FDCPA Case Ruling on Convenience Fees Having Impact on Collectors

The U.S. District Court for the Eastern District of New York earlier this year denied a debt collector’s motion to dismiss an FDCPA case, holding that its $5 surcharge for payments via credit card may have violated the law.  The case has apparently been used recently against many other debt collectors.

In Quinteros v. MBI Associates, Inc., 2014 WL 793138 (E.D.N.Y. Feb. 28, 2014), the debtor received a debt collection notice from the debt collection agency, which stated that the debtor would pay a $5 processing fee for optional credit card or check by phone payments.

The letter stated, in pertinent part:

Should you require more time to make payment or wish to make payment arrangements, please call this office upon receipt of this letter. Our office accepts Visa, MasterCard and American Express which you may pay over the phone or online at www.paymbi.com. There will be a $5.00 processing fee for all credit cards or checks over the phone.

The debtor then sued for a violation of the FDCPA contending that the $5 charge was not expressly authorized in the underlying debt contract.

Defendant moved to dismiss Plaintiff’s complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted.

In February, the District Court judge denied the defendant’s motion to dismiss, holding that (i) the collection of any amount not expressly authorized in the underlying debt contract is a violation of the FDCPA, regardless of whether the debt collector is engaged in an abusive practice; and (ii) the notice sent to the debtor that referenced the $5 processing fee violated the FDCPA’s prohibition on misleading documents because it implied that the defendant could legally receive this payment.

Although this ruling is older than most we cover, it has become more relevant in recent months. An insideARM.com reader tipped us off that this particular ruling was being used in other recent case filings. After making a few calls, we learned that this was indeed the case.

It also aligns with a recent recommendation from the North Carolina Collectors Association that urged collection agencies in that state to stop charging payment convenience fees while the association works with state regulators on a “new interpretation or change the law.”