Federal: AFC Letter Concerning Remittance Tax Provision in Budget Reconciliation Bill

The Honorable Mike Crapo
Chairman
Committee on Finance
U.S. Senate
Washington, DC 20510

The Honorable Ron Wyden
Ranking Member
Committee on Finance
U.S. Senate
Washington, DC 20510

The Honorable Jason Smith
Chairman
Committee on Ways & Means
U.S. House of Representatives
Washington, DC 20515

The Honorable Richard Neal
Ranking Member
Committee on Ways & Means
U.S. House of Representatives
Washington, DC 20515

Re: The American Fintech Council’s Concern Regarding Remittance Tax Provision in Budget Reconciliation Bill

Dear Chairs Crapo and Smith, and Ranking Members Wyden and Neal:

On behalf of the American Fintech Council (AFC),  I write to express our concern regarding the blanket tax on remittances and cross-border payments (the Provision) of the impending and evolving budget reconciliation bill (the Bill) currently under consideration by the House and Senate. AFC has consistently advocated for a regulatory framework that is clear, consistent, and responsive to evolving financial services. The inclusion of a blanket tax on remittances and cross-border payments in the Bill would have harmful unintended consequences for a clear and consistent regulatory framework, local businesses, and ultimately for vulnerable Americans.

AFC is the premier trade association representing the largest financial technology (Fintech) companies and innovative banks who power them. Our mission is to promote a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies. Our members are lowering the cost of financial transactions, allowing them to help meet demand for high-quality, affordable products. Specifically, payments providers specializing in cross-border transfers play a critical role in the financial lives of millions of Americans, offering fast, affordable, and transparent alternatives to traditional international wire services. These companies increase competition, lower costs, and expand access to secure, regulated payment options, particularly for immigrant and underserved communities who rely on remittances to support family members abroad.

AFC has consistently and proactively engaged with state and federal financial services regulators to improve their understanding of the innovative financial products and services. AFC recognizes the importance of developing clear and consistent regulatory frameworks, including a harmonization of money transmitter laws across the states. The current patchwork approach imposes a substantial compliance burden, particularly on smaller providers, without improving consumer outcomes or enforcement clarity. Streamlined licensing standards and coordinated supervision across states would reduce friction in the payments ecosystem and expand access to regulated financial products.

While we respect the Congress’ efforts in this area, passage of the Provision establishes conflicting definitions and requirements that are incongruent with existing state laws on money transmission. Currently, state legislatures have been diligently working to pass and implement the Conference of State Bank Supervisors’ model Money Transmission Act (MTMA), which seeks to modernize and harmonize the payments regulatory framework, including for remittances.  AFC has supported this model legislation due to its pragmatic approach towards modernizing the complex payments regulatory ecosystem. Thus far, over 25 states have enacted the MTMA,  providing much-needed harmonization for remittance providers and other money transmitters who serve millions of consumers. Unfortunately, establishing a tax on remittances would likely be misaligned with the provisions of the MTMA and create confusion across these previously harmonized jurisdictions.

AFC is not alone in its recognition that taxing remittances causes significant practical harm to the remittance ecosystem. A 2016 U.S. Government Accountability Office report on the international remittance market found that Oklahoma’s remittance law, which included similar policies to those considered in the Provision, led to decreased revenues and transaction volumes, and a shift toward informal, unregulated markets, undermining  financial security, public interest, and the anti-money laundering efforts of private sector and government entities.  It is important to note that to date, while a number of state legislatures have considered taxing remittances in a similar manner as the Provision, none of these bills have passed, with many of them dying very early in the process. Simply put, state legislatures have recognized that pursuing taxation of remittances does not represent pragmatic policymaking that will help their states and constituents.

Our concerns regarding the Provision pertain not only to the legal and regulatory implications for remittance providers, but also to the consumers who use these services. In practice, the providers of remittance transfer services often operate through agent relationships with local retailers such as grocers, pharmacies, and other small businesses. A remittance tax would raise the cost of engaging in this business and ultimately drive consumers away. It also means an increase in compliance costs for money transmitters, forcing a reduction in service or an increase in prices for the end user.

Furthermore, remittances are of crucial importance to immigrant communities working in the U.S. According to the FDIC, approximately 5.6 million U.S. households are unbanked, and an additional 19 million are underbanked.  Many of these underbanked individuals are part of immigrant communities that frequently depend on money orders, prepaid products, and cross-border payments—including remittances—to manage basic financial needs and care for their families both domestically and abroad. Policies that raise barriers to these services will have a disproportionate impact on already-marginalized communities seeking to contribute to the U.S. economy by significantly increasing the underlying costs of remittances. In turn, these individuals may seek cheaper options that lie outside of the regulatory perimeter and thus outside of prudent regulatory oversight.

Given the above concerns, AFC respectfully requests Congress pursue a pragmatic approach to policymaking, rather than imposing new costs on the most financially vulnerable. We recommend working with stakeholders, including regulators, consumer advocates, and industry, to identify solutions that enhance financial transparency without restricting access or undermining regulatory consistency.

We commend the Committees for their hard work in crafting this complex reconciliation effort. AFC remains committed to partnering with Congress to ensure any new financial policies reflect the realities of the modern payments ecosystem and ensure that the American economy and American consumers are best served. Please do not hesitate to reach out if we can serve as a resource or provide further perspective on the role of fintech in enhancing America’s financial health.

Sincerely,

Ian P. Moloney

SVP, Head of Policy and Regulatory Affairs

American Fintech Council

Cc: The Honorable Tim Scott, Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. Senate
The Honorable Elizabeth Warren, Ranking Member, Committee on Banking, Housing, and Urban Affairs, U.S. Senate
The Honorable French Hill, Chairman, Committee on Financial Services, U.S. House of Representatives
The Honorable Maxine Waters, Ranking Member, Committee on Financial Services, U.S. House of Representatives

[1] AFC’s membership spans technology platforms,non-bank lenders, banks, payments providers, loan servicers, credit bureaus,and personal financial management companies.
[2] U.S. Government AccountabilityOffice, International Remittances: Actions Needed to Address UnreliableOfficial U.S. Estimate, GAO-16-60, (Feb. 16, 2016), available at https://www.gao.gov/products/gao-16-60.[1] Federal Deposit Insurance Corporation, 2023FDIC National Survey of Unbanked and Underbanked Households, (Nov. 14,2024), available at https://www.fdic.gov/household-survey/2023-fdic-national-survey-unbanked-and-underbanked-households-report.
[3] Ibid.
[4] U.S. Government Accountability Office, International Remittances: Actions Needed to Address Unreliable Official U.S. Estimate, GAO-16-60, (Feb. 16, 2016), available at https://www.gao.gov/products/gao-16-60.
[5] Federal Deposit Insurance Corporation, 2023FDIC National Survey of Unbanked and Underbanked Households, (Nov. 14,2024), available at https://www.fdic.gov/household-survey/2023-fdic-national-survey-unbanked-and-underbanked-households-report.
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