[Federal Register Volume 87, Number 127 (Tuesday, July 5, 2022)]
[Rules and Regulations]
[Pages 39733-39735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14230]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 87, No. 127 / Tuesday, July 5, 2022 / Rules
and Regulations
[[Page 39733]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1006
Debt Collection Practices (Regulation F); Pay-to-Pay Fees
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Advisory opinion.
-----------------------------------------------------------------------
SUMMARY: Section 808(1) of the Fair Debt Collection Practices Act
(FDCPA or Act) prohibits debt collectors from collecting any amount
(including any interest, fee, charge, or expense incidental to the
principal obligation) unless that amount is expressly authorized by the
agreement creating the debt or permitted by law. The Consumer Financial
Protection Bureau (CFPB) issues this advisory opinion to affirm that
this provision prohibits debt collectors from collecting pay-to-pay or
``convenience'' fees, such as fees imposed for making a payment online
or by phone, when those fees are not expressly authorized by the
agreement creating the debt or expressly authorized by law. This
advisory opinion also clarifies that a debt collector may also violate
section 808(1) when the debt collector collects pay-to-pay fees through
a third-party payment processor.
DATES: This advisory opinion is effective on July 5, 2022.
FOR FURTHER INFORMATION CONTACT: Sonya Pass, Senior Legal Counsel and
Chief of Staff, Legal Division, (202) 435-7700. If you require this
document in an alternative electronic format, please contact
[email protected].
SUPPLEMENTARY INFORMATION:
I. Advisory Opinion
A. Background
Congress enacted the FDCPA in 1977 to ``eliminate abusive debt
collection practices by debt collectors, to insure that those debt
collectors who refrain from using abusive debt collection practices are
not competitively disadvantaged, and to promote consistent State action
to protect consumers against debt collection abuses.'' \1\ The statute
was a response to ``abundant evidence of the use of abusive, deceptive,
and unfair debt collection practices by many debt collectors,'' which
Congress attributed to the ``inadequacy'' of ``existing laws and
procedures,'' including State laws.\2\ To remedy this, the FDCPA
imposes various requirements and restrictions on debt collectors' debt
collection activity. Relevant here is section 808, which provides that
a ``debt collector may not use unfair or unconscionable means to
collect or attempt to collect any debt.'' \3\ Section 808 then states
that ``[w]ithout limiting the general application of the foregoing, the
following conduct is a violation of this section'' and enumerates eight
specifically prohibited practices, including the ``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.'' \4\
---------------------------------------------------------------------------
\1\ Public Law 95-109, sec. 802(e), 91 Stat. 874, 874 (codified
at 15 U.S.C. 1692(e)).
\2\ 15 U.S.C. 1692(a), (b). See also S. Rep. No. 95-382, at 2
(1977) (stating that ``debt collection abuse by third party debt
collectors [was] a widespread and serious national problem,'' which
Congress largely attributed to a ``lack of meaningful legislation on
the State level'').
\3\ 15 U.S.C. 1692f.
\4\ 15 U.S.C. 1692f(1).
---------------------------------------------------------------------------
At the time of the FDCPA's enactment, the Federal Trade Commission
(FTC) was the agency that administered, and had primary responsibility
for enforcing, the FDCPA.\5\ Then, in 2010, Congress passed the Dodd-
Frank Wall Street Reform and Consumer Protection Act, which created the
CFPB and granted it authority to administer, implement, and enforce the
FDCPA.\6\ Congress also provided the CFPB authority to prescribe rules
under the FDCPA.\7\ Pursuant to that authority, in 2020, the CFPB
issued Regulation F, which implements the FDCPA, to prescribe rules
governing the activities of debt collectors.\8\ The CFPB implemented
FDCPA section 808(1) at 12 CFR 1006.22(b) by ``generally mirror[ing]
the statute, with minor wording and organizational changes for
clarity.'' \9\ In particular, the CFPB stated that the ``term `any
amount' includes any interest, fee, charge, or expense incidental to
the principal obligation.'' \10\
---------------------------------------------------------------------------
\5\ See 15 U.S.C. 1692l(a) (2010).
\6\ Public Law 111-203, sec. 1089, 124 Stat. 1376, 2093
(codified at 15 U.S.C. 1692l(b)(6)).
\7\ 15 U.S.C. 1691l(d).
\8\ See Debt Collection Practices (Regulation F), 85 FR 76734
(Nov. 30, 2020); Debt Collection Practices (Regulation F), 86 FR
5766 (Jan. 19, 2021).
