Coalition Opposes Settlement Over Money-Wiring Fees

A group of California politicians, civil rights groups and Latino community leaders were expected today to announce their opposition to a preliminary settlement by Western Union and MoneyGram that would compensate immigrants nationwide who allegedly paid exorbitant hidden fees when wiring money to Mexico.

Disappointed with the terms of the settlement, they are calling for California to split off from the rest of the country to pursue an existing class-action suit against the companies in state court, even if that means freezing California immigrants out of the nationwide deal.

Under the settlement announced in May, discount coupons would be provided to anyone who wired money to Mexico using the services over the last 12 years--including Californians--but it would block current and future lawsuits on the matter.

Legislators--among them U.S. Reps. Grace F. Napolitano (D-Norwalk), Matthew G. Martinez (D-Monterey Park) and Maxine Waters (D-Los Angeles) and California Senate Majority Leader Richard Polanco (D-Los Angeles)--were expected to announce their opposition at a news conference today. They argue that strict California consumer protection laws give plaintiffs here the best chance of prevailing against the corporations.

“Maybe there is a chance to get a better settlement for the Californians involved,” Napolitano said. “California represents over 30% of the total [money]-sending population. . . . I’m fighting for the rights of the people who have an inherent trust in these companies to get their money across to their loved ones.”

The lawmakers--along with the mayors of Bell Gardens and Maywood; more than a dozen community rights groups, including the San Francisco-based Greenlining Institute and Hermandad Mexicana Nacional; and immigrant associations from several Mexican states--will file a friend-of-the-court brief today in Illinois asking that an injunction freezing the California case be lifted.

Proponents of the settlement warn that the California chorus of disapproval could ultimately scuttle benefits for all consumers who now stand to gain.

“If they were able to persuade a judge that the settlement wasn’t fair, adequate or reasonable for Californians, they would be able to kill the settlement,” said Chicago attorney Matthew Piers, who helped negotiate the deal on behalf of Illinois immigrants.

At the very least, Piers said, opposition could delay implementation of the deal. The settlement was negotiated by Illinois and Texas attorneys who filed federal class-action lawsuits in those states. An Illinois federal judge gave preliminary approval to the deal and issued the injunction blocking other suits. The proposal is slated for final approval in November.

The California opposition could also open a rift among national Latino organizations. In the preliminary settlement, MoneyGram Payment Systems Inc. and Western Union parent First Data Corp. agreed to set aside $2.3 million in contributions to Latino community organizations--to be disbursed by the Mexican American Legal Defense and Educational Fund (MALDEF) and the National Assn. of Latino Elected and Appointed Officials (NALEO). Those organizations are absent from the brief that will be filed today.

“The opposition could not only undermine the entire settlement but it could put everyone in California at risk of not getting any relief at all,” said NALEO Executive Director Arturo Vargas.

The lawsuits have challenged the companies’ practice of using currency exchange rates that are far less favorable than prevailing daily rates without informing customers, many of them immigrants who can least afford it. Mexican immigrants in the U.S. send more than $4 billion to relatives in their home country yearly, much of it from California, and the bulk of the money transferred electronically is handled by the two companies.

Under the settlement, the companies will begin disclosing that they profit from a currency exchange markup, although they will not disclose the rates they use. They will also offer future discount vouchers to customers who have wired money to Mexico since 1987. In addition, they are funding a $3-million binational media blitz and a multimillion-dollar first-class mailing to all former consumers--many of them transient--to inform them of the deal. Those efforts are slated to begin Labor Day.

California attorney Fred J. Kumetz, who filed the class-action case here, has lambasted the deal as inadequate because it benefits only those who continue to use the wire transfer services. He filed a brief in federal District Court in Chicago late last month asking that the injunction be lifted, and the brief to be filed today supports his.

American Civil Liberties Union Legal Director Mark Rosenbaum said California could easily be excised from the settlement without jeopardizing the deal for the rest of the nation. The ACLU serves as co-counsel on the California case.

The companies have lauded the settlement as an amicable end to potentially costly litigation and have stressed their commitment to their U.S.-Mexico customers. Pete Ziverts, spokesman for Western Union and sister company Orlandi Valuta--also affected by the settlement--said the injunction blocking the California case should hold.

“The injunction is part of what we believe is a fair and equitable settlement agreement,” he said.