Compliance Bulletin 2017-01: Phone Pay Fees, 35936-35938 [2017-16188]
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Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices
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permits carefully targeted and cost
effective responses.
The U.S. government’s critical need
for comprehensive broadband data
continues to increase as high-speed
Internet access and the skills to use the
technology are becoming essential to
Americans’ daily lives and to the
nation’s economy. The U.S. Government
Accountability Office, NTIA, and the
FCC have all issued reports noting the
importance of useful broadband
adoption data for policymakers.
Congress sought to address the paucity
of such information in the Broadband
Data Improvement Act in 2008 and the
American Recovery and Reinvestment
Act in 2009, and recent congressional
action has highlighted the need for more
accurate broadband data.3 Modifying
the November 2017 CPS to include
NTIA’s requested information collection
will enable the Commerce Department
and NTIA to advance the
Administration’s infrastructure
initiative, as well as to respond to
congressional concerns and directives.
Since 1994, NTIA has sponsored 13
supplements to the CPS on the Internet
and the shifting technologies consumers
use for online access. The Census
Bureau enjoys an outstanding reputation
for data gathering and analysis based on
its centuries of experience and its
scientific methods. Coordinating NTIA’s
requested information collection on
broadband usage with the Bureau’s
scheduled November 2017 CPS will
significantly reduce the potential
burdens on that agency and on surveyed
households. The 66 questions to be
added to the November 2017 CPS are
comparable to the 61 questions that
NTIA added to the July 2015 CPS.
Affected Public: Individuals and
households.
Frequency: Once.
Respondent’s Obligation: Voluntary.
This information collection request
may be viewed at reginfo.gov. Follow
the instructions to view Department of
Commerce collections currently under
review by OMB.
Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
3 See e.g., Dean Heller, U.S. Senator for Nevada,
Heller, Manchin Introduce Bill to Expand Access to
Rural Broadband (June 15, 2017) at https://
www.heller.senate.gov/public/index.cfm/
pressreleases?ID=D1AC86C9-DAC4-43F1-B72DE6CE577C3925; U.S. House Energy and Commerce
Committee, #SubCommTech Examines Further
Challenges and Opportunities to Achieve
Nationwide Broadband Coverage (June 21, 2017) at
https://energycommerce.house.gov/news-center/
press-releases/subcommtech-examines-furtherchallenges-and-opportunities-achieve.
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notice to OIRA_Submission@
omb.eop.gov or faxed to (202) 395–5806.
Sheleen Dumas,
Department al PRA Lead, Office of the Chief
Information Officer.
[FR Doc. 2017–16255 Filed 8–1–17; 8:45 am]
BILLING CODE 3510–60–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
Compliance Bulletin 2017–01: Phone
Pay Fees
Bureau of Consumer Financial
Protection.
ACTION: Compliance bulletin.
AGENCY:
The Consumer Financial
Protection Bureau (CFPB or Bureau)
issues this Compliance Bulletin to
provide guidance to covered persons
and service providers regarding fee
assessments for pay-by-phone services
(phone pay fees) and the potential for
violations of sections 1031 and 1036 of
the Dodd-Frank Wall Street Reform and
Consumer Protection Act’s (Dodd-Frank
Act) prohibition on engaging in unfair,
deceptive, or abusive acts or practices
(collectively, UDAAPs) when assessing
phone pay fees. This Bulletin also
provides guidance to debt collectors
about compliance with the Fair Debt
Collection Practices Act (FDCPA) when
assessing phone pay fees.
This Bulletin summarizes the current
law, highlighting relevant examples of
conduct observed during supervisory
examinations and enforcement
investigations that may violate Federal
consumer financial law. Whether
conduct similar to the conduct
described in this Bulletin violates these
laws may depend on additional facts
and analysis. The Bureau will closely
review conduct related to phone pay
fees for potential violations of Federal
consumer financial laws.
DATES: The Bureau released this
Compliance Bulletin on its Web site on
July 27, 2017.
FOR FURTHER INFORMATION CONTACT:
Chantal Hernandez, Attorney-Advisor,
Office of Supervision Policy, 1700 G
Street NW., 20552, (202) 435–7084.
SUPPLEMENTARY INFORMATION:
SUMMARY:
[1]. Compliance Bulletin
Across various consumer financial
products and services, many entities
provide consumers multiple payment
options. For instance, many provide
consumers the option of making
payments over the phone by using an
automated system or speaking with a
live representative. Many entities also
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provide consumers the option to make
phone payments by using a credit card,
debit card, or electronic check, or to
have their payment expedited. A
number of entities also use third-party
service providers to handle and process
the payments. State and Federal laws
may restrict fees related to phone
payments.1 Entities are advised to
review applicable laws to determine
whether they may charge phone pay
fees. In the course of its Supervision and
Enforcement activities, the Bureau has
identified conduct that may violate or
risks violating Federal consumer
financial laws relating to phone pay fee
practices.
