The Consumer Financial Protection Bureau has intensified its scrutiny of junk fees in the financial marketplace, with debt collectors and loan servicers squarely in the crosshairs this time. The Bureau published a blog post yesterday about new tactics that companies are undertaking to charge illegal junk fees to consumers, and debt collectors were front and center in the article.
The big picture: Junk fees, including those charged by debt collectors, often violate the Fair Debt Collection Practices Act. The CFPB’s focus on these practices aims to prevent companies from using illegal fee tactics to boost profits.
- What’s illegal: Debt collectors cannot charge fees not expressly authorized by the consumer’s original agreement or permitted by law. Common violations include:
- “Pay-to-pay” fees for using specific payment methods.
- Fees for payoff statements improperly imposed by mortgage servicers.
- Arbitrary collection fees not outlined in initial agreements.
- Recent trends: As companies face accountability for these fees, some are adopting new, questionable strategies, according to the post. Those include:
- Amending contracts without genuine consumer consent to add fees.
- Burying fees in “terms of service” using deceptive tactics like dark patterns.
What they’re saying: The CFPB has cited companies for such practices during supervisory examinations, emphasizing the illegality of altering contracts to introduce fees consumers never agreed to.
Zoom out: The CFPB’s junk fee crackdown builds on its broader consumer protection initiatives:
- A circular issued earlier this year warned that unlawful contract terms may violate the Consumer Financial Protection Act.
- A proposed rule requires nonbank financial companies to disclose their use of terms limiting consumer rights.
Between the lines: State regulators are also empowered to enforce federal and state consumer protection laws, amplifying pressure on the industry to ensure compliance.
