The Consumer Financial Protection Bureau (CFPB) is 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 payment options."
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.