Report of Supervisory or Enforcement
Findings
Examples of Conduct That May Violate
or Risk Violating the Prohibition on
UDAAPs
Under the Dodd-Frank Act, all
covered persons or service providers are
legally required to refrain from
committing unfair, deceptive, or abusive
acts or practices in violation of the Act.
An act or practice is unfair when (i) it
causes or is likely to cause substantial
injury to consumers; (ii) the injury is not
reasonably avoidable by consumers; and
(iii) the injury is not outweighed by
countervailing benefits to consumers or
to competition.2 An act or practice is
deceptive when (i) the act or practice
misleads or is likely to mislead the
consumer; (ii) the consumer’s
interpretation is reasonable under the
circumstances; and (iii) the misleading
act or practice is material.3
Depending on the facts and
circumstances, the following nonexhaustive list of examples of conduct
related to phone pay fees may constitute
UDAAPs or contribute to the risk of
committing UDAAPs.4 Accordingly, the
1 For example, as implemented by Regulation Z,
a Credit CARD Act amendment to the Truth In
Lending Act provides that for credit card accounts
under an open-end consumer credit plan, a creditor
(including a third party that collects, receives, or
processes payments on behalf of a creditor) may not
impose a separate fee to allow consumers to make
a payment by any method (including telephone
payments) unless the payment method involves an
expedited service by a service representative of the
creditor. See 15 U.S.C. 1637(l); 12 CFR 1026.10(e).
2 Dodd-Frank Act §§ 1031, 1036, 12 U.S.C. 5531,
5536.
3 See CFPB Exam Manual at UDAAP 5 (noting
that the standard for ‘‘deceptive’’ practices in the
Dodd-Frank Act is informed by the standards for
the same terms under Section 5 of the FTC Act).
4 The Bureau will also review whether phone pay
fee conduct may violate the Dodd-Frank Act’s
prohibition on abusive acts or practices. An act or
practice is abusive when it materially interferes
with the ability of a consumer to understand a term
or condition of a consumer financial product or
service; or takes unreasonable advantage of (i) a
consumer’s lack of understanding of the material
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Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices
Bureau will be watching these practices
closely.
Failing To Disclose the Prices of All
Available Phone Pay Fees When
Different Phone Pay Options Carry
Materially Different Fees
Many entities charge different phone
pay fees depending on the payment
method used by the consumer. Prior to
charging such fees, entities sometimes
send periodic billing statements or other
documentation that discloses that
‘‘transaction fees may apply’’ to various
payment methods, but that do not
disclose the relevant fees to be charged
for those methods.5 In some of these
instances, entities may depend solely on
phone representatives to disclose the
relevant fees to consumers before the
charge is imposed. Yet, the phone
representatives may potentially only
reveal the higher-cost options or fail to
inform consumers of the material price
difference between available options.
This conduct poses a risk of an unfair
practice: It may cause substantial harm
to consumers, who are pushed into
materially higher-cost options; this
harm may not be reasonably avoidable
if consumers are unable to select lowercost alternatives because they do not
have the necessary information to know
that such options are available; and
countervailing benefits to consumers or
competition may not warrant the
entity’s failure to disclose the materially
different prices of the available phone
pay options to its consumers.
sradovich on DSKBCFCHB2PROD with NOTICES
Misrepresenting the Available Payments
Options or That a Fee Is Required To
Pay by Phone
Entities sometimes charge a fee for
expedited phone payments, but also
offer consumers no-fee phone pay
options that post after a processing
delay. Some entities in turn offer their
fee-based expedited payment option as
their default pay-by-phone option. In
such cases, disclosures in connection
with the default option may risk
misleading consumers into believing
that a fee is required under all
risks, costs, or conditions of the product or service;
(ii) a consumer’s inability to protect his or her
interest in selecting or using a consumer financial
product or service; or (iii) a consumer’s reasonable
reliance on a covered person to act in his or her
interests. Dodd-Frank Act § 1031(d), 12 U.S.C.
5531(d). See CFPB Bulletin 2013–07: Prohibition of
Unfair, Deceptive, or Abusive Acts or Practices in
the collection of Consumer Debts, available at
https://files.consumerfinance.gov/f/201307_cfpb_
bulletin_unfair-deceptive-abusive-practices.pdf for
additional guidance on UDAAPs.
