Any debt collectors still charging convenience fees or other fees to consumers that are not covered in the contract between the consumer and the original creditor are breaking the law and may be subject to lawsuits from consumers and regulatory scrutiny from the Consumer Financial Protection Bureau, the agency announced yesterday by issuing an Advisory Opinion.
A copy of the advisory opinion can be accessed by clicking here.
The guidance on convenience fees and other fees that may may be charged by collectors that fall outside of the scope of the original agreement between the consumer and the creditor are part of the CFPB’s crackdown on what it calls “junk” fees charged to consumers.
Collectors are only allowed to collect whatever is expressly authorized by the underlying agreement or otherwise permitted by law, under the Fair Debt Collection Practices Act. Convenience fees, in which a consumer is assessed a fee for making a payment via debit or credit card — often to cover the charges associated with transactions in this channel — are not to be assessed unless the underlying agreement permits them. The CFPB also pointed out that just because the FDCPA or a state law may not prohibit the assessment of an additional charge or fee is not the same as that charge or fee being authorized.
Under the FDCPA, collectors are not allowed to collect “… any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” In interpreting this language, the CFPB said that the provision allows the collection of a charge or fee if:
- the agreement creating the debt expressly permits the charge and some law does not prohibit it
- some law expressly permits the charge, even if the agreement creating the debt is silent. The CFPB’s interpretation of the phrase “permitted by law” applies to any “amount” covered under section 808(1), including pay-to-pay fees.
Where some courts have adopted an interpretation of the law to allow collectors to assess additional fees in certain cases, “the CFPB declines to do so,” it said in the opinion.
Also included in the list of prohibited fees and actions are convenience fees assessed by a payment processor, for which any of that fee is remitted back to the collector in the form of a kickback or commission.
“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.”