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What the CFPB's Advisory Rule Means for Convenience Fees

By: LaToya Irby

© Rawf8 / AdobeStock

Over the past few months, the Consumer Financial Protection Bureau has been taking steps to protect consumers from unfair fees, i.e. junk fees—additional fees charged to consumers on the back-end of a transaction.

The Bureau most recently issued an advisory opinion on convenience fees charged in collections, affirming the FDCPA’s prohibition on charging extra fees that aren’t allowed by the original loan or permitted by law.1

“Debt collectors play a critical role in the consumer finance ecosystem,” the CFPB writes in a press release, “and the [Bureau] wants to ensure that law-abiding debt collectors are not disadvantaged by their competitors that impose unlawful fees.

Convenience Fees in Collections

Convenience fees are charged in the collections and bill payment industry as a way to pass payment processing costs onto consumers. When they are charged, convenience fees apply to payments made on a particular payment channel, usually online payments. Considering that firms typically prefer the timing and ease of online payments, we’ve often questioned whether it’s truly fair to pass the costs onto consumers.

The CFPB’s Advisory Opinion

The CFPB’s advisory opinion outlines when and how agencies can charge additional fees based on Section 808 of the FDCPA.

Convenience fees—or any other fee—can only be charged if fee is included in the original contract or expressly permitted by law. The Bureau comments that the absence of a law against convenience fees should not be considered permission to charge a fee.2

Bypassing the requirements by having a third-party payment processor charge the fee may not be a legal loophole, in the CFPB’s opinion, “​…if the firm receives any amount in connection with that fee, whether in installments or in a lump sum.”2

The Bureau’s advisory opinion has the effectiveness of a new rule, meaning agencies are expected to follow these guidelines once the opinion is published in the Federal Register.