5 Where applicable, 12 CFR 1026.7(a)(6)(ii) and
1026.7(b)(6)(iii) of Regulation Z will require
disclosure in subsequent periodic billing statements
of the amount of such fees paid in connection with
prior billing periods.
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circumstances to make any payment by
phone.
For example, in a public enforcement
action, the Bureau alleged that an entity
and its service provider engaged in
deceptive acts or practices when it gave
delinquent credit card holders the false
impression that they had to pay $14.95
to make payment by phone when, in
fact, the sole purpose of that fee was to
expedite phone payments. Specifically,
the Bureau alleged that the entity or its
service provider: (i) Misrepresented in
credit card agreements that the fee’s
purpose was to allow payment by
phone, when its purpose was solely to
ensure payment posted the same day it
was made; (ii) failed to disclose during
collection calls that the fee’s purpose
was solely to expedite payment, and in
certain circumstances misrepresented
that the fee was a ‘‘processing fee’’; (iii)
volunteered that consumers could make
payment using a checking account and
triggered the fee by setting such
payments to post immediately by
default; and (iv) failed to disclose the
existence of no-cost payment
alternatives, including free next-day
payment.6
In another public enforcement action,
the Bureau alleged that a mortgage
servicer engaged in a deceptive practice
by misrepresenting to consumers, both
expressly and by implication, that a
particular pay-by-phone option was the
only available payment method, or that
consumers must use the particular payby-phone option in order to avoid
negative consequences, including
incurring a late fee or even facing
foreclosure. In fact, the servicer
accepted several payment options free
of charge. In many instances, consumers
could have used these other payment
methods to make timely payments and
avoid late fees.7
Failing To Disclose That a Phone Pay
Fee Would Be Added to a Consumer’s
Payment Could Create the
Misimpression That There Was No
Service Fee
An entity may risk engaging in a
deceptive act or practice when it fails to
disclose that a phone pay fee will be
charged in addition to a consumer’s
otherwise applicable payment amount
and indicates to that consumer that only
the otherwise applicable payment
amount will be charged.8 This conduct
6 See In re Citibank, N.A. et al., No. 2015–CFPB–
0015 (July 21, 2015).
7 See FTC and CFPB v Green Tree Servicing, LLC.,
No. 15–cv–02064 (April 23, 2015).
8 An example would be as follows: A consumer
owes a payment of $250. The consumer calls and
tells the customer service representative that she
will pay by phone. The customer service
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35937
may leave the misimpression that there
is no service fee, when in fact the entity
does charge the consumer a fee. This
potential misrepresentation may be
material to consumers because a
consumer who knows about the fee may
inquire whether there is an alternative
payment option with a lower fee or may
choose a payment method that requires
no fee.
Lack of Employee Monitoring or Service
Provider Oversight May Lead to
Misrepresentations or Failure To
Disclose Available Options and Fees
A number of entities have policies
and procedures in place requiring
phone representatives to disclose all
available phone pay options and fees to
consumers, including requiring the use
of detailed phone scripts. But deviations
from call scripts may potentially cause
phone representatives to misrepresent
the available phone payment options
and fees resulting in a consumer being
charged a higher fee than otherwise
would have been applicable. Entities
can reduce the risk of
misrepresentations through adequate
monitoring.
In November 2016 the Bureau issued
a separate bulletin on detecting and
preventing consumer harm from
production incentives.9 Companies may
wish to consult that bulletin when
considering incentive programs for
employees that process phone pay fees.
Companies should also consider the
impact that incentives created by
contracts and agreements with service
providers might have on compliance
risk relating to potential UDAAPs
associated with phone pay fees.
Examples of Conduct That May Violate
or Risk Violating the FDCPA
Under the FDCPA, a person defined
as a ‘‘debt collector’’ is prohibited from
charging fees, including phone pay fees,
in certain instances.10 Under Section
808(1) of the FDCPA, a debt collector
may not collect any amount (including
any interest, fee, charge, or expense
incidental to the principal obligation)
unless such amount is expressly
representative confirms that the borrower
authorizes a payment of $250. In fact, the
consumer’s bank account is debited $265 . . . $250
for the otherwise applicable payment amount and
$15 for a pay-by-phone fee.
9 CFPB Compliance Bulletin 2016–03 (Nov. 28,
2016), available at https://
www.consumerfinance.gov/policy-compliance/
guidance/implementation-guidance/cfpbcompliance-bulletin-2016-03-detecting-andpreventing-consumer-harm-from-productionincentives/.
