On June 29, the CFPB issued an advisory opinion affirming that federal law 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 advisory opinion is based on 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. The opinion:
- 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.
The advisory opinion will be effective upon publication in the Federal Register.
Will this prohibition be applicable to financial institutions collecting their own debt through the UDAP/UDAAP connection?