The Inconvenient Reality of Convenience Fees

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You should probably stop charging convenience fees. You also probably won’t listen to me, or to your compliance team.

Nevertheless, it’s a risky prospect, the precedents aren’t terribly clear, and, if a recent case, Acosta v. Credit Bureau of Napa County, is to be believed, it’s against the Fair Debt Collection Practices Act and liable to get you sued.

Here are the facts, per the filing on 29 April 2015:

The plaintiff received a collection notice for $524.59. The notice helpfully listed “6 easy payment options,” including one with a convenience fee: “Pay via Credit Card. ($14.95 Chase Receivables processing fee where applicable).” Four of the remaining five options did not include a convenience fee.

However, the plaintiff (via her attorney), believes that that $14.95 convenience fee violates the FDCPA in the following ways:

  • 1692e: False or misleading representations. “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”
  • 1692e(2): (2) The false representation of—
    • (A) the character, amount, or legal status of any debt; or
    • (B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.
  • 1692e(10): (10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
  • 1692f: Unfair practices. “A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.”
  • 1692f(1): (1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation [emphasis added, editor) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.

Was that $14.95 part of the collection? That’s at issue here. Per the plaintiff’s counsel, the answer is yes, and because it’s yes, 1692f(1) was violated (which dominoed, in a sense, the other sections of the FDCPA). Per the agency, the answer is no, there was no collection intended: the $14.95 should be considered a “pass through.” Additionally, the agency never claimed the processing fee was due, and, too: there were four other options available to the plaintiff that didn’t have a convenience fee at all.

The court…didn’t see it that way. Per the court, for there to have been no collection for the agency, then that $14.95 should have gone directly to the payment (i.e., third party) processor.

And since there was a collection, the court then went on to determine whether it was “expressly authorized by the agreement creating the debt or permitted by law.” Which, per the court, this fee did neither: neither expressly authorized, and not permitted by law.

Which brings us back to the beginning of this piece: convenience fees just aren’tAcosta tells us this. Quinteros out of New York tells us this. There are incredibly narrow applications for convenience fees; but, for the most part, the risks are too great.

What compliance folk can do now:

  1. Examine the agreements consumers sign with your clients. If there is no express language in those agreements stating that past-due accounts sent to collections might incur additional costs, you should not charge a convenience fee.
  2. Review your internal written policies regarding convenience fees with your own legal counsel — paying specific attention to the sections of the FDCPA quoted above.
  3. Stop adding convenience fees to transactions. Which, I know, is easier said than done, and a tough conversation to have with operations and management. But the risks, at this point, do not outweigh the benefits at all, and simply open your agency up for lawsuits and unwanted scrutiny.

Continuing the Discussion

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  • avatar Connie Hartmann says:

    “Per the defendant’s [sic - should have been 'plaintiff's'] counsel, the answer is yes, and because it’s yes, 1692f(1) was violated (which dominoed, in a sense, the other sections of the FDCPA).”

  • avatar Mike Bevel says:

    Connie:

    Thank you VERY much. I had “defendant” throughout, where I clearly meant “plaintiff.”

  • avatar Sisko says:

    Does this ruling indicate that if ALL of the convenience fee is passed along to the third party processor, then the plaintiff would have no case?

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