The CFPB has issued an advisory opinion that addresses when the Fair Debt Collection Practices Act permits a debt collector to charge “pay-to-pay” or “convenience fees,” such as fees imposed for making a payment online or by phone. 

FDCPA section 808(1) prohibits debt collectors from collecting “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.”  In the advisory opinion, the CFPB first interprets section 808(1) to apply to “any amount” collected by a debt collector in connection with the collection of a debt, even if such amount is not “incidental to” the principal obligation.  It then interprets section 808(1) to prohibit a debt collector from collecting any amount unless such amount either is expressly authorized by the agreement creating the debt (and is not prohibited by law) or is expressly permitted by law.  Thus, under the CFPB’s interpretation, a charge is impermissible under section 808(1) if both the agreement creating the debt and other law are silent.

The CFPB also states that, under its interpretation, amounts are impermissible if they are neither expressly authorized by the agreement creating the debt or by law, “even if such amounts are the subject of a separate, valid agreement under State law.”  The CFPB declines to follow the interpretation of some courts that fees authorized by a separate agreement are permissible under section 808(1) because such fees are “permitted by law” (i.e. because they are authorized by a lawful agreement).

The CFPB also addresses debt collectors’ use of payment processors who charge convenience fees.  It states that a debt collector may violate section 808(1) in that situation.  According to the CFPB, “a debt collector collects an amount under section 808(1) at a minimum when a third-party payment processor collects a pay-to-pay fee from a consumer and remits to the debt collector any amount in connection with that fee, whether in installments or a lump sum.”

The CFPB’s interpretation of section 808(1) is not surprising.  In 2017, the CFPB issued a compliance bulletin (2017-11) on pay-by-phone fees.  Although the bulletin was primarily directed at UDAAP issues arising from such fees, it also addressed the application of section 808(1) to such fees.  The CFPB discussed the finding of its examiners that one or more mortgage servicers meeting the FDCPA “debt collector” definition had violated the FDCPA by charging fees for taking mortgage payments by phone to borrowers whose mortgage instruments did not expressly authorize such fees and who resided in states where applicable law did not expressly permit collection of such fees.

Although the advisory opinion is directed at convenience fees and by its terms only applies to “debt collectors” subject to the FDCPA, it has much broader implications.  First, the CFPB’s interpretation of section 808(1) would apply to any type of fee charged by a debt collector.  Second, the debt collection laws of many states broadly apply the FDCPA’s prohibitions to first-party collections and other persons engaging in collection activity who are not “debt collectors” under the FDCPA.   For example, the U.S. Court of Appeals for the Fourth Circuit recently ruled that a mortgage servicer, even if not a “debt collector” under the FDCPA, had violated the Maryland Consumer Debt Collection Act, which incorporates FDCPA prohibitions, by charging a $5 convenience fee to borrowers for monthly payments made by phone or online that was not expressly authorized by the mortgage documents or by law.