Alert

August 1, 2017

CFPB Issues Bulletin Addressing Phone Pay Fees

Yesterday, the Consumer Financial Protection Bureau issued Compliance Bulletin 2017-01: Phone Pay Fees. In the Bulletin, the CFPB warns that certain practices with respect to phone pay fees could result in violating the Dodd-Frank Act's prohibition against unfair, deceptive, or abusive acts or practices (UDAAP) or violating the Fair Debt Collection Practices Act.

As a result of its supervisory and enforcement activities, the CFPB has identified the following conduct that presents the risk of constituting a UDAAP:

• Failing to disclose the prices of all available phone pay fees when different phone pay options carry materially different fees;
• Misrepresenting the available payment 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, creating the misimpression that there was no service fee; and
• Lack of employee monitoring or service provider oversight, which may lead to misrepresentations or failure to disclose available options and fees.

With respect to the FDCPA, the CFPB warns that a person who meets the definition of "debt collector" must ensure that phone pay fees are either expressly authorized by the agreement creating the debt or permitted by law in order to avoid violating Section 808(1) of the FDCPA.

The CFPB also expressed concern that employee and service provider production incentive programs could create incentives to steer borrowers to more costly payment options or to avoid disclosures, resulting in a UDAAP.

The CFPB expects companies to review their practices in connection with phone pay fees to assess potential risk of committing UDAAPs or violating the FDCPA. While the CFPB does not mandate any particular way to inform consumers about the available phone pay options and fees, the CFPB suggests that companies consider doing the following:

• Review applicable state and federal laws, including the FDCPA, to confirm whether entities are permitted to charge phone pay fees;
• Review underlying debt agreements to determine whether such fees are authorized by the contract;
• Review internal and service providers' policies and procedures on phone pay fees, including call scripts and employee training materials, and revise policies and procedures to address any concerns identified during the review, as appropriate;
• Review 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;
• Incorporate pay-by-phone issues in regular monitoring or audits of calls with consumers;
• Review consumer complaints regarding phone pay fees;
• Perform regular reviews of service providers as to their pertinent practices; and
• Review that the entity has a corrective action program to address any violations identified and to reimburse consumers when appropriate.