(WASHINGTON) - People from Latin America working in the United States send more than $20 billion a year to their families back home, but $3 billion of that is eaten up in transaction fees and other charges, according to Senate testimony Thursday.
Immigrants trying to support relatives in their home countries are subject to ``hideous, and often hidden, practices in the international money transmitting business,'' Rep. Luis Gutierrez, D-Ill., told the Senate Banking Committee.
Gutierrez and others said that lower income immigrants, some in the country illegally, are particularly susceptible to higher fees because they do not have bank accounts and must go through smaller, sometimes less reputable transfer companies.
On average, he said, Latin American migrants wire home around $250 a month, but with transaction fees and losses through unfair exchange rates, their relatives may receive as little as $200.
Manuel Orozco, author of a report on remittances commissioned by the Multilateral Investment Fund of the Inter-American Development Bank, said the average fees have declined in recent years for those countries where there is market choice. He said it costs an average $11.60 in local currency fees to send $200 to Mexico, but for Cuba, where there is little competition, the price is $25.58. The actual cost of sending money is about $6, he said.
Sergio Bendixen, who conducted a survey last year for the Inter-American Development Bank on the remittance issue, told the panel that 69 percent of Hispanic immigrants send money back to their relatives, and those making less than $20,000 a year are more likely to send cash remittances than older, more middle-class immigrants.
About two-thirds are unaware that their families receive less than they send because of additional commissions, fees and exchange rates and only 46 percent of non-citizens have bank accounts.
Orozco said that in 2001, immigrants sent $9.2 billion to Mexico. The nearly $2 billion sent to El Salvador was 17 percent of that nation's gross domestic product while the $600 million returning to Nicaragua was 22 percent of GDP.
Gutierrez said he has introduced legislation that would require money transfer companies to fully inform customers of all commissions and fees charged and clearly state the exchange rate.
Sen. Paul Sarbanes, D-Md., chairman of the committee, agreed that if those sending money home had more financial education ``they would be able to send remittances at a fraction of the costs they currently pay.''
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