CFPB cracks down on hidden payment fees

by Ryan Smith02 Aug 2017

The Consumer Financial Protection Bureau is cracking down on financial services companies that charge expensive fees to customers who want to pay their bills by phone.

The CFPB is particularly concerned about companies it says make misleading statements about the purpose or amount of pay-by-phone fees or don’t inform customers of much cheaper payment options.

“The bureau is warning companies about tricking consumers into more expensive fees when they pay bills by phone,” CFPB Director Richard Cordray said. “We are concerned that companies are misleading consumers about pay-by-phone fees or keeping them in the dark about much cheaper or no-cost options.”

Most financial services companies give their customers several payment options. Some companies give their customers an option to pay bills by phone, either through an automated system or by speaking to a live agent. The fees charged can vary depending on whether customers make payments by electronic check, debit card or credit card. Consumers are sometimes charged a hefty additional fee to expedite phone payments.

According to the CFPB, some financial services companies are misrepresenting the purpose and amount of the fees, which means consumers may incur charges for unneeded services.

“For example, a recent bureau 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 CFPB said. “The fee was actually for posting payment to the account the same day. Customers 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. Moreover, many were not aware of no-cost payment alternatives that would post after a delay.”

Many customers aren’t aware of those alternatives, the CFPB claimed, because some financial services companies are deliberately keeping them in the dark. Many companies don’t disclose their fees in writing upfront to the customer, according to the CFPB.

“This may substantially harm consumers who wind up using much more expensive options because they are not informed that significantly cheaper options are available,” the CFPB said.

The agency isn’t mandating any particular way for financial services companies to disclose their pay-by-phone fees. However, the CFPB said that it “expects companies to review their practices” and address any issues. It warned that it would use “all appropriate tools” to ensure customers were properly informed, including enforcement actions if necessary.

Related stories:
CFPB enforcement actions plummet
CFPB mulls hike of mortgage data rule reporting threshold

Source of Article:
http://www.mpamag.com/news/cfpb-cracks-down-on-hidden-payment-fees-74809.aspx

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