10 Debt collectors sometimes charge ‘‘convenience
fees’’ or fees for processing consumer payments
through a particular channel.
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35938
Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Notices
authorized by the agreement creating
the debt or permitted by law.11
Supervision has found that one or
more mortgage servicers that met the
definition of ‘‘debt collector’’ under the
FDCPA violated the Act when they
charged fees for taking mortgage
payments over the phone to borrowers
whose mortgage instruments did not
expressly authorize collecting such fees
and who reside in states where
applicable law does not expressly
permit collecting such fees. Supervision
directed one or more servicers to review
mortgage notes and applicable state law,
and to only collect pay-by-phone fees
where expressly authorized by contract
or state law.12
sradovich on DSKBCFCHB2PROD with NOTICES
The Bureau’s Expectations
The Bureau expects entities to review
their practices on charging phone pay
fees for potential risks of committing
UDAAPs or violating the FDCPA. While
the Bureau does not mandate any
particular method for informing
consumers about the available phone
pay options and fees, entities should
consider the following suggestions in
assessing whether their practices may
present a risk of constituting a UDAAP
or FDCPA violation:
• Review applicable State and
Federal laws, including the FDCPA, to
confirm whether entities are permitted
to charge phone pay fees.
• Review underlying debt agreements
to determine whether such fees are
authorized by the contract.
• Review internal and service
providers’ policies and procedures on
phone pay fees, including call scripts
and employee training materials, and
revise policies and procedures to
address any concerns identified during
the review, as appropriate.13
• Review whether information on
phone pay fees is shared in account
disclosures, loan agreements, periodic
statements, payment coupon books, on
the company’s Web site, over the phone,
or through other mechanisms.
• Incorporate pay-by-phone issues in
regular monitoring or audits of calls
with consumers.
• Review consumer complaints
regarding phone pay fees.
• Perform regular reviews of service
providers as to their pertinent
practices.14
11 15
U.S.C. 1692f(1).
Supervisory Highlights, Fall 2015 edition at
pp. 20–21.
13 Entities should refer to CFPB Compliance
Bulletin and Policy Guidance; 2016–02, Service
Providers (Oct. 31, 2016), available at https://
www.consumerfinance.gov/documents/1385/
102016_cfpb_OfficialGuidanceServiceProvider
Bulletin.pdf.
14 Id.
12 See
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• Review that the entity has a
corrective action program to address any
violations identified and to reimburse
consumers when appropriate.
Entities should also consider
reviewing employee and service
provider production incentive programs
to see if there are incentives to steer
borrowers to certain payment types or to
avoid disclosures. As discussed in more
detail in CFPB Compliance Bulletin
2016–03,15 the Bureau acknowledges
that production incentives have been
common across many economic sectors
and can affect a wide range of outcomes
for employees or service providers, from
their compensation levels to whether
they will continue to be employed or
retained at all. The Bureau has also
highlighted the risks posed to
consumers by production incentive
programs, especially when they create
an unrealistic culture of high-pressure
targets or when the activities of
employees or service providers are not
adequately monitored for compliance
with the law.
In the context of phone pay fees,
production incentives may enhance the
potential risk of entities engaging in
UDAAPs. Production incentives that
reward employees or service providers
based on consumers using a higher-cost
phone pay option may potentially lead
entities to steer consumers to a highercost option despite the availability of
lower-cost alternatives. Similarly,
incentive programs that reward
representatives who complete a large
number of daily calls may potentially
cause these representatives to spend less
time discussing the available phone pay
options and fees resulting in the
consumer paying a higher fee because
the consumer is not informed of the
lower-cost alternatives. Entities should
review these programs accordingly.
The Bureau will continue to review
closely the practices of entities assessing
phone pay fees for potential UDAAPs
and FDCPA violations, including the
practices described above. The Bureau
will use all appropriate tools to assess
whether supervisory, enforcement, or
other actions may be necessary.
[2]. Regulatory Requirements
This Compliance Bulletin is a nonbinding general statement of policy
articulating considerations relevant to
the Bureau’s exercise of its supervisory
and enforcement authority. It is
therefore exempt from notice and
comment rulemaking requirements
15 See CFPB Bulletin 2016–03, Detecting and
Preventing Consumer Harm from Production
Incentives (Nov. 28, 2016), available at https://
www.consumerfinance.gov/documents/1537/
201611_cfpb_Production_Incentives_Bulletin.pdf.
