Maryland Issues Guidance on Illegality of “Convenience Fees”

The Maryland Commissioner of Financial Regulation recently published an industry regulatory guidance stating that it is a violation of the Maryland Consumer Debt Collection Act (MCDCA) to collect fees, on any form of loan payment, that are not set forth in the loan document.  The guidance is meant to put the industry on notice following a recent Fourth Circuit case reaching the same conclusion.

As interpreted by the Fourth Circuit, and, subsequently, the Commissioner, under the MCDCA, any fee charged – whether for convenience or to recoup actual costs – that is not set forth in the applicable loan documents, is illegal.  It could also be a violation of the MCDCA to attempt to circumvent these restrictions using payment platforms that are associated with the lender or servicer to collect a loan payment fee or requiring consumers to amend their loan documents for the purposes of inserting such fees.  The guidance applies to all lenders, servicers, or any other person collecting or attempting to collect a debt, or alleged debt, arising out of a consumer transaction in Maryland. 

The Commissioner advises lenders and servicers to review their records to determine if any impermissible fees have been charged and, if they have, provide appropriate reimbursements to affected borrowers.