everyone says prices have come down because of competition and such, and only as long as those competitors are allowed to compete equally, then prices do come down and the market is a wonderful place in the final analysis.
    My question is going to go to the merger of First Data and Concord EFS, and if anyone has an opinion on how that would impact not just the non-bankers, but the banking part and the credit union part of transmitters. I am going to start with Mr. Suro, and again thank you for all the hard work that you are doing over there at Pew.
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    Ms. BROWN-WAITE. Mr. Suro, you are recognized.
    Mr. SURO. Yes, congressman. I just do not know enough about that proposed merger and the companies involved to really have an opinion on what impact it would have on the market.
    Mr. GONZALEZ. Dr. Orozco?
    Mr. OROZCO. Thank you. I think the proposed merger actually poses a threat to competition because of what it means to merge to major giant non-bank financial institutions. It will drive out a lot of small competitors that are coming just now, like the credit unions and the community banks. I think it is very threatening.
    I also think that we might face problems with foreign exchange issues again, because there are differences in the companies that are doing this business, and some of that Ezra represents, not all, provide the same level of transparency. In some countries, there is a very serious problem of foreign exchange speculation, and that needs to be addressed. That is why we need to adhere to certain standards.
    I do not think punitive regulation is necessary, but we need to have some sort of oversight that is missing at this point. The situation that might occur with the merger between First Data and Concord might be an illustration of where prices might go up instead of go down.
    Mr. GONZALEZ. Okay. Thank you.
    Mr. Valenzuela?
    Mr. VALENZUELA. I do not have anything meaningful to say on this subject.
    Mr. GONZALEZ. Okay. Thank you.
    Ms. Perez?
    Ms. PEREZ. Unfortunately, I do not know enough about the merger to comment at this time.
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    Mr. GONZALEZ. Thank you.
    Mr. Herrera?
    Mr. HERRERA. Likewise.
    Mr. GONZALEZ. Okay.
    Mr. Levine?
    Mr. LEVINE. I do not represent Western Union with regard to their antitrust issues.
    Mr. GONZALEZ. You do not have an opinion from the non-bank side of transmitters as to whether this is potentially harmful to competition, or not, it does not pose any threat?
    Mr. LEVINE. I am not aware of any adverse consequences with regard to that. This is my own personal statement, with regard to that proposed merger.
    Mr. GONZALEZ. Okay. Thank you very much.
    I yield back the balance of my time.
    Ms. BROWN-WAITE. Thank you very much.
    Ms. Waters, the gentlelady from California is recognized.
    Ms. WATERS. Thank you very much.
    Let me ask, first, Mr. Suro, in the fourth paragraph of your testimony, you mention that for example about half said, when you were talking about the remittance senders and receivers, they are often unaware of the full cost. You said that less than one-fifth, for example, knew the difference between published exchange rates and the rates used in the transfer process. What do you mean by that?
    Mr. SURO. In this survey, less than one-fifth of the senders were aware of the differences between the published costs and the actual foreign exchange costs. It was an important factor in the difference between what they thought was going to be received and what was actually received by their families. Often the pricing comes in a kind of packaging where there is a flat fee for sending. There is the actual rate of exchange. Sometimes there is a foreign exchange cost as well. And there is often a lack of understanding of all the different elements of that pricing package which can affect what is actually paid for the transmission.
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    Ms. WATERS. So what you are describing is, there could be something advertised that says send $300, it costs $9.99, but it does not talk about it costs more if you send $500 and other things apply and that kind of description of the cost.
    Mr. SURO. Right. A transmitter or even a bank or anybody engaged in this business might say the fee for transmitting $200 is $5 per transmission, but there may be additional costs that come up when the transmission is being completed. There is not a uniform system of totaling up these costs or even using the same names for them in different venues.
    Ms. WATERS. Okay.
    Ms. Perez, how many of your non-banked customers, your remittance senders, become banked customers of the bank once you have dealt with them?
    Ms. PEREZ. Based on our products so far, most of the customers that we do business with do eventually end up becoming customers because it is a lower rate to send it as a customer.
    Ms. WATERS. Do you have any statistics or data on that?
    Ms. PEREZ. I would say about 80 percent.
    Ms. WATERS. Would you get to me some documentation of that?
    Ms. PEREZ. Yes, sure.
    Ms. WATERS. Let me just wrap this up by saying, of course I am from Los Angeles and I am very familiar with the class action lawsuit. I do not believe that there would have been a settlement unless there was some basis for the class action lawsuit. The settlement, to me, was kind of a joke. As I remember it, the settlement included or basically gave coupons to the remittance senders to do more business with Western Union at a little bitty discount of some kind. So it was actually a great advertisement, recruitment, and probably expanded the business even more, with a little bit of a discount.
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    I am very interested in this issue for a lot of reasons. I do believe that the poorest people in our society are the most vulnerable, and that they are the most abused in the financial services industry. I just believe that. As a matter of fact, when I look at some of the organizations, such as MoneyGram and Western Union, they seem to be coupled with payday loan operations where you get a check cashed for an amount, you get a payday loan for 1,000 percent interest, and I guess you can do a remittance if you can figure out the cost, and get charged for that, too.
    So it seems to me there is a consolidation of that part of the financial services community that is convenient for poor people, for people who do not speak English very well, for people who do not understand the game. It seems that these services are concentrated more and more, which makes them even more vulnerable. I really like the idea of the credit union because people sign up; they become a part of an organization; they have access to all of the products of the credit union. It treats them as a real person, rather than payday loan operations, check-cashing operations, and transmitting remittance operations all in one.
    So I do not know where all of this is going, except to say I would like to do whatever is possible to keep people from being exploited or ripped off. I will work closely with Mr. Gutierrez and others. I think expanding competition may have some value, particularly if the ownership of that competition is by the very people who have helped to make the industry as strong as it is. I don't see Western Union or MoneyGram talking about any joint ventures with any Latinos or Latin Americans.
    Ms. BROWN-WAITE. The gentlelady's time has expired.
    Ms. WATERS. And when I begin to see that kind of involvement, then I will have a lot more respect for the industry.
    Thank you very much.
    Ms. BROWN-WAITE. The chair notes that some members may have additional questions for this panel which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record.
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    Ladies and gentlemen of the panel, thank you very much for being here. We appreciate it. You are dismissed.
    This hearing is officially adjourned.
    [Whereupon, at 1:03 p.m., the subcommittee was adjourned.]