CFPB “Junk” Fees Advisory & Impact on Collections

What collector wouldn’t like to take a payment over the phone or get agreement on an electronic payment?  And what institution would turn down the opportunity to charge a fee on a transaction that reduces delinquency?  Unfortunately, these two areas of continuing concern for financial institutions are now the source of increasing risk.  Recent developments have made it clear there is a storm brewing on both fronts and the limits on the definition of a debt collector under the FDCPA may be under attack, too!  These are not easy days for collections or compliance professionals.  Complaints, regulatory penalties, and class action litigation continue to negatively impact the ability to collect on delinquent loans.  Now the CFPB has issued an advisory opinion affirming that federal law often prohibits debt collectors from charging “pay-to-pay” fees under the FDCPA and other federal rules.  These charges, commonly described by debt collectors as “convenience fees”, are imposed on borrowers who want to make a payment in a particular way, such as online or by phone.  Unfortunately, recent class action litigation has also scored a direct hit on so-called “junk fees.”

An effective collection process must include sound methods for communicating with borrowers, resolving the delinquency, recovering collateral on defaulted loans, and doing all of this while complying with an increasing variety of state and federal laws, rules, and regulations.  Join collections veteran and regulatory compliance attorney, David Reed, as he details the steps to fully comply with recent guidance, while still maintaining an effective collections function.