Hispanic Heritage Month: The hidden problem of sending money back home

Joshua Contreras

Wise was founded by immigrants, built by immigrants, and is used by immigrants.

The United States is a nation of immigrants — shaped by the courageous people from around the world who have left their homes and loved ones to seek refuge and opportunity. Hispanic Heritage Month is celebrated from September 15 to October 15 and is a time to celebrate the rich culture, history, and contributions of Hispanic and Latino communities in the United States. It's also a time to shed light on important issues that affect these communities, such as the often-overlooked problem of hidden fees in remittance services.

Did you know that most people are unaware of what they actually pay to send, spend, or receive money internationally? That’s because remittance providers often mislead people on the fees they charge. They may say they have low, or even no fees, but they hide extra fees in a marked-up exchange rate. In fact, there's only one rate that you ever need to care about: the mid-market rate, like the one you see on Google.

The Importance of remittances
Remittances, or money transfers sent by individuals working abroad to their families in their home countries, play a vital role in the economic well-being of Hispanic and Latino communities in the United States. According to the World Bank, remittances are a lifeline for millions of families worldwide, helping to alleviate poverty, improve access to education and healthcare, and promote economic development in recipient countries.

But today, it’s still expensive for people sending remittances, with the global average cost at 6.3% of the amount sent. The international community wants to fix this. The United Nations Sustainable Development Goal 10c aims to bring down these costs to less than 3% on average by 2030. In the United States, Hispanic immigrants make up a substantial portion of remittance senders. These funds serve as a way to support loved ones and contribute to their homeland's economy, making remittances a deeply ingrained cultural and financial practice among Hispanic communities.

Exchange rate markups are junk fees: The hidden problem
While remittances are a lifeline for many, the process of sending money overseas can be expensive due to various fees and hidden costs. One issue that often goes unnoticed is the hidden exchange rate mark-up imposed by some remittance service providers. Exchange rate mark-ups refer to the difference between the actual exchange rate and the rate offered to customers. Many remittance services offer less favorable exchange rates, effectively taking a portion of the sender's money in the form of hidden fees. This practice can lead to recipients receiving less money than expected, negatively impacting their financial well-being.

The Impact on Hispanic Communities
The United States is by far the biggest remittance sending country in the world, with Mexico receiving the largest portion of those remittances. The impact of these junk fees in remittances is felt within Hispanic communities. Immigrants who work tirelessly to support their families back home lose a significant portion of their hard-earned money to these hidden fees. This can create financial strain and hinder the intended purpose of the remittances, which is to improve the lives of recipients.

In the United States, $8.7 billion is lost to hidden exchange rate mark-ups. Currently, there’s no rule banning hidden fees in the exchange rate, but the consumer watchdog, the Consumer Financial Protection Bureau (CFPB) wants to make it easier for people to understand the fees charged by remittance providers. The CFPB is considering taking action to improve how fees and exchange rate mark-ups are displayed. This idea has gained support from US Senators, consumer and immigration groups, and an industry trade association. The goal is to provide clearer information to people, helping them make better decisions when sending money abroad.

The solution: Ending junk fees in international payments
To address the problem of junk fees when sending remittances, it is essential to take several steps:

  • Price transparency: Remittance service providers should be transparent about their fees and exchange rates. Senders should have access to clear information on the total cost of sending money. The fees shown to consumers should include exchange rate mark-ups to prevent unfair practices in the remittance industry. The consumer watchdog (CFPB) should require disclosures to show the “total cost” that includes both exchange rate margin and upfront fees in one single amount, by updating the Remittance Rule or issuing clear guidance to industry.

  • Consumer education: Hispanic communities should be educated about the potential hidden fees in remittance services and how to compare providers to find the best value for their money.

During Hispanic Heritage Month, it is crucial to recognize the contributions of Hispanic and Latino communities in the United States and the vital role remittances play in supporting their families and home countries. While remittances are a lifeline for many, hidden exchange rate mark-ups reduce the benefits and intended purpose from these financial transactions. By raising awareness about the hidden fees in remittance services and advocating for transparency and fair practices, we can ensure that Hispanic communities, and all remittance senders, are not unfairly burdened by these junk fees. In doing so, we can ensure remittance payments go further to support for families both in the United States and abroad.

Help us change the law — share your story with the CFPB.
Help us end junk fees in remittance payments by sharing your hidden fees story directly with the U.S. consumer finance watchdog (CFPB). This will help save Americans millions of dollars and contribute to the United Nations goal to reduce remittance costs to 3% by 2030.

Share your story

Join our campaign to end hidden fees around the world, Nothing to Hide. We need policymakers to address these misleading practices, close the loopholes in the law and make it possible for consumers and businesses to accurately compare prices. By signing up you’ll stay up to date with the latest developments and learn about ways to get involved.

This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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