CFPB Releases Advisory Opinion Reaffirming Position on “Pay to Pay” Fees
On June 29, the Consumer Financial Protection Bureau (CFPB) released an advisory opinion reaffirming its position that pay-to-pay or “convenience” fees are prohibited by section 808(1) of the Fair Debt Collection Practices Act (FDCPA) unless the fees are expressly authorized by the agreement creating the debt or expressly authorized by law. The advisory opinion also reiterates that the silence of a statute does not authorize conduct and the prohibition applies to third-party payment processors. One thing to keep in mind is the FDCPA and its prohibitions against pay-to-pay fees apply to third-party debt collectors and generally do not apply to credit unions.
The statute and regulation under examination are, respectively, section 808(1) of the FDCPA and 12 CFR 1006.22(b). Section 808(1) prohibits: “[t]he collection of 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.” The advisory opinion reflects on recent CFPB compliance bulletins and Supervisory Highlights discussing the CFPB’s past findings on pay-to-pay fees. One 2017 compliance bulletin reiterates the CFPB’s own conclusions on section 808(1) that are again expressed in this advisory opinion.
The CFPB reasons section 808(1) prohibits a debt collector from collecting pay-to-pay fees by exploring the plain-English meaning of “any” and “including” in section 808(1). The CFPB maintains “[the] FDCPA section 808(1) and Regulation F, 12 CFR 1006.22(b), apply to any amount collected by a debt collector in connection with the collection of a debt, including, but not limited to, any interest, fee, charge, or expense that is incidental to the principal obligation” (emphasis added). The CFPB finds the combination of “any” and “including” encompasses any amount charged in connection to a debt and does not just limit charges to those that are “incidental to the principal obligation.” As a result, the CFPB holds any pay-to-pay fees charged to a consumer for accepting that consumer's payment on a debt through a particular “channel” such as an online portal or phone are prohibited by section 808(1) “even if such amount is not ‘incidental to’ the principal obligation.”
However, section 808(1) does allow the collection of an amount if the collection is “expressly authorized by the agreement creating the debt or permitted by law.” The CFPB’s advisory opinion explores what “permitted by law” means for the collection of pay-to-pay fees. Relying on the plain-English definition of “permit” and reading the definition within the context of the statute, a debt collector may only collect an amount if either expressly authorized by the agreement or expressly permitted by law. The CFPB argues its interpretation holds “an amount is impermissible if both the agreement creating the debt and other law are silent.” The CFPB also emphasizes that separate valid agreements made under state contract law that may permit the collection of pay-to-pay fees are also prohibited under this interpretation. In other words, the CFPB maintains a debt collector may not collect any amount, such as a pay-to-pay fee, without express authorization within the agreement creating the debt or by another law.
Finally, the CFPB states debt collectors may violate section 808(1) when using a payment processor who charges a pay-to-pay fees. Thus, applying the prohibition of using pay-to-pay fees to third-party payment processors.
The CFPB released this advisory opinion in the hopes it clarifies and reaffirms its past position on pay-to-pay fees. If there are any remaining questions involving these issues, please do not hesitate to contact the NAFCU compliance team at firstname.lastname@example.org.
About the Author
Justin joined NAFCU as a regulatory compliance counsel in August 2021. As part of the Regulatory Compliance Team, he provides daily compliance assistance to member credit unions on a variety of topics.