\9\ 85 FR 76734, 76833.
\10\ Id. at 76833, 76892.
---------------------------------------------------------------------------
In 2013, the CFPB launched its supervisory program over certain
larger participants in the consumer debt collection market. Through
these examinations, the CFPB ascertains compliance with the FDCPA, and
now Regulation F, as well as other Federal consumer financial laws. The
CFPB also periodically publishes Supervisory Highlights with anonymized
findings and analysis from these supervisory examinations, as well as
compliance bulletins to provide entities with guidance on complying
with certain legal requirements.
For example, in 2017, the CFPB issued a compliance bulletin
(Bulletin) that ``provides guidance to debt collectors about compliance
with the [FDCPA] when assessing phone pay fees,'' a type of pay-to-pay
fee.\11\ The Bulletin summarizes CFPB staff's conclusion that, under
section 808(1), debt collectors may collect such pay-to-pay fees only
if the underlying contract or state law expressly authorizes those
fees.\12\ In particular, the Bulletin states that in at least one
supervisory exam, CFPB examiners found that a debt collector ``violated
[section 808(1)] when they charged fees for taking mortgage payments
over the phone'' where the underlying contracts creating the debt did
not expressly authorize collecting such fees and where the relevant
State law did not ``expressly permit collecting such fees.'' \13\
---------------------------------------------------------------------------
\11\ CFPB Compliance Bulletin 2017-01, 82 FR 35936, 35936 (Aug.
2, 2017).
\12\ Id. at 35938.
\13\ Id. (explaining that the CFPB examiners had instructed the
company to collect pay-by-phone fees only ``where expressly
authorized by contract or state law''); see also CFPB: Fall 2014
Supervisory Highlights, at 7, available at https://files.consumerfinance.gov/f/201410_cfpb_supervisory-highlights_fall-2014.pdf (similar); CFPB: Fall 2015 Supervisory Highlights, at 20-
21, available at https://files.consumerfinance.gov/f/201510_cfpb_supervisory-highlights.pdf (similar).
---------------------------------------------------------------------------
[[Page 39734]]
B. Coverage
This advisory opinion applies to debt collectors as defined in
section 803(6) of the FDCPA and implemented in Regulation F, 12 CFR
1006.2(i). As used in this advisory opinion, pay-to-pay fees--sometimes
called convenience fees--refers to fees incurred by consumers to make
debt collection payments through a particular channel, such as over the
telephone or online.
C. Legal Analysis
1. Any Amount
Section 808(1) of the FDCPA prohibits debt collectors, in relevant
part, from ``collect[ing] . . . any amount (including any interest,
fee, charge, or expense incidental to the principal obligation).'' \14\
As the Supreme Court has explained, the ``word `any' has an expansive
meaning, that is, `one or some indiscriminately of whatever kind.' ''
\15\ In addition, under its ordinary meaning, the term ``including''
typically indicates a partial list.\16\ The CFPB interprets the words
``any'' and ``including'' as used in section 808(1) consistent with
their ordinary meanings. Accordingly, the CFPB clarifies that FDCPA
section 808(1) and Regulation F, 12 CFR 1006.22(b), apply to any amount
collected by a debt collector in connection with the collection of a
debt,\17\ including, but not limited to, any interest, fee, charge, or
expense that is incidental to the principal obligation.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 1692f(1) (emphasis added). See also 12 CFR
1006.22(b).
\15\ Ali v. Fed. Bur. of Prisons, 552 U.S. 214, 219 (2008)
(quoting United States v. Gonzales, 520 U.S. 1, 5 (1997), in turn
quoting Webster's Third New International Dictionary 97 (1976)).
\16\ Include, Black's Law Dictionary (11th ed. 2019).
Additionally, as the Supreme Court has stated, ``including'' is
``not [a term] of all-embracing definition, but connotes simply an
illustrative application of the general principle.'' Fed. Land Bank
of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 100 (1941); see
also Arizona State Bd. For Charter Schools v. Dep't of Educ., 464
F.3d 1003, 1007 (9th Cir. 2006) (``[T]he word `including' is
ordinarily defined as a term of illustration, signifying that what
follows is an example of the preceding principle.''); United States
v. Hawley, 919 F.3d 252, 256 (4th Cir. 2019) (explaining that
``including'' ``is an introductory term for an incomplete list of
examples'').
\17\ The CFPB notes that, if a debt collector is engaged in a
truly separate transaction and is not collecting or attempting to
collect a debt covered by the FDCPA, section 808(1) does not apply.
