The Consumer Financial Protection Bureau issued an advisory opinion late last month affirming that federal law frequently prohibits debt collectors from charging “pay-to-pay” fees.
The advisory opinion interprets language in Section 808 of the Fair Debt Collection Practices Act, which bans debt collectors from collecting amounts that are not expressly authorized under an underlying agreement or permitted by law. Debt collectors violate the Fair Debt Collection Practices Act when they receive kickbacks from payment processors that charge unauthorized fees, according to the CFPB.
“Pay-to-pay” charges, which debt collectors describe as “convenience fees,” are sometimes issued to customers who want to make a payment in a specific way, such as online or by phone, according to the CFPB. Debt collectors that charge those fees do so even though 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,” according to the CFPB.
“Federal law generally forbids debt collectors from imposing extra fees not authorized by the original loan,” said CFPB Director Rohit Chopra. “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.”
Under Chopra’s leadership, the CFPB has taken an aggressive approach to combating “junk fees.” Also in June, the CFPB announced it was reviewing the credit card industry’s penalty policies and published an advanced notice of proposed rulemaking requesting information to determine whether regulations need to be changed to address late fees under the Credit Card Accountability Responsibility and Disclosure Act of 2009.