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under the Administrative Procedure Act
pursuant to 5 U.S.C. 553(b). Because no
notice of proposed rulemaking is
required, the Regulatory Flexibility Act
does not require an initial or final
regulatory flexibility analysis. 5 U.S.C.
603(a), 604(a). The Bureau has
determined that this Compliance
Bulletin does not impose any new or
revise any existing recordkeeping,
reporting, or disclosure requirements on
covered entities or members of the
public that would be collections of
information requiring OMB approval
under the Paperwork Reduction Act, 44
U.S.C. 3501 et seq.
Dated: July 25, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial
Protection.
[FR Doc. 2017–16188 Filed 8–1–17; 8:45 am]
BILLING CODE 4810–AM–P
DEPARTMENT OF ENERGY
Environmental Management SiteSpecific Advisory Board, Oak Ridge
Reservation
Department of Energy.
Notice of open meeting.
AGENCY:
ACTION:
This notice announces a
meeting of the Environmental
Management Site-Specific Advisory
Board (EM SSAB), Oak Ridge
Reservation. The Federal Advisory
Committee Act requires that public
notice of this meeting be announced in
the Federal Register.
DATES: Saturday, August 19, 2017, 9:00
a.m. to 2:30 p.m.
ADDRESSES: Tremont Lodge, 7726 East
Lamar Alexander Parkway, Townsend,
Tennessee 37882.
FOR FURTHER INFORMATION CONTACT:
Melyssa P. Noe, Alternate Deputy
Designated Federal Officer, U.S.
Department of Energy, Oak Ridge Office
of Environmental Management, P.O.
Box 2001, EM–942, Oak Ridge, TN
37831. Phone (865) 241–3315; Fax (865)
241–6932; Email: Melyssa.Noe@
orem.doe.gov. Or visit the Web site at
https://energy.gov/orem/services/
community-engagement/oak-ridge-sitespecific-advisory-board.
SUPPLEMENTARY INFORMATION:
Purpose of the Board: The purpose of
the Board is to make recommendations
to DOE–EM and site management in the
areas of environmental restoration,
waste management, and related
activities.
Tentative Agenda:
• Welcome, Opening Remarks and
Introductions
SUMMARY:
E:\FR\FM\02AUN1.SGM
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Agencies
[Federal Register Volume 82, Number 147 (Wednesday, August 2, 2017)]
[Notices]
[Pages 35936-35938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16188]
=======================================================================
-----------------------------------------------------------------------
BUREAU OF CONSUMER FINANCIAL PROTECTION
Compliance Bulletin 2017-01: Phone Pay Fees
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Compliance bulletin.
-----------------------------------------------------------------------
SUMMARY: The Consumer Financial Protection Bureau (CFPB or Bureau)
issues this Compliance Bulletin to provide guidance to covered persons
and service providers regarding fee assessments for pay-by-phone
services (phone pay fees) and the potential for violations of sections
1031 and 1036 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act's (Dodd-Frank Act) prohibition on engaging in unfair,
deceptive, or abusive acts or practices (collectively, UDAAPs) when
assessing phone pay fees. This Bulletin also provides guidance to debt
collectors about compliance with the Fair Debt Collection Practices Act
(FDCPA) when assessing phone pay fees.
This Bulletin summarizes the current law, highlighting relevant
examples of conduct observed during supervisory examinations and
enforcement investigations that may violate Federal consumer financial
law. Whether conduct similar to the conduct described in this Bulletin
violates these laws may depend on additional facts and analysis. The
Bureau will closely review conduct related to phone pay fees for
potential violations of Federal consumer financial laws.
DATES: The Bureau released this Compliance Bulletin on its Web site on
July 27, 2017.
FOR FURTHER INFORMATION CONTACT: Chantal Hernandez, Attorney-Advisor,
Office of Supervision Policy, 1700 G Street NW., 20552, (202) 435-7084.
SUPPLEMENTARY INFORMATION:
[1]. Compliance Bulletin
Across various consumer financial products and services, many
entities provide consumers multiple payment options. For instance, many
provide consumers the option of making payments over the phone by using
an automated system or speaking with a live representative. Many
entities also provide consumers the option to make phone payments by
using a credit card, debit card, or electronic check, or to have their
payment expedited. A number of entities also use third-party service
providers to handle and process the payments. State and Federal laws
may restrict fees related to phone payments.\1\ Entities are advised to
review applicable laws to determine whether they may charge phone pay
fees. In the course of its Supervision and Enforcement activities, the
Bureau has identified conduct that may violate or risks violating
Federal consumer financial laws relating to phone pay fee practices.
