By Nathalie Voit
The Consumer Financial Protection Bureau (CFPB) is cracking down on “pay-to-pay” fees, additional fees which debt collectors will often charge consumers for accepting a particular type of payment.
Also referred to as “convenience fees,” the consumer watchdog agency told the general public that most of these fees are often illegal in an advisory opinion posted to its website on June 29.
“Federal law generally forbids debt collectors from imposing extra fees not authorized by the original loan,” CFPB Director Rohit Chopra said in a press release. “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.”
The agency said that while most debt collectors do not impose these fees, some do even when it is “cheaper” and easier to process payments by phone or online than to receive standard paper-check payments (debt collectors typically process these for free).
However, the CFPB said these fees are often in explicit violation of Section 808 of the Fair Debt Collection Practices Act, “which prohibits debt collectors from collecting any amount” that is not expressly stated in the consumer’s contract or sanctioned by the law.
Where no law authorizes such a fee, the CFPB said the practice is unlawful, even if no specific law bans it.
The move is part of a broader effort by the Biden-Harris administration to crack down on so-called “junk” fees and other exploitative practices common within the consumer finance industry.
On June 22, the CFPB initiated a review of credit card company penalty policies costing consumers upwards of $12 billion each year.
The agency also requested public input on fees on bank accounts, credit cards, and other financial products earlier this year.
