Businesses that send money overseas, perceived by immigrants as lifelines between immigrant communities and their native countries, indulge in bad business practices. They do not inform the consumer how exchange rates are determined and fail to make telephone numbers available that clients can call if they have problems with services, according to a study carried out by the New York City Department of Consumer Affairs.
The report investigated 90 money transfer businesses in three New York City neighborhoods—Jackson Heights in Queens, Sunset Park in Brooklyn and Washington Heights in Manhattan—and discovered that variations in fees for their services are as much as $30.
In Washington Heights, a neighborhood of immigrants primarily from the Dominican Republic, the cost of sending $500 to the island varies between $5 and $36.
On October 21, the Commissioner of the Department of Consumer Affairs Gretchen Dykstra said it wasn’t very clear whether the services offered by the businesses in question radically differed to justify this variation in rates. Dykstra said that this issue merits a more thorough investigation. The drastic differences in fees were also observed in Sunset Park and in Jackson Heights.
The report highlighted the fact that almost none of the businesses notified clients about the exchange rates on a given day—a rate which may not be favorable to the consumer—and the amount charged in taxes for a given transaction.
The state doesn’t regulate the amount that these businesses charge for transactions. Those who criticize the high commissions claim that these prices would fall if banking institutions offered similar money-transferring services and eliminated the additional cost incurred by involving a third party in commercial transactions.
“Banks should establish commercial links with businesses who deal with monetary transfers so that these [businesses] don’t feel obligated to struggle with intermediary parties,” said Dr. Manuel Orozco of Inter-American Dialogue, an organization based in Washington D.C.
In New York State there are more than 15,000 money transfer businesses that process 160,000 transactions per day. These small businesses are affiliated with 67 large companies, such as Western Union and MoneyGram.
It is estimated that about $3 billion are sent annually from New York to Latin America.
