WASHINGTON, D.C. — The Consumer Financial Protection Bureau
(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 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
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.
The 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.
The CFPB will continue to monitor the practices of companies that assess
pay-by-phone fees for potential violations. The Bureau will use all
appropriate tools to assess whether supervisory, enforcement, or other actions
may be necessary.
This article by was distributed by the Personal Finance Syndication Network.