Reducing so-called “junk fees” – specifically “pay to pay” charges by debt collectors – is the aim of an advisory opinion issued by the federal consumer financial protection agency, it said Wednesday.
According to the Consumer Financial Protection Bureau (CFPB), the advisory opinion it issued affirms that federal law “often prohibits” debt collectors from charging “pay-to-pay” fees, which the bureau said are commonly described by the collectors as “convenience fees.” The fees, the agency said, are imposed on consumers who want to make a payment in a particular way, such as online or by phone.
The CFPB said the opinion shows that the fees are often illegal, “and provides a roadmap on the fees that a debt collector can lawfully collect.”
According to the advisory opinion, Section 808(1) of the Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from collecting “any amount (including any interest, fee, charge, or expense incidental to the principal obligation)” unless the amount is expressly authorized by the agreement creating the debt or permitted by law.
The opinion states that it affirms that the provision prohibits debt collectors from collecting pay-to-pay or “convenience” fees, such as those imposed for making a payment online or by phone, when those fees are not expressly authorized by the agreement creating the debt or expressly authorized by law.
“This advisory opinion also clarifies that a debt collector may also violate section 808(1) when the debt collector collects pay-to-pay fees through a third-party payment processor,” the opinion adds.
The bureau said the advisory opinion covers several points on debt collection practices, including that the opinion:
- Identifies scope of illegal fees: The bureau said 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,” the bureau said. It added that 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: The bureau said that 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.