The Court of Appeals for the Eleventh Circuit has affirmed a lower court’s ruling for the plaintiffs in a Fair Debt Collection Practices Act case over convenience fees, ruling loan servicers are prohibited from charging anything not expressly authorized by the underlying agreement or permitted by law.
This decision clarifies a critical issue in the credit and collection industry — whether loan servicers acting as debt collectors can impose pay-to-pay or convenience fees on consumers for expedited payment methods. The court found that such fees, when not explicitly authorized in loan agreements or permitted by state or federal law, violate the FDCPA. The cases were ones in which the Consumer Financial Protection Bureau and the Federal Trade Commissioned weighed in, supporting the plaintiff’s position.
The background: The case originated when the plaintiffs, whose mortgages were in default, were charged additional fees by the defendant, a loan servicer, for making payments online or by phone. The fees, known as “Speedpay” fees, ranged from $7.50 to $12 per transaction. While borrowers could avoid the fee by mailing payments, many opted for the convenience of electronic payments.
- The plaintiffs argued these fees were an unlawful collection practice under the FDCPA, which prohibits debt collectors from collecting any amount beyond what is authorized by the debt agreement or allowed by law.
- The plaintiffs had paid these fees multiple times but contended that their original mortgage agreements did not include provisions allowing such charges. They filed suit, alleging that the servicer’s practice of imposing these fees violated federal consumer protection laws, and a District Court judge sided with the plaintiffs.
The ruling: The Eleventh Circuit upheld the lower court’s ruling, finding that the loan servicer, acting as a debt collector, improperly charged fees that were neither explicitly included in the plaintiffs’ mortgage agreements nor permitted by law. The ruling emphasized that:
- The servicer was acting as a debt collector under the FDCPA, as it acquired the loans after default and was engaged in collecting payments.
- The convenience fees constituted an “amount” under the FDCPA, meaning the servicer was subject to the law’s restrictions on what could be collected.
- Because the plaintiffs’ loan agreements did not explicitly authorize the fees and no law permitted them, the fees were unlawful.
The court rejected the servicer’s argument that the fees were separate from debt collection, finding that they were imposed in connection with debt payments. The ruling aligns with interpretations from other jurisdictions and a CFPB advisory opinion, which similarly concluded that debt collectors cannot charge convenience fees unless explicitly permitted.
