Collector - September 2016 - (Page 46)
Cash or Credit?
State and federal concerns for charging transaction fees.
ransaction fee, convenience fee,
swipe fee-call it what you like, but
the question remains as to whether
or not debt collectors can legally charge this
type of fee to consumers when processing a
particular method of payment, such as credit
cards, debit cards and payments by phone.
The ability to charge a transaction fee is a
question of both federal and state law, and
one that has caught the eye of regulators
and consumer attorneys. In order to impose
any fees related to processing payments,
debt collectors must familiarize themselves
with relevant case law under the Fair Debt
Collection Practices Act as well as any state
restrictions that might apply.
The FDCPA forbids "(t)he collection of
any amount (including any interest, fee,
charge, or expense incidental to the principal
obligation) unless such amount is expressly
authorized by the agreement creating the
debt or permitted by law."
While this statement appears straight
forward, courts do not agree on whether or
not transaction fees are covered under this
clause. Some courts perceive transaction
fees as a separate agreement choosing the
additional service of the payment method
offered but some do not, causing a split
in authority. Often times the collection
agency does not receive any benefit from the
transaction fee as the fee goes to the credit
company. However, other courts have held
that transaction fees are "incidental" to the
debt and, therefore, should be considered
covered under the FDCPA.
An enforcement action by the
Federal Trade Commission also signals
that transaction fees are subject to
the requirements of the FDCPA. The
FTC alleged in its complaint that the
defendants-a debt buyer and a debt
collection law firm-violated the FDCPA
by deceptively charging consumers a fee
for payments authorized by telephone.
According to the FTC, the debt collector
led consumers to believe that the fee was
unavoidable when, in fact, those who paid by
mail or online did not incur the fee.
State law may prohibit or restrict debt
collectors or licensees from imposing
transaction fees, such as in Colorado,
Minnesota and Washington. Other states
prohibit the imposition of "surcharge"
fees when a "buyer" elects to use a credit
card in lieu of payment by cash, check or
similar means. Due to variances in state
requirements, it's imperative that debt
collectors review all applicable state laws
before imposing a transaction fee.
Overall, collectors should proceed with
caution when it comes to charging fees.
Reviewing state and federal laws will help
debt collectors understand when they
can or cannot add a transaction fee. ACA
SearchPoint document #4006, Payment
Transaction Fees, can help with this effort.
The document takes a look at applicable
federal law and court decisions and provides
a breakdown of state requirements.
Have you checked out ACA's member-only
SearchPoint library? ACA SearchPoint is filled
with documents that put important compliance
information related to the FDCPA, FCRA,
TCPA, state laws and many other topics at
your fingertips. To access ACA SearchPoint,
Table of Contents for the Digital Edition of Collector - September 2016
5 Ways to Get Electronic Payments Right
Making the Connection
Curious About Amicus Curiae?
Know the Score
What Creditors Need to Know About the TCPA
ACA Industry Advancement Support Helps Secure Victory for Collection Industry in FDCPA Case
Collector - September 2016