By Katalina M. Bianco, J.D.
The Consumer Financial Protection Bureau has identified conduct that the Bureau believes may violate the Consumer Financial Protection Act's prohibition against unfair, deceptive, or abusive acts or practices, commonly known as UDAAP. Compliance Bulletin 2017-01 provides guidance for companies on practices the Bureau considers UDAAP violations. Guidance also is provided for debt collectors about compliance with the Fair Debt Collection Practices Act when assessing phone pay fees.
"The Bureau is warning companies about tricking consumers into more expensive fees when they pay bills by phone," said CFPB Director Richard Cordray. "We are concerned that companies are misleading consumers about pay-by-phone fees or keeping them in the dark about much cheaper or no-cost payment options."
In the course of its supervision and enforcement activities, the CFPB identified conduct that may risk violating federal consumer financial laws. The Bureau listed phone pay fee practices that will draw its close attention:
- failing to disclose the prices of all available phone pay fees when different phone pay options carry materially different fees;
- misrepresenting the available payments options or that a fee is required to pay by phone;
- failing to disclose that a phone pay fee would be added to a consumer’s payment, which could create the misimpression that there was no service fee; and
- lack of employee monitoring or service provider oversight that may lead to misrepresentations or failure to disclose available options and fees.
Bureau concerns. The CFPB is concerned about companies misrepresenting the purpose and amount of pay-by-phone fees, which can result in consumers incurring charges for services they don’t need. In addition, some companies do not disclose their fees in writing upfront to consumers. If phone representatives fail to disclose charges, consumers may wind up paying expensive fees because they are not informed that significantly cheaper options are available.
Debt collection. The CFPB has identified instances of FDCPA violations by mortgage servicers when they charged fees for taking mortgage payments over the phone to borrowers whose mortgage instruments did not expressly authorize collecting such fees and who reside in states where applicable law does not expressly permit collecting such fees.
CFPB expectations. While the CFPB does not mandate any particular method for informing consumers about the available phone pay options and fees, entities should consider potential risks of committing UDAAPs or violating the FDCPA. Among other things, the CFPB suggests a review of:
- internal and service providers’ policies and procedures on phone pay fees, including call scripts and employee training materials, revising policies and procedures to address any concerns identified during the review, as appropriate;
- whether information on phone pay fees is shared in account disclosures, loan agreements, periodic statements, payment coupon books, on the company’s website, over the phone, or through other mechanisms; and
- service provider practices.
The CFPB also suggests giving consideration to employee and service provider production incentive programs to see if there are incentives to steer borrowers to certain payment types or to avoid disclosures. In the context of phone pay fees, the CFPB warns, production incentives may enhance the potential risk of entities engaging in UDAAPs.
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