CFPB warns debt collectors on “pay-to-pay” fees
On June 29, the CFPB issued an advisory opinion to state its interpretation that Section 808 of the FDCPA and Regulation F generally prohibit debt collectors from charging consumers “pay-to-pay” fees for making payments online or by phone. “These types of fees are often illegal,” the Bureau said, explaining that its “advisory opinion and accompanying analysis seek to stop these violations of law and assist consumers who are seeking to hold debt collectors accountable for illegal practices.”
These fees, commonly known as convenience fees, are prohibited in many circumstances under the FDCPA, the Bureau said. It pointed out that allowable fees are those authorized in the original underlying agreements that consumers have with their creditors, such as with credit card companies, or those that are affirmatively permitted by law. Moreover, the Bureau stressed that the fact that a law does not expressly prohibit the assessment of a fee does not mean a debt collector is authorized to charge a fee. Specifically, the advisory opinion interprets FDCPA Section 808(1) to permit collection of fee only if: (i) “the agreement creating the debt expressly permits the charge and some law does not prohibit it”; or (ii) “some law expressly permits the charge, even if the agreement creating the debt is silent.” Additionally, the Bureau’s “interpretation of the phrase ‘permitted by law’ applies to any ‘amount’ covered under section 808(1), including pay-to-pay fees.” The Bureau further added that while some courts have adopted a “separate agreement” interpretation of the law to allow collectors to assess certain pay-to-pay fees, the agency “declines to do so.”
The Bureau also opined that a debt collector is in violation of the FDCPA if it uses a third-party payment processor for which any of that fee is remitted back to the collector in the form of a kickback or commission. “Federal law generally forbids debt collectors from imposing extra fees not authorized by the original loan,” CFPB Director Rohit Chopra said. “Today’s advisory opinion shows that these fees are often illegal, and provides a roadmap on the fees that a debt collector can lawfully collect.”
As previously covered by InfoBytes, the Bureau finalized its Advisory Opinions Policy in 2020. Under the policy, entities seeking to comply with existing regulatory requirements are permitted to request an advisory opinion in the form of an interpretive rule from the Bureau (published in the Federal Register for increased transparency) to address areas of uncertainty.