CFPB issues advisory opinion on pay-to-pay, convenience fees

As part of its ongoing efforts to address so-called “junk fees,” the CFPB today issued an advisory opinion stating that the Fair Debt Collection Practices Act prohibits debt collectors from charging “pay-to-pay” or convenience fees—which include fees imposed for making a payment online or by phone—unless those fees are expressly authorized by the agreement creating the debt or the amount of the fee is affirmatively permitted by law. The advisory opinion also states that debt collectors may violate the FDCPA when the debt collector collects pay-to-pay fees through a third-party payment processor.

While the FDCPA typically applies to third-party debt collectors, first-party creditors may be subject to the law if applicable state law extends the FDCPA to first-party creditors, and mortgage servicers may fall under the FDCPA definition if a mortgage debt is in default at the time of a service transfer. Additionally, the bureau has made clear that, under its UDAAP authority, it has supervision and enforcement authority over first-party collectors and service providers debt collection activities, even though they are not subject to the FDCPA.

ABA has previously opposed this interpretation by the bureau. In February 2022, ABA and other financial trade organizations filed an amicus brief with the United States Court of Appeals for the Ninth Circuit to rebut CFPB’s argument in their amicus brief that the collection of convenience fees violate the FDCPA. ABA’s joint amicus brief argues that the CFPB’s interpretation is contrary to the plain language of the FDCPA and that there is no basis in the broad language of this section to eliminate the freedom of borrowers and servicers to enter otherwise lawful, enforceable contracts under state law unless a state statute specially authorizes a certain fee for a certain service.