Back in February 2021, BitAML wrote a blog titled: CFPB: Consumer protection is ramping up in crypto – where we discussed how consumer protection was fast becoming a point of emphasis for regulators within the crypto space.
If you did not heed our advice then, now is the time to take a look at your consumer protection policies and procedures, and if needed put new protocols in place.
Choice Money Transfer is the latest example for others
According to Consumer Finance, the CFPB is taking action against Choice Money Transfer for allegedly, “not providing accurate fee, exchange rate, and other key information for money transfers.” While not a crypto money transmitter, Choice Money Transfer and its enforcement action offer practical lessons (and warnings) for those engaged in cryptocurrency exchanging activities.
This enforcement action is important for all other money transfer companies to pay attention to regarding consumer protection and how to properly disclose information. Take Choice Money as a learning opportunity for what should be changed moving forward with crypto money transmitters.
Key things to implement
Among the key findings of the enforcement action, was the inaccurate disclosure of the appropriate (fiat) exchange rate. Those in the crypto industry know and understand that there is no universal price for bitcoin and most other cryptocurrencies, making it difficult for newer consumers to understand what may be a reasonable rate at the time. While most indexes generally quote a similar rate, consumers transacting via crypto platforms (e.g., bitcoin ATMs, exchanges, etc.) are often presented with a premium rate favorable to the money transmitter. Because of this, it is important to provide attribution as to what index you’re quoting so that consumers can make an informed decision.
Crypto money transmitters should also ensure that the exchange rate disclosures include the date and total amount with all fees included; this is a key finding highlighted by regulatory examiners. The terminology of the exchange rate, fees, total transaction amount, and other key pieces of information should also be consistently displayed and shared with the consumer to avoid confusion and offer a consistent, transparent experience to all.
The examiners identified language as a consumer barrier when services were limited to a single, primary language. As cryptocurrency is universal and worldwide, depending upon the residency or domicile of one’s customer base and the transaction location, the support of multiple languages is a must.
Lastly, the enforcement action determined that Choice Money failed to develop and maintain policies and procedures for error resolution. In short, they did not have a system for receiving, investigating, and resolving consumer complaints. Complaints are a reality of doing business. Having a documented protocol for addressing these complaints in a timely manner is critical to protecting consumers and promoting strong, ethical business practices. Oftentimes, some of the best innovations or customer experiences are developed in response to a negative service in which the customer gives the company a negative review or actually gives the company feedback in hopes that they will improve their systems and procedures.
All these aspects are key in consumer protection and understanding, and as we said in 2021 – “Consumer protection is good business.”
If you look at consumer protection as a way to build customer trust and brand loyalty, then you’ll experience benefits to your business and reputation. Consumer protection should not be looked at as a chore, but rather an opportunity to exceed customer expectations, differentiate yourself from the competition, and mitigate the risk of negative regulatory attention.
We’ve regularly advised our clients to add consumer protection policies and protocols to their AML programs that exceed regulatory expectations, and will continue to push those to make the necessary changes. BitAML has drafted policies including a Consumer Protection Policy and Consumer Complaint Resolution Policy.
If you’re concerned that your consumer protection protocols aren’t up to snuff, particularly in light of what appears to be an increase in federal scrutiny coming in the very near future, reach out to us today. We’ll help you get your business where it needs to be.