---------------------------------------------------------------------------
Consistent with this interpretation, the CFPB further clarifies
that pay-to-pay fees charged to consumers for accepting a consumer's
payment on a debt through a particular payment channel are an
``amount'' within the meaning of FDCPA section 808(1) and Regulation F,
12 CFR 1006.22(b). The CFPB acknowledges that some courts have held
otherwise, finding that pay-to-pay fees do not violate FDCPA section
808(1) because such fees are not ``incidental to the principal
obligation.'' \18\ But, as explained, the CFPB interprets section
808(1) to apply to ``any amount,'' even if such amount is not
``incidental to'' the principal obligation.\19\
---------------------------------------------------------------------------
\18\ See, e.g., Flores v. Collection Consultants of Cal., No. SA
CV 14-0771-DOC, 2015 WL 4254032, at 10 (C.D. Cal. Mar. 20, 2015);
Shula v. Lawent, 359 F.3d 489, 492-93 (7th Cir. 2004). In Shula, it
does not appear that that court was presented with the question
whether ``any amount'' included more than ``fees . . . incidental to
the principal obligation''; nor did that court analyze the issue.
For the reasons stated above, the CFPB disagrees with that decision
to the extent it suggested that section 808(1) applies only to
amounts that are incidental to the principal obligation.
\19\ Section 808(1) of the FDCPA and Regulation F, 12 CFR
1006.22(b), also covers pay-to-pay fees for the separate reason that
such fees are ``incidental to'' the principal obligation. While the
FDCPA does not define ``incidental,'' it is ordinarily understood as
``related to,'' see Collins English Dictionary (12th ed. 2014), or
``[s]ubordinate to something of greater importance,'' see Black's
Law Dictionary (11th ed. 2019). Pay-to-pay fees meet these
definitions: They are ``related to'' the principal obligation
because they are fees charged for paying the principal obligation.
Indeed, if the principal obligation did not exist, then neither
would the pay-to-pay fee. These fees are also generally minor in
comparison to the outstanding debt and are therefore ``subordinate
to'' the principal obligation.
---------------------------------------------------------------------------
2. Permitted by Law
Section 808(1) of the FDCPA prohibits, in relevant part, the
collection of any amount ``unless such amount is expressly authorized
by the agreement creating the debt or permitted by law.'' \20\ The word
``permit'' is susceptible to multiple meanings, but it tends to refer
to ``affirmative authorization,'' and the CFPB reads section 808(1) to
use the word in that sense. Dictionaries provide that ``permit'' can
mean either ``to consent to expressly or formally,'' suggesting
affirmative authorization, or to ``allow'' or ``to acquiesce, by
failure to prevent,'' suggesting that the lack of a prohibition is
sufficient.\21\ However, ``allow and permit have an important
connotative difference. Allow . . . suggests merely the absence of
opposition, or refraining from a proscription. In contrast, permit
suggests affirmative sanction or approval.'' \22\ Use of the word
``permit,'' rather than ``allow,'' therefore suggests that affirmative
authorization, rather than a mere lack of a prohibition, is required.
Furthermore, as the Supreme Court has instructed, ``words of a statute
must be read in their context,'' \23\ and here, ``permit'' is used not
in isolation but as part of the phrase ``permitted by law.'' While in
some contexts one may ``permit'' something by failing to prevent it, it
is far less natural to understand ``permitted by law'' to mean
``permitted by the absence of any law prohibiting it.''
---------------------------------------------------------------------------
\20\ 15 U.S.C. 1692f(1) (emphasis added). See also 12 CFR
1006.22(b).
\21\ Permit, Webster's Third New International Dictionary 1683
(1976); see also Permit, Black's Law Dictionary (5th ed. 1979)
(defining ``permit'' as ``[t]o suffer, allow, consent, let; to give
leave or license; to acquiesce, by failure to prevent, or to
expressly assent or agree to the doing of an act'').
\22\ Garner's Dictionary of Legal Usage 46 (3d ed. 2011); see
also Alexander v. Carrington Mortgage Services, 23 F.4th 370, 377
(4th Cir. 2022) (holding ``permitted by law'' requires affirmative
authorization).
\23\ King v. Burwell, 576 U.S. 473, 492 (2015).