---------------------------------------------------------------------------
\1\ For example, as implemented by Regulation Z, a Credit CARD
Act amendment to the Truth In Lending Act provides that for credit
card accounts under an open-end consumer credit plan, a creditor
(including a third party that collects, receives, or processes
payments on behalf of a creditor) may not impose a separate fee to
allow consumers to make a payment by any method (including telephone
payments) unless the payment method involves an expedited service by
a service representative of the creditor. See 15 U.S.C. 1637(l); 12
CFR 1026.10(e).
---------------------------------------------------------------------------
Report of Supervisory or Enforcement Findings
Examples of Conduct That May Violate or Risk Violating the Prohibition
on UDAAPs
Under the Dodd-Frank Act, all covered persons or service providers
are legally required to refrain from committing unfair, deceptive, or
abusive acts or practices in violation of the Act. An act or practice
is unfair when (i) it causes or is likely to cause substantial injury
to consumers; (ii) the injury is not reasonably avoidable by consumers;
and (iii) the injury is not outweighed by countervailing benefits to
consumers or to competition.\2\ An act or practice is deceptive when
(i) the act or practice misleads or is likely to mislead the consumer;
(ii) the consumer's interpretation is reasonable under the
circumstances; and (iii) the misleading act or practice is material.\3\
---------------------------------------------------------------------------
\2\ Dodd-Frank Act Sec. Sec. 1031, 1036, 12 U.S.C. 5531, 5536.
\3\ See CFPB Exam Manual at UDAAP 5 (noting that the standard
for ``deceptive'' practices in the Dodd-Frank Act is informed by the
standards for the same terms under Section 5 of the FTC Act).
---------------------------------------------------------------------------
Depending on the facts and circumstances, the following non-
exhaustive list of examples of conduct related to phone pay fees may
constitute UDAAPs or contribute to the risk of committing UDAAPs.\4\
Accordingly, the
[[Page 35937]]
Bureau will be watching these practices closely.
---------------------------------------------------------------------------
\4\ The Bureau will also review whether phone pay fee conduct
may violate the Dodd-Frank Act's prohibition on abusive acts or
practices. An act or practice is abusive when it materially
interferes with the ability of a consumer to understand a term or
condition of a consumer financial product or service; or takes
unreasonable advantage of (i) a consumer's lack of understanding of
the material risks, costs, or conditions of the product or service;
(ii) a consumer's inability to protect his or her interest in
selecting or using a consumer financial product or service; or (iii)
a consumer's reasonable reliance on a covered person to act in his
or her interests. Dodd-Frank Act Sec. 1031(d), 12 U.S.C. 5531(d).
See CFPB Bulletin 2013-07: Prohibition of Unfair, Deceptive, or
Abusive Acts or Practices in the collection of Consumer Debts,
available at https://files.consumerfinance.gov/f/201307_cfpb_bulletin_unfair-deceptive-abusive-practices.pdf for
additional guidance on UDAAPs.
---------------------------------------------------------------------------
Failing To Disclose the Prices of All Available Phone Pay Fees When
Different Phone Pay Options Carry Materially Different Fees
Many entities charge different phone pay fees depending on the
payment method used by the consumer. Prior to charging such fees,
entities sometimes send periodic billing statements or other
documentation that discloses that ``transaction fees may apply'' to
various payment methods, but that do not disclose the relevant fees to
be charged for those methods.\5\ In some of these instances, entities
may depend solely on phone representatives to disclose the relevant
fees to consumers before the charge is imposed. Yet, the phone
representatives may potentially only reveal the higher-cost options or
fail to inform consumers of the material price difference between
available options. This conduct poses a risk of an unfair practice: It
may cause substantial harm to consumers, who are pushed into materially
higher-cost options; this harm may not be reasonably avoidable if
consumers are unable to select lower-cost alternatives because they do
not have the necessary information to know that such options are
available; and countervailing benefits to consumers or competition may
not warrant the entity's failure to disclose the materially different
prices of the available phone pay options to its consumers.
---------------------------------------------------------------------------
\5\ Where applicable, 12 CFR 1026.7(a)(6)(ii) and
1026.7(b)(6)(iii) of Regulation Z will require disclosure in
subsequent periodic billing statements of the amount of such fees
paid in connection with prior billing periods.
---------------------------------------------------------------------------
Misrepresenting the Available Payments Options or That a Fee Is
Required To Pay by Phone
Entities sometimes charge a fee for expedited phone payments, but
also offer consumers no-fee phone pay options that post after a
processing delay. Some entities in turn offer their fee-based expedited
payment option as their default pay-by-phone option. In such cases,
disclosures in connection with the default option may risk misleading
consumers into believing that a fee is required under all circumstances
to make any payment by phone.
