WASHINGTON–The Consumer Financial Protection Bureau has issued an advisory opinion it said affirms that federal law often prohibits debt collectors from charging “pay-to-pay” fees.
These charges, commonly described by debt collectors as “convenience fees,” are imposed on consumers who want to make a payment in a particular way, such as online or by phone, the Bureau stated.
“Federal law generally forbids debt collectors from imposing extra fees not authorized by the original loan,” said CFPB Director Rohit Chopra in a statement. “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.”
While noting that debt collectors play a critical role in the consumer finance ecosystem, the CFPB said it wants to ensure law-abiding debt collectors are not disadvantaged by their competitors that impose unlawful fees.
Holding Collectors ‘Accountable’
“While most debt collectors allow consumers to make payments by phone or online without charging additional fees, some debt collectors impose additional fees for those types of payments,” the Bureau said. “These debt collectors do so even if it is cheaper and less time-consuming for them to process phone and online payments than it is to process the paper-check payments delivered by mail or in person that debt collectors typically process for free. These types of fees are often illegal, and today’s 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.”
According to the CFPB, the advisory opinion interprets the language in Section 808 of the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from collecting any amount that is not expressly authorized by the underlying agreement or permitted by law.
What’s Covered
The Bureau said the advisory opinion covers the following on debt collection practices:
- Identifies scope of illegal fees: The collection of any fee is prohibited unless the fee amount is in the consumer’s contract or affirmatively permitted by law.
- Affirms that silence in the law is not an authorization: A debt collector may only collect a fee when it is authorized by the agreement creating the debt or is “permitted by law.” Where no law expressly authorizes a fee, it is not “permitted by law,” even if no law expressly prohibits it.
- Clarifies role of payment processors: Debt collectors violate the FDCPA when using payment processors who charge unauthorized fees at a minimum if the debt collector receives a kickback from the payment processor.