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The CFPB Wednesday issued an advisory opinion affirming that federal law often prohibits debt collectors from charging “pay-to-pay” or “convenience” fees, which are imposed on consumers who want to make a payment in a specific way, such as online or by phone.

“Federal law generally forbids debt collectors from imposing extra fees not authorized by the original loan,” said CFPB Director Rohit Chopra. “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 advisory opinion interprets the language in Section 808 of the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from collecting any amount that is not expressly authorized by the underlying agreement or permitted by law.

The advisory opinion covers the following on debt collection practices:

• identifies the scope of illegal fees;
• affirms that silence in the law is not an authorization; and
• clarifies the role of payment processors.

Since credit unions do not collect third-party debts and are therefore not considered debt collectors under the FDCPA, this advisory opinion does not directly apply. However, credit unions that engage the services of third-party debt collectors will need to conduct vendor due diligence to ensure compliance with this interpretation of the FDCPA.

Earlier this year, NAFCU submitted a joint trades amicus brief in the Thomas-Lawson case where the CFPB argued that a convenience fee charged by a mortgage servicer may violate the FDCPA.

In addition, the association submitted comments to the bureau sharing that while the association is generally supportive of the CFPB improving consumers’ understanding of financial products and services, its mischaracterization of fees in the financial services industry as “junk fees,” “excessive or exploitative fees,” or “inflated or surprise fees,” only confuses and frustrates consumers.

Read the advisory opinion. NAFCU will continue to monitor the CPPB’s movement with FDCPA regulations and share updates with credit union members.