For example, in a public enforcement action, the Bureau alleged
that an entity and its service provider engaged in deceptive acts or
practices when it gave delinquent credit card holders the false
impression that they had to pay $14.95 to make payment by phone when,
in fact, the sole purpose of that fee was to expedite phone payments.
Specifically, the Bureau alleged that the entity or its service
provider: (i) Misrepresented in credit card agreements that the fee's
purpose was to allow payment by phone, when its purpose was solely to
ensure payment posted the same day it was made; (ii) failed to disclose
during collection calls that the fee's purpose was solely to expedite
payment, and in certain circumstances misrepresented that the fee was a
``processing fee''; (iii) volunteered that consumers could make payment
using a checking account and triggered the fee by setting such payments
to post immediately by default; and (iv) failed to disclose the
existence of no-cost payment alternatives, including free next-day
payment.\6\
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\6\ See In re Citibank, N.A. et al., No. 2015-CFPB-0015 (July
21, 2015).
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In another public enforcement action, the Bureau alleged that a
mortgage servicer engaged in a deceptive practice by misrepresenting to
consumers, both expressly and by implication, that a particular pay-by-
phone option was the only available payment method, or that consumers
must use the particular pay-by-phone option in order to avoid negative
consequences, including incurring a late fee or even facing
foreclosure. In fact, the servicer accepted several payment options
free of charge. In many instances, consumers could have used these
other payment methods to make timely payments and avoid late fees.\7\
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\7\ See FTC and CFPB v Green Tree Servicing, LLC., No. 15-cv-
02064 (April 23, 2015).
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Failing To Disclose That a Phone Pay Fee Would Be Added to a Consumer's
Payment Could Create the Misimpression That There Was No Service Fee
An entity may risk engaging in a deceptive act or practice when it
fails to disclose that a phone pay fee will be charged in addition to a
consumer's otherwise applicable payment amount and indicates to that
consumer that only the otherwise applicable payment amount will be
charged.\8\ This conduct may leave the misimpression that there is no
service fee, when in fact the entity does charge the consumer a fee.
This potential misrepresentation may be material to consumers because a
consumer who knows about the fee may inquire whether there is an
alternative payment option with a lower fee or may choose a payment
method that requires no fee.
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\8\ An example would be as follows: A consumer owes a payment of
$250. The consumer calls and tells the customer service
representative that she will pay by phone. The customer service
representative confirms that the borrower authorizes a payment of
$250. In fact, the consumer's bank account is debited $265 . . .
$250 for the otherwise applicable payment amount and $15 for a pay-
by-phone fee.
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Lack of Employee Monitoring or Service Provider Oversight May Lead to
Misrepresentations or Failure To Disclose Available Options and Fees
A number of entities have policies and procedures in place
requiring phone representatives to disclose all available phone pay
options and fees to consumers, including requiring the use of detailed
phone scripts. But deviations from call scripts may potentially cause
phone representatives to misrepresent the available phone payment
options and fees resulting in a consumer being charged a higher fee
than otherwise would have been applicable. Entities can reduce the risk
of misrepresentations through adequate monitoring.
In November 2016 the Bureau issued a separate bulletin on detecting
and preventing consumer harm from production incentives.\9\ Companies
may wish to consult that bulletin when considering incentive programs
for employees that process phone pay fees. Companies should also
consider the impact that incentives created by contracts and agreements
with service providers might have on compliance risk relating to
potential UDAAPs associated with phone pay fees.
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\9\ CFPB Compliance Bulletin 2016-03 (Nov. 28, 2016), available
at https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/cfpb-compliance-bulletin-2016-03-detecting-and-preventing-consumer-harm-from-production-incentives/.
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Examples of Conduct That May Violate or Risk Violating the FDCPA
Under the FDCPA, a person defined as a ``debt collector'' is
prohibited from charging fees, including phone pay fees, in certain
instances.\10\ Under Section 808(1) of the FDCPA, a debt collector may
not collect any amount (including any interest, fee, charge, or expense
incidental to the principal obligation) unless such amount is expressly
[[Page 35938]]
authorized by the agreement creating the debt or permitted by law.\11\
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\10\ Debt collectors sometimes charge ``convenience fees'' or
fees for processing consumer payments through a particular channel.
\11\ 15 U.S.C. 1692f(1).
