CFPB Issues Compliance Bulletin on Fees for Phone Payments


7/31/2017 3:55 PM

CFPB warns of potential UDAAP and FDCPA risks related to charging fees for payments made by phone.

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The Consumer Financial Protection Bureau’s most recent compliance bulletin (Compliance Bulletin 2017-01: Phone Pay Fees) provides guidance to the credit and collection industry regarding fee assessments for making payments over the phone and outlines the potential risk for violations of the prohibition on unfair, deceptive or abusive acts or practices (UDAAPs) or the Fair Debt Collection Practices Act.

The bulletin reflects the CFPB’s concern that companies may potentially mislead consumers about the purpose and amount of certain pay-by-phone fees or fail to inform them about alternative, less expensive (or free) payment options. In its bulletin, the CFPB provides a list of practices regarding pay-by-phone fees that may potentially harm consumers, including:  

  1. Failing to disclose the prices of all available phone pay fees when different phone pay options carry materially different fees.
  2. Misrepresenting the available payment options or that a fee is required to pay by phone.
  3. Failing to disclose that a phone pay fee would be added to a consumer’s payment could create the impression that there was no service fee.
  4. Lack of employee monitoring or service provider oversight may lead to misrepresentations or failure to disclose available options and fees.

The bulletin also affirms the CFPB’s stance that fees for taking payments over the phone are governed by the FDCPA, and that debt collectors may only collect such fees when the amount is expressly authorized by the underlying contract creating the debt or expressly authorized by applicable state law.

Practical Considerations

The CFPB’s recent bulletin does not mandate any particular way to inform consumers about pay-by-phone options and fees, nor does it expressly prohibit such fees. However, the bureau expects entities to review their practices on charging fees for phone payments to assess whether they may present a risk of committing a UDAAP or FDCPA violation. In conducting such a review, the bulletin suggests entities do the following:

  • Review applicable state and federal laws (including the FDCPA) to confirm whether fees for phone payments are permissible.
  • Review underlying debt agreements to determine whether such fees are authorized by the contract.
  • Review and revise (as appropriate) internal and service providers’ policies and procedures related to phone pay fees, including call scripts and training materials.
  • Review where information on phone pay fees is shared, such as in account disclosures, loan agreements, periodic statements, payment coupon books, on the company’s website, over the phone or other mechanisms.
  • Incorporate pay-by-phone issues in regular employee monitoring or audits of calls with consumers.
  • Review consumer complaints regarding fees that are charged.
  • Perform regular reviews of service providers as to their pertinent practices (refer to CFPB Compliance Bulletin 2016-02).
  • Review that the company has a corrective action plan to address any violations and to reimburse consumers when appropriate.

The bulletin also advises entities to carefully review employee and service provider incentive programs to determine if there are incentives to steer borrowers to certain payment types or to avoid disclosures.

For example, the bulletin suggests that incentives that reward employees or service providers based on consumers using a higher-cost phone pay option may potentially lead entities to steer consumers to a higher-cost option despite the availability of lower cost options.  Similarly, incentive programs that reward representatives who complete a large number of daily calls may potentially lead representatives to spend less time discussing the available phone pay options and fees resulting in the consumer paying a higher fee because the consumer is not informed of lower-cost alternatives.

This new bulletin serves as a warning that the CFPB will be closely reviewing conduct related to phone pay fees. Entities are strongly encouraged to review applicable laws to confirm whether they may charge such fees, and carefully review their business practices for assessing fees for payment options.

ACA members may review state requirements related to payment fees in ACA’s SearchPoint document, Payment Transaction Fees.  Members must be logged in to ACA’s website to access SearchPoint documents.

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