February 5, 1999

Consumer Bill Would Stop Hidden Fees for Across-the-Border Money Transfers

Sacramento — Spurred by reports that money transfer companies are profiting from indirect fees by reducing the dollar-to-peso exchange rate, Assemblymember Thomas Calderon (D-Montebello) has introduced AB 143-, which would force companies to explicitly disclose exchange rates.

Sending money to Mexico can be costly. Recent news articles reported that of the $5 billion sent across the border by Mexican workers in 1997, almost $1 billion more was lost, stolen or eaten up by hidden fees — including indirect charges associated with exchange rates.

Through money transfer companies, such as Money Gram and Western Union, commonly advertise such flat rates as $27 to send $300," unsuspecting customers actually pay much more because of reduced exchange rates.

For example, if the day's exchange rate is 8.3 pesos to the dollar, but the money transfer service is paying only 7.3 pesos, a $100 money transfer is worth only $88 when it arrives in Mexico. Meanwhile, the wire service has made $12 on top of its transfer fee.

"This bill will stop these companies from advertising one price, then quietly benefiting from low exchange rates," Calderon said. "By charging these unclear fees, money transfer companies are taking hard-earned cash out of the family members in Mexico and other countries who need it."

Although money transfer companies disclose the exchange rate at the time of the order, many customers are unaware of the low rates.

Specifically, AB 143 will:

Require money exchange companies to state the official rate of exchange, the rate being used by the wire service for that particular transaction, and the difference between the two of the customer receipt;

Require money exchange companies to post the official rate of exchange on signs and advertising;

Require violators to face civil penalties of up to $1,000 per day or criminal penalties of $50,000 or one year in jail.

"This is consumer-friendly legislation that supports truth in advertising laws that are already on the books," Calderon said. "AB 143 will protect consumers, allowing them to comparison shop to get the most for their money."

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