Continuing its 2022 cadence of issuing press releases nearly every day, on June 29, 2022, the CFPB announced it issued an advisory opinion regarding "pay-to-pay" or "convenience fees." The opinion, which explicitly references fees for online and phone payments, confirms that the Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from charging these types of fees to consumers unless they are expressly authorized by agreement or permitted by law.
The opinion includes the following additional guidance:
- Silence in the law is not the same as "permitted by law." Therefore "permitted by law" in the CFPB's view means language which would explicitly allow the fee to be charged.
- Section 808(1) of the FDCPA applies even if the fees are part of a separate agreement that might be otherwise valid under state law. Therefore, even if the debt collector and consumer enter into a separate agreement to pay the fees, these types of fees still violate the FDCPA.
- "Any amount" as defined in the FDCPA applies to any sum collected in connection with the debt. It is not limited to interest, fees, charges, or expenses. Therefore, "any amount" applies to these types of fees.
- Collecting convenience fees through a third-party payment processor violates the FDCPA if the debt collector receives a kickback.
In the section relevant to payment processors, the CFPB cautioned that "[d]ebt 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." (emphasis added). This language implies that other conduct between a payment processor and a debt collector might violate the FDCPA, but no additional details were provided.
The full advisory opinion can be found here.
This CFPB has developed a pattern of finding the nuance in the FDCPA and contorting it to achieve its objectives. See, for example, this announcement where the CFPB claimed oversight of additional entities or its announcement that the Equal Credit Opportunity Act applies to debt collection.
The starting point of this advisory opinion is nothing new: debt collectors have (or should have) known for a long while that they cannot charge fees that are not authorized by contract or allowed under the law. So what is the ultimate objective here? What new guidance is the CFPB really trying to convey? Why did they spend time on this advisory opinion rather than one related to the Hunstein debacle?
Is the CFPB trying to shut down all fees associated with payments, even pass-through fees (i.e., the debt collector does not profit)? Is this what was hinted at in the bizarrely phrased reference to kickbacks? If kickbacks indicate the fees violate the FDCPA, why didn't the CFPB just say that? Why include the "at a minimum" language?
Here again is the sentence regarding payment processors in its entirety: "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." (emphasis added) Is this just a poorly worded, grammatically bizarre sentence? Or is the CFPB trying to say that some other aspect of the payment processor/debt collection relationship might violate the FDCPA?
I don't know the answers to the above, but since the CFPB does nothing by mistake, this advisory opinion seems to be the beginning of something rather than the end. As such, ARM entities should watch for future guidance, or more likely future action, from the CFPB. That said, something tangible ARM entities can do now is review their payment processing contracts to ensure nothing can be construed as a kickback. Even if you and your vendor know something isn't a kickback, it may be worth a review to make sure none of your agreements have any language the CFPB can misinterpret.