---------------------------------------------------------------------------
The CFPB therefore interprets FDCPA section 808(1) to prohibit a
debt collector from collecting any amount unless such amount either is
expressly authorized by the agreement creating the debt (and is not
prohibited by law) or is expressly permitted by law. That is, the CFPB
interprets FDCPA section 808(1) to permit collection of an amount only
if: (1) the agreement creating the debt expressly permits the charge
and some law does not prohibit it; or (2) some law expressly permits
the charge, even if the agreement creating the debt is silent. The
CFPB's interpretation of the phrase ``permitted by law'' applies to any
``amount'' covered under section 808(1), including pay-to-pay fees.\24\
---------------------------------------------------------------------------
\24\ Note that, even if pay-to-pay fees are expressly authorized
in the underlying agreement or permitted by State law, debt
collectors must still take care to comply with other laws, including
other provisions of the FDCPA and the Consumer Financial Protection
Act's prohibition on unfair, deceptive, or abusive acts or
practices, when assessing pay-to-pay fees.
---------------------------------------------------------------------------
Under the CFPB's interpretation, an amount is impermissible if both
the agreement creating the debt and other law are silent. For example,
under the CFPB's interpretation, amounts, including pay-to-pay fees,
that are neither expressly authorized by the agreement creating the
debt nor expressly authorized by law are impermissible under FDCPA
section 808(1) and Regulation F, 12 CFR 1006.22(b), even if such
amounts are the subject of a separate, valid agreement under State
contract law.\25\ Although some courts have adopted this ``separate
agreement'' interpretation to permit debt collectors to collect, for
example, certain pay-to-pay fees, the CFPB declines to do so. Such a
reading would render the part of section 808(1) that refers to amounts
``expressly authorized by the agreement creating the debt'' superfluous
\26\ because a lawful
[[Page 39735]]
agreement creating the debt is, by definition, an agreement valid under
State contract law.\27\ In addition, the separate agreement
interpretation ignores section 808(1)'s focus on the ``amount'' being
``expressly authorized by the agreement creating the debt'' or
``permitted by law.'' \28\ Under section 808(1), it is not enough for
the agreement to be ``permitted by law''; rather, the ``amount'' itself
must be. Contract law standing alone does not provide for the
collection of any specific amounts--and no principle of contract law
says debt collectors may collect pay-to-pay fees.\29\ Thus, while it
may have been permissible under contract law for a debt collector to
enter into separate agreements with consumers, contract law does not
permit the ``amount'' at issue, i.e., the pay-to-pay fees.
---------------------------------------------------------------------------
\25\ The CFPB acknowledges that some district courts have held
otherwise. See, e.g., Thomas-Lawson v. Carrington Mortg. Servs.,
LLC, No. 2:20-cv-07301-ODW, 2021 WL 1253578 (C.D. Cal. Apr. 5,
2021), appeal pending, No. 21-55459 (9th Cir.).
\26\ See Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029,
1037 (2019) (refusing to interpret the FDCPA in a way that would
render a provision ``superfluous'').
\27\ Accord Alexander, 23 F.4th at 379 (rejecting the separate
agreement interpretation in part because it would render section
808(1)'s other prong superfluous). The separate agreement
interpretation also would conflict with the FDCPA's use of the
phrase ``expressly authorized,'' since general principles of State
contract law allow parties to agree to express or implied terms as
part of any agreement. See Restatement (Second) of Contracts Sec. 4
cmt. a (1981). If general principles of contract law counted as a
``law'' that ``permitted'' the collection of amounts, debt
collectors would be free to collect not only those amounts
authorized by separate agreements, but also to collect amounts that
are only implicitly authorized by the agreement creating the debt--
further rendering section 808(1)'s ``express'' requirement
meaningless.
\28\ See Johnson v. Riddle, 305 F.3d 1107, 1118 (10th Cir. 2002)
(``The statute does not ask whether [the debt collector's] actions
were permitted by law . . . , it asks whether the amount he sought
to collect was permitted by law.'' (emphasis in original)).
\29\ While a contract might, consistent with contract law,
permit an amount, section 808(1) only permits collecting amounts
authorized by contract when the amount is expressly authorized by
the contract ``creating the debt.''
---------------------------------------------------------------------------
The CFPB's interpretation of ``permitted by law'' in FDCPA section
808(1) is consistent with the previous interpretation in a CFPB
compliance bulletin as discussed in part I.A., as well as with the
prior interpretation of FTC staff and the holdings of the majority of
courts to address the issue.\30\ In particular, in 1988, FTC staff
issued Commentary that set forth ``staff interpretations'' of the
FDCPA.\31\ As relevant here, FTC staff stated that, under section
808(1), a ``debt collector may attempt to collect a fee or charge in
addition to the debt if . . . the contract [creating the debt] is
silent but the charge is otherwise expressly permitted by state law.''
