CFPB Warns Companies Against Tricking Consumers Into Expensive Pay-By-Phone Fees

Bureau Concerned About Companies Misleading Consumers About Pay-By-Phone Fees,
Keeping Them in the Dark About Much Cheaper Options

RELEASE: July 31, 2017

CFPB issued a bulletin warning companies about tricking consumers into expensive pay-by-phone fees. The Bureau is concerned about companies potentially misleading consumers about the purpose and amount of certain pay-by-phone fees or keeping them in the dark about much cheaper payment options. The bulletin also reviews guidelines to help consumer financial companies comply with the law.

The bulletin is available at: http://files.consumerfinance.gov/f/documents/201707_cfpb_compliance-bulletin-phone-pay-fee.pdf
 
Most financial service companies give consumers several options to make payments. Some consumers may choose to pay bills by phone using an automated system or speaking with a live customer representative. Companies may charge different pay-by-phone fees depending on what method of payment the consumer uses, such as payment by electronic check, debit card, or credit card. Consumers may also be charged an additional fee to expedite phone payments, though many companies offer consumers no-fee or lower-fee pay-by-phone options that post after a delay. In its supervision and enforcement activities, the Bureau identified harmful practices regarding pay-by-phone fees such as: 

  • Misleading consumers about pay-by-phone fees: The Bureau 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. For example, a recent Bureau enforcement action alleged that a company and its service provider misled consumers into paying a $14.95 pay-by-phone fee by deceptively calling it a “processing” charge. The fee was actually for posting payment to the account the same day. Consumers paying by phone ended up being charged for expedited payment even though most of them did not need to post payment on the same day. Moreover, many were not aware of no-cost payment alternatives that would post after a delay.
  • Keeping consumers in the dark about much cheaper payment options: Some companies do not disclose their fees in writing upfront to consumers. Instead, they may depend solely on phone representatives to disclose the relevant fees to consumers before the charge is imposed. These representatives may then fail to inform consumers about significant price differences between available pay-by-phone options. This may substantially harm consumers who wind up using much more expensive options because they are not informed that significantly cheaper options are available.

CFPB does not mandate any particular way to inform consumers about pay-by-phone options and fees. However, the Bureau expects companies to review their practices for potential risks of violating consumer financial laws and to address any issues.  Appropriate risk management and due diligence can help companies avoid harming consumers through unlawful practices and help them comply with federal laws. The CFPB recommends that financial institutions take steps to ensure that they are following laws related to pay-by-phone fees. Companies should review state and federal laws to confirm they can charge such fees, and review their policies and procedures. Companies should also review consumer complaints about fees that are charged.

No Author Biography has been linked to this Article.

Related Articles

moran_cathy
March 3, 2024
The skills of a consumer bankruptcy lawyer must include a healthy dose of the skillset of a teacher. More on listening/communicating with Clients: Who Is Stupid Here? Why Listening Is a Bankruptcy Lawyer’s Superpower
Members
January 19, 2020
Two new proposals from the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) could make it easier for payday and other high-cost lenders to use banks as a fig leaf, allowing online lenders to offer predatory loans at interest rates that are prohibited under state law. Online lenders have become increasingly bold in...
Mark
May 8, 2022
At my firm, we see a lot of consumers who have some combination of high debt and low income. Many of them arrive for their consultations after having been abused by debt collectors and predatory lenders, harmed by mortgage servicing errors, or subjected to inaccurate and derogatory credit reporting. Until fairly recently, after filing bankruptcies for these folks, we usually...
Members
December 13, 2020
By Margaret A. Burks, Chapter 13 Standing Trustee for the Southern District of Ohio (Cincinnati) Chapter 13 works. Some people wish to continually criticize Chapter 13. They criticize the success rate. They criticize racial bias. They criticize how Chapter 13 works. They also criticize the fact that Chapter 13 appears less voluntary than it was before access to Chapter 7...
February 3, 2019
By Henry E. Hildebrand, III, Chapter 13 Trustee for the Middle District of TN (Nashville) Where a Chapter 13 plan provides that a mortgage payment will be paid “outside the plan,” the plan does not “provide for” the mortgage payment and, accordingly, the discharge under § 1328 is not applicable to the mortgage obligation. Dukes v. Suncoast Credit Union, 909...
Members
January 20, 2019
On October 1, 2018, Dynele L. Schinker-Kuharich was appointed as a Chapter 13 Standing Trustee for the Northern District of Ohio. She maintains her offices in Canton. Ms. Schinker-Kuharich replaces retiring Toby Rosen who served in this position for 30 years. Prior to her appointment as a Standing Chapter 13, Schinker-Kuharich was on the panel of Chapter 7 Trustees for...
Members
Copy of Hildebrand-2016
June 18, 2023
The Ninth Circuit has now joined its sister Circuit in holding that the Bankruptcy Code does not permita Chapter 13 Trustee to retain the percentage fees collected on payments that a chapter 13 debtor made pre-confirmation in accordance with 26 U.S.C. §586 but, upon dismissal prior to confirmation of the plan, is obligated to return the fee to the debtor,...
Members
Copy of Hildebrand-2016
August 20, 2023
Equity that accrues as a result of market conditions in debtor’s assets between the time of confirmation of a Chapter 13 plan and conversion to Chapter 7 constitutes property of the estate which may be administered by the Chapter 7 trustee.
Members
boltz2
June 25, 2023
Summary: Brittner filed an adversary proceeding against Beach Anesthesia alleging violations of the automatic stay, but the bankruptcy court (affirmed by the district court) held that she had either failed to establish actual damages or to mitigate damages. The Court of Appeals held that that Brittner needed to satisfy a five-part test to establish a violation of the automatic stay:  (1) that a bankruptcy...
November 21, 2021
TFS Bill Pay has launched a new powerful tool to help you succeed; the Attorney Report Center located in your AttorneyPortal. In the current bankruptcy environment, it is absolutely essential that your firm receives all of the compensation for the valuable work it has already done. TFS now provides you with pre-set, real-time reports to confirm your clients’ payments, which...

Looking to Become a Member?

ConsiderChapter13.org offers a forum to advance continuing education of consumer bankruptcy via access to insightful articles, informative webinars, and the latest industry news. Join now to benefit from expert resources and stay informed.

Webinars

These informative sessions are led by industry experts and cover a range of consumer bankruptcy topics.

Member Articles

Written by industry experts, these articles provide in-depth analysis and practical guidance on consumer bankruptcy topics.

Industry News

The Academy is the go-to source for the latest news and analysis in the Chapter 13 bankruptcy industry.

To get started, please let us know which of these best fits your current position: