CFPB Issues Compliance Bulletin on Pay-By-Phone Fees

On July 27, 2017, the CFPB issued a compliance bulletin providing guidance to covered persons and service providers on fee assessments for pay-by-phone services and the potential for violations of the Dodd-Frank Act’s prohibition of engaging in unfair, deceptive, or abusive acts or practices (UDAAPs) and the Fair Debt Collecting Practices Act (FDCPA) that may come with assessing these phone pay fees.  The bulletin provides a list of practices that may violate or risk violating the UDAAP prohibitions or the FDCPA.  The bulletin also provides recommendations for entities to analyze whether their practices present risk of being a UDAAP or FDCPA violation.

The CFPB’s non-exhaustive list of practices related to phone pay fees that may constitute a UDAAP violation includes: (1) failing to disclose the prices of all available phone pay fees when different phone pay options carry materially different fees; (2) misrepresenting the available payment options or that a fee is required to pay by phone; (3) failing to disclose that a phone pay fee would be added to a consumer’s payment and therefore create the misimpression that there was no service fee; and (4) lacking employee monitoring or service provider oversight that in turn results in misrepresentations or failure to disclose available options and fees.

The bulletin also includes one example of conduct that may violate or risk violating the FDCPA.  This example of conduct involves mortgage servicers that meet the definition of “debt collector” under the FDCPA charging fees for taking mortgage payments over the phone from borrowers whose mortgage instruments do not expressly authorize collecting such fees and who reside in a state where applicable law does not expressly permit collecting such fees.

Finally, the bulletin provides suggestions that covered entities should consider to avoid UDAAPs and FDCPA violations.  Among others, these suggestions include: (1) reviewing applicable state and federal laws to confirm whether entities are permitted to charge phone pay fees; (2) reviewing underlying debt agreements to determine whether such fees are authorized by the contract; and (3) reviewing internal and service providers’ policies and procedures on phone pay fees, including call scripts and employee training materials, and revising policies and procedures to address any concerns identified during the review, as appropriate.

The full text of the bulletin may be found here.