\32\ Conversely, FTC staff stated that ``a debt collector may not
collect an additional amount if . . . the contract does not provide for
collection of the amount and state law is silent.'' \33\
---------------------------------------------------------------------------
\30\ See, e.g., Alexander, 23 F.4th at 376-77 (holding, in a
case regarding pay-to-pay fees, that `` 'permitted by law' requires
affirmative sanction or approval''); Seeger v. AFNI, Inc., 548 F.3d
1107, 1111, 1112 (7th Cir. 2008) (finding that, to be entitled to
collect a fee, debt collectors ``must show that the fee is either
authorized by the governing contract or that it is permitted by
Wisconsin law'' and that, in that case, that neither an agreement
nor a law expressly permitting a collection fee existed); Tuttle v.
Equifax Check, 190 F.3d 9, 13 (2d Cir. 1999) (explaining that if
``state law neither affirmatively permits nor expressly prohibits
service charges, a service charge can be imposed only if the
customer expressly agrees to it in the [underlying] contract'').
\31\ See Staff Commentary on the Fair Debt Collection Practices
Act, 53 FR 50097, 50101 (Dec. 13, 1988).
\32\ Id. at 50108.
\33\ Id.
---------------------------------------------------------------------------
The CFPB's interpretation is also consistent with the FDCPA's
statutory purposes. As noted in part I.A, Congress passed the FDCPA
because it found that existing laws and procedures, including at the
state level, were inadequate to protect consumers. Given this concern,
it would be particularly unnatural to understand ``permitted by law''
to mean ``permitted because no law prohibits it.'' Accordingly, the
CFPB interprets FDCPA section 808(1) and Regulation F, 12 CFR
1006.22(b), to prohibit debt collectors from collecting any amount,
including any pay-to-pay fee, not expressly authorized in the agreement
creating the debt unless there is some law that affirmatively
authorizes the collection of that amount.
3. Payment Processors
Debt collectors may violate FDCPA section 808(1) and Regulation F,
12 CFR 1006.22(b), when using payment processors who charge consumers
pay-to-pay fees. For instance, a debt collector collects an amount
under section 808(1) at a minimum when a third-party payment processor
collects a pay-to-pay fee from a consumer and remits to the debt
collector any amount in connection with that fee, whether in
installments or in a lump sum.\34\
---------------------------------------------------------------------------
\34\ See, e.g., Ballentine's Law Dictionary (3d ed. 2010)
(defining ``collect'' as ``to receive payment''); cf. 15 U.S.C.
1692a(6) (defining debt collector to include persons who ``directly
or indirectly'' collect debts).
---------------------------------------------------------------------------
II. Regulatory Matters
This is an advisory opinion issued under the CFPB's authority to
interpret the FDCPA, including under section 1022(b)(1) of the Consumer
Financial Protection Act, which authorizes guidance as may be necessary
or appropriate to enable the CFPB to administer and carry out the
purposes and objectives of Federal consumer financial laws, such as the
FDCPA.\35\
---------------------------------------------------------------------------
\35\ 12 U.S.C. 5512(b)(1); 5481(14); 5481(12)(H).
---------------------------------------------------------------------------
An advisory opinion is a type of interpretive rule. As an
interpretive rule, this advisory opinion is exempt from the notice-and-
comment rulemaking requirements of the Administrative Procedure
Act.\36\ Because no notice of proposed rulemaking is required, the
Regulatory Flexibility Act does not require an initial or final
regulatory flexibility analysis.\37\ The CFPB has also determined that
this advisory opinion does not impose any new or revise any existing
recordkeeping, reporting, or disclosure requirements on covered
entities or members of the public that would be collections of
information requiring approval by the Office of Management and Budget
under the Paperwork Reduction Act.\38\
---------------------------------------------------------------------------
\36\ 5 U.S.C. 553(b).
\37\ 5 U.S.C. 603(a), 604(a).
\38\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------
Pursuant to the Congressional Review Act,\39\ the CFPB will submit
a report containing this advisory opinion and other required
information to the United States Senate, the United States House of
Representatives, and the Comptroller General of the United States prior
to the opinion's published effective date. The Office of Information
and Regulatory Affairs has designated this advisory opinion as not a
``major rule'' as defined by 5 U.S.C. 804(2).
---------------------------------------------------------------------------
\39\ 5 U.S.C. 801 et seq.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-14230 Filed 7-1-22; 8:45 am]
BILLING CODE 4810-AM-P