Security & Fraud

CFPB Rails Against Costly Pay-By-Phone Fees

The Consumer Financial Protection Bureau warned companies  Monday (July 31) about  tricking consumers into expensive pay-by-phone fees.

In a press release the government watchdog said it is concerned about the potential for companies to mislead consumers about the purpose and amount of certain pay-by-phone fees or keeping them in the dark about much cheaper payment options. “The Bureau is warning companies about tricking consumers into more expensive fees when they pay bills by phone,” said CFPB Director Richard Cordray in a press release. “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 payment options.”

 According to the CFPB, though 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 customer service 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, the CFPB said.  The government agency noted a recent bureau enforcement action in which it alleged  a company and its service provider misled consumers into paying a $14.95 pay-by-phone fee by deceptively calling it a “processing” charge. According to the CFPB, the fee was actually for posting payment to the account the same day.  

In another example, the CFPB said some companies do not disclose their fees in writing up front to consumers. Instead, they may depend solely on phone representatives to disclose the relevant fees to consumers before the charge is imposed. These representatives may then fail to inform consumers about significant price differences between available pay-by-phone options. 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.

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