In collections, the biggest challenge is getting in contact with account holders and setting up a payment agreement to resolve outstanding debt, especially with consumers who have a low propensity to pay. But once the agreement is made, it’s smooth sailing. Right?
The cost involved with processing payments can be significant for agencies, especially when they are not charging a fee, and if a fee was not expressly authorized in the original agreement that created the debt, it’s difficult to imagine how agencies can reduce costs in a compliant manner.
So, what can you do? Can you charge a fee to offset this expense? What about compliance? The best question you can ask yourself is, “do we have the right payment processing partner to help show us the way?”
Fortunately, with the right payment processing partner, the modern iteration of the No-Cost-to-Biller fee model allows agencies to save money on processing fees in a manner compliant with the FDCPA, CFPB, Card Brands, state law, etc.
What is a No-Cost-To-Biller fee model, and how can it help my business?
At a high-level, the No-Cost-To-Biller fee model applies the principal transaction amount to the agency, and with consumer consent, a fee may be assessed by the third-party technology platform which enables the convenience of processing the payment. With the right fintech partner, this model can be deployed in several iterations to fit a merchants payment ecosystem, while ensuring compliance with the appropriate regulations. In all cases, the payment processor collects the principal and uses the model to offset costs.
Where there is a restriction (either due to a state regulation or client restriction), no fee is applied, and the merchant is charged the processing fee directly.
Is it compliant?
Yes, with the correct fee model.
There are several key considerations to ensure compliance, but this model is nuanced and every rule cannot be conveyed in one article. Here are several key principles which need to be embedded in any merchant's payment ecosystem:
Consumer consent is critical. Agencies are responsible for providing consumers with disclosures that contain the necessary items for compliance. With proper disclosures, an agency can then obtain consumers consent to move forward in the process. It’s also important to ensure the agency does not receive revenue from the fee, but only uses it to offset costs. This has been a hot topic lately, but it has always been a rule for any vendor who has expertise in this field.
Adherence to Regulations
When reviewing individual states’ statutes, one must recognize where a consumer resides at the time of payment, and adhere to individual state statutes. This can get tricky, as you need to keep in mind fee rules set by the Card Brands do not supersede state law. In fact, all of the salient compliance pillars, i.e. the FDCPA, CFPB, Card Brands, State Law, etc. need to be adhered to in every transaction. All of these items (and more) need to be integrated into your authoritative database so rules are followed programmatically.
There is a lot of nuance involved with employing a No-Cost-To-Biller fee model. The best way for debt collectors to ensure compliance while offsetting costs is to find a payment processor who has done their legal due diligence, is able to provide guidance on the subject and is a true expert in this area.
To learn more about how to stay compliant with the law, watch our one-hour webinar: Breaking Down the CFPB's Opinion on Convenience Fees, featuring experts Rick Perr (Co-Managing Partner, Philadelphia, Kaufman Dolowich & Voluck LLP) and Rob Kennedy (Vice President of Sales, North America, Nuvei).