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Supervision has found that one or more mortgage servicers that met
the definition of ``debt collector'' under the FDCPA violated the Act
when they charged fees for taking mortgage payments over the phone to
borrowers whose mortgage instruments did not expressly authorize
collecting such fees and who reside in states where applicable law does
not expressly permit collecting such fees. Supervision directed one or
more servicers to review mortgage notes and applicable state law, and
to only collect pay-by-phone fees where expressly authorized by
contract or state law.\12\
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\12\ See Supervisory Highlights, Fall 2015 edition at pp. 20-21.
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The Bureau's Expectations
The Bureau expects entities to review their practices on charging
phone pay fees for potential risks of committing UDAAPs or violating
the FDCPA. While the Bureau does not mandate any particular method for
informing consumers about the available phone pay options and fees,
entities should consider the following suggestions in assessing whether
their practices may present a risk of constituting a UDAAP or FDCPA
violation:
Review applicable State and Federal laws, including the
FDCPA, to confirm whether entities are permitted to charge phone pay
fees.
Review underlying debt agreements to determine whether
such fees are authorized by the contract.
Review internal and service providers' policies and
procedures on phone pay fees, including call scripts and employee
training materials, and revise policies and procedures to address any
concerns identified during the review, as appropriate.\13\
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\13\ Entities should refer to CFPB Compliance Bulletin and
Policy Guidance; 2016-02, Service Providers (Oct. 31, 2016),
available at https://www.consumerfinance.gov/documents/1385/102016_cfpb_OfficialGuidanceServiceProviderBulletin.pdf.
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Review whether information on phone pay fees is shared in
account disclosures, loan agreements, periodic statements, payment
coupon books, on the company's Web site, over the phone, or through
other mechanisms.
Incorporate pay-by-phone issues in regular monitoring or
audits of calls with consumers.
Review consumer complaints regarding phone pay fees.
Perform regular reviews of service providers as to their
pertinent practices.\14\
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\14\ Id.
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Review that the entity has a corrective action program to
address any violations identified and to reimburse consumers when
appropriate.
Entities should also consider reviewing employee and service
provider production incentive programs to see if there are incentives
to steer borrowers to certain payment types or to avoid disclosures. As
discussed in more detail in CFPB Compliance Bulletin 2016-03,\15\ the
Bureau acknowledges that production incentives have been common across
many economic sectors and can affect a wide range of outcomes for
employees or service providers, from their compensation levels to
whether they will continue to be employed or retained at all. The
Bureau has also highlighted the risks posed to consumers by production
incentive programs, especially when they create an unrealistic culture
of high-pressure targets or when the activities of employees or service
providers are not adequately monitored for compliance with the law.
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\15\ See CFPB Bulletin 2016-03, Detecting and Preventing
Consumer Harm from Production Incentives (Nov. 28, 2016), available
at https://www.consumerfinance.gov/documents/1537/201611_cfpb_Production_Incentives_Bulletin.pdf.
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In the context of phone pay fees, production incentives may enhance
the potential risk of entities engaging in UDAAPs. Production
incentives that reward employees or service providers based on
consumers using a higher-cost phone pay option may potentially lead
entities to steer consumers to a higher-cost option despite the
availability of lower-cost alternatives. Similarly, incentive programs
that reward representatives who complete a large number of daily calls
may potentially cause these representatives to spend less time
discussing the available phone pay options and fees resulting in the
consumer paying a higher fee because the consumer is not informed of
the lower-cost alternatives. Entities should review these programs
accordingly.
The Bureau will continue to review closely the practices of
entities assessing phone pay fees for potential UDAAPs and FDCPA
violations, including the practices described above. The Bureau will
use all appropriate tools to assess whether supervisory, enforcement,
or other actions may be necessary.
[2]. Regulatory Requirements
This Compliance Bulletin is a non-binding general statement of
policy articulating considerations relevant to the Bureau's exercise of
its supervisory and enforcement authority. It is therefore exempt from
notice and comment rulemaking requirements under the Administrative
Procedure Act pursuant to 5 U.S.C. 553(b). Because no notice of
proposed rulemaking is required, the Regulatory Flexibility Act does
not require an initial or final regulatory flexibility analysis. 5
U.S.C. 603(a), 604(a). The Bureau has determined that this Compliance
Bulletin does not impose any new or revise any existing recordkeeping,
reporting, or disclosure requirements on covered entities or members of
the public that would be collections of information requiring OMB
approval under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
Dated: July 25, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-16188 Filed 8-1-17; 8:45 am]
BILLING CODE 4810-AM-P