FDCPA Case Ruling on Convenience Fees Having Impact on Collectors

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The U.S. District Court for the Eastern District of New York earlier this year denied a debt collector’s motion to dismiss an FDCPA case, holding that its $5 surcharge for payments via credit card may have violated the law.  The case has apparently been used recently against many other debt collectors.

In Quinteros v. MBI Associates, Inc., 2014 WL 793138 (E.D.N.Y. Feb. 28, 2014), the debtor received a debt collection notice from the debt collection agency, which stated that the debtor would pay a $5 processing fee for optional credit card or check by phone payments.

The letter stated, in pertinent part:

Should you require more time to make payment or wish to make payment arrangements, please call this office upon receipt of this letter. Our office accepts Visa, MasterCard and American Express which you may pay over the phone or online at www.paymbi.com. There will be a $5.00 processing fee for all credit cards or checks over the phone.

The debtor then sued for a violation of the FDCPA contending that the $5 charge was not expressly authorized in the underlying debt contract.

Defendant moved to dismiss Plaintiff’s complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted.

In February, the District Court judge denied the defendant’s motion to dismiss, holding that (i) the collection of any amount not expressly authorized in the underlying debt contract is a violation of the FDCPA, regardless of whether the debt collector is engaged in an abusive practice; and (ii) the notice sent to the debtor that referenced the $5 processing fee violated the FDCPA’s prohibition on misleading documents because it implied that the defendant could legally receive this payment.

Although this ruling is older than most we cover, it has become more relevant in recent months. An insideARM.com reader tipped us off that this particular ruling was being used in other recent case filings. After making a few calls, we learned that this was indeed the case.

It also aligns with a recent recommendation from the North Carolina Collectors Association that urged collection agencies in that state to stop charging payment convenience fees while the association works with state regulators on a “new interpretation or change the law.”


Continuing the Discussion

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  • avatar mike kaufmann says:

    Hello Patrick,

    I’m curious. Did the agency itself charge the convenience fee as a means to make a profit or did their payment processor charge that fee to run the payment?

    Is there a distinction between the actual agency charging the fee or the fee being a transaction charge by the payment processor?


  • avatar paybill says:

    Why is the debt collection industry continuously not treated like every other industry out there? It is common practice to charge this fee just to cover the cost of processing the payment. If collection agencies aren’t allowed to do it then nobody should. In NC, where I am located, the creditors have the exact same law on the books about charging this fee, yet only collection agencies are being singled out while other such as Duke Energy for instance can continue to do it with no problem.

  • avatar Patrick Lunsford says:

    @ mike kaufmann: it does appear they were charging the fee without regard to their processor’s service charge.

    As for the other question on the distinction, I honestly do not know the answer to that.

  • avatar todd bean says:


    Because federal law, specifically targeted at the debt collection industry [FDCPA] gives strict instructions, not guidelines, on what you can and cannot do.

    Your industry has tried this argument over and over and the answer is the same. Your industry even tried to argue you had a first amendment right to call debtors.

    Other industries that you mention are also regulated. Duke Energy cannot just charge you whatever they want for electricity, because they have to answer to regulators.

    What I find funny is the FDCPA is written where a ninth grader can easily understand it, but since it is written so favorably toward consumers [because of the abuses when there was no regulation] the debt collection industry is always trying to find “ways around it”; trying to nickle and dime here and there; and then play the role of “why us”, “why us”, “what did we do to deserve all this attention.”

    You could not police yourselves, just like many in business not just in debt collection, so the government stepped in and forced you to lie in the bed you made for yourselves.

    The FDCPA is a strict liability statute, no matter how you try to get around it; how much you complain; or how unfair you think it is.

    You are not comparing apples to apples. Your conduct is governed by a strict liability standard and law and the conduct of others you want to use in comparison, generally speaking, is not governed by a strict liability standard.

    In my appeal your debt collection industry lawyers actually argued that my conduct violated the FDCPA. My response was, yes it sure did and proud of it, but I’m not bound by the FDCPA and you are!!!! That was your argument? If you want the specific cite linked just let me know, but that was YOUR industry’s defense, that the consumers conduct, in essence started it, so “we get a pass.”

    Yeah, good luck with that.

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