CFPB Tackles Junk Fees Charged by Debt Collectors

The federal agency clarifies scope of illegal fees, including "pay-to-pay" fees.

By
Ben Luthi
Ben Luthi
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Ben Luthi has been writing about credit cards and personal finance for six years and has written for U.S. News, NerdWallet, CreditCards.com and Experian, among others. Ben has developed many of Investopedia's in-depth credit card reviews and enjoys collecting and redeeming credit card miles and points in his everyday life and international travels.
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Published June 30, 2022

The Consumer Financial Protection Bureau (CFPB) has released an advisory opinion that targets "pay-to-pay" fees that debt collectors charge consumers. The federal agency says that unlawful debt collection agencies have tried to take advantage of silence in the law, calling them convenience fees, and using third-party payment processors, which provide a kickback to the agencies.

Key Takeaways

  • The CFPB has taken a stand against "convenience fees" charged by debt collectors for certain payment methods.
  • The federal agency argues that the fees are not included in the scope of fees allowed by the Fair Debt Collection Practices Act (FDCPA).
  • The agency also tackles the relationship some collection agencies have with third-party payment processors.

CFPB Clarifies Which Debt Collection Fees Are and Aren't Legal

Debt collectors play a vital role in the consumer finance ecosystem, says the CFPB, but collection agencies are still bound by the law when determining which fees they can charge customers.

In particular, the federal agency has called out unlawful debt collectors who charge a convenience fee for certain payment methods, such as online and phone payments.

The CFPB's advisory opinion reaffirms that the only fees that collection agencies are allowed to charge are the fees authorized by the original loan. As a result, the "pay-to-pay" fees, as the CFPB calls them, are often illegal and disadvantage both consumers and law-abiding debt collectors.

Additionally, the CFBP has clarified the role of third-party payment processors that collection agencies use, stating that it's a violation of the FDCPA for debt collectors to receive kickbacks from payment processors, who may charge unauthorized fees.

With the advisory opinion, the federal agency confirms that just because federal law doesn't expressly prohibit a fee, it doesn't mean it's permitted. Debt collection fees must be expressly authorized for collectors to charge them.

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  1. Consumer Financial Protection Bureau. "Advisory Opinion on Debt Collectors' Collection of Pay-to-Pay Fees."