Billers Beware: CFPB Warns Companies against ‘Tricking’ Consumers into Expensive Pay-by-Phone Fees
The CFPB issued a bulletin today (July 31) warning companies about tricking consumers into expensive pay-by-phone fees. The bureau says it’s concerned about companies potentially misleading consumers about the purpose and amount of certain pay-by-phone fees or “keeping them in the dark” about much cheaper payment options.
The bulletin also reviews guidelines to help consumer financial companies comply with current law.
Most financial service companies give consumers several options to make payments. Some consumers may choose to pay bills by phone using an automated system or speaking with a live customer representative. Companies may charge different pay-by-phone fees depending on what method of payment the consumer uses, such as payment by electronic check, debit card or credit card. Consumers may also be charged an additional fee to expedite phone payments, though many companies offer consumers no-fee or lower-fee pay-by-phone options that post after a delay. In its supervision and enforcement activities, the bureau identified harmful practices regarding pay-by-phone fees such as:
- Misleading consumers about pay-by-phone fees: The bureau is concerned about companies misrepresenting the purpose and amount of pay-by-phone fees. For example, a recent CFPB enforcement action alleged that a company and its service provider misled consumers into paying a $14.95 pay-by-phone fee by deceptively calling it a “processing” charge. The fee was actually for posting payment to the account the same day. Consumers paying by phone ended up being charged for expedited payment even though most of them did not need to post payment on the same day, according to the agency.
- Not disclosing cheaper payment options: Some companies don’t disclose their fees in writing up front to consumers, the CFPB says. Instead, they may depend solely on phone representatives to disclose the relevant fees to consumers before the charge is imposed. If representatives fail to inform consumers about significant price differences between available pay-by-phone options, consumers may be harmed.
The CFPB doesn’t mandate any particular way to disclose pay-by-phone options and fees, but the bureau says it expects companies to review their practices for potential risks of violating consumer financial laws and to address any issues.
The CFPB recommends that financial institutions take steps to ensure that they are following federal and state laws related to pay-by-phone fees. Companies should also review consumer complaints about fees, the bureau suggested.