On June 29, 2022, the CFPB issued an advisory opinion affirming 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.
From CFPB Director Rohit Chopra’s statement:
“Federal law generally forbids debt collectors from imposing extra fees not authorized by the original loan. 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.”
According to the CFPB, some debt collectors impose additional fees payments made by consumers by phone or online despite the fact that it is cheaper and less time-consuming for them to process those types of payments than it is to process the paper-check payments delivered by mail or in person that debt collectors typically process for free. The CFPB’s advisory opinion aims to stop violations such as imposing those type of fees which are often illegal. 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.
Read the CFPB’s full release here.
The advisory opinion can be found here.
