CONVENIENCE FEE COLLECTION STATE OUTLINE Understanding state specific guidelines regarding the collection of a convenience fee

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2 PaymentVision White Paper CONVENIENCE FEE COLLECTION STATE OUTLINE Understanding state specific guidelines regarding the collection of a convenience fee Table of Contents 1: Overview 1: Arizona 1: Arkansas 1: Colorado 2: Connecticut 2: Delaware 2: D.C. 2: Georgia 2: Idaho 2: Illinois 2: Kansas 2: Louisiana 2: Maine 2: Massachusetts 2: Minnesota 3: Missouri 3: Nebraska 3: Nevada 3: New Hampshire 3: New York 3: North Carolina 3: North Dakota 3: Oklahoma 3: Oregon 3: Pennsylvania 3: Puerto Rico 3: Rhode Island 3: South Carolina 3: Tennessee 4: Utah 4: Vermont 4: Washington 4: Wisconsin 4: Wyoming When evaluating processes as it involves collections it is very important to remember that in recent years, the FTC has focused on bringing a greater number of cases and obtaining stronger monetary and injunctive remedies against debt collectors that violate the law. Compliance is important! Before a company begins a state- by- state evaluation, it must first start by reviewing the federal regulation that applies. Under federal debt collection laws known as the Fair Debt Collection Practices Act (FDCPA for short), a debt collection agency cannot collect or try to collect a fee unless the fee is expressly authorized by the agreement creating the debt or permitted by state law. In other words, the FDCPA allows the collection of an additional amount if state law expressly permits it, even if the contract is silent on the matter; however, if state law neither affirmatively permits nor expressly prohibits collection of an additional amount, the amount can only be collected if the consumer expressly agrees to it in the contract. Prior, the interpretation was generally argued that the definition of collection fees did not include convenience fees this interpretation is being held as incorrect time after time. Therefore it is important as the collector to review the initial debt documents to ensure that a convenience fee is mentioned and agreed to in the documents. If it is and the state does not prohibit it, you can charge. If such charge is by way of credit card, you must also ensure it follows the applicable card rules. Examples of states that have explicitly spoken to the ability for collection agencies to charge convenience fees include: Arizona- A collection fee is allowed if established in the contract 1. The amount must be justly due from and legally chargeable against the debtor. 2 Arkansas- Collection fee that an agency can charge a creditor is limited to : (a) no more than 50% of the total amount actually collected on all account for one client; (b) no more than 50% of the total amount actually collected on any one account and/or (c) a minimum charge of more than $1. 3 Colorado- A creditor s contract or agreement with the consumer for a payment convenience fee must be specific and clear enough to notify the consumer of the fee. 4 1 Ariz.Admin Code R Ariz. Rev. Stat. Ann (4) 3 Ark. Code Ann (a) 4 CO. A.G. Dec. 26, 2006 PaymentVision White Paper 1

3 Connecticut- As a consumer collection agency licensee, it is your responsibility to ensure you do not receive prohibited fees prohibited by Section 23a- 805 (a)(12). 5 Delaware- Collection fee must be covered in the agreement. Collection costs (including charge by a collection agency) may be recovered to the extent they are actually incurred. 6 D.C.- A collection agency may not attempt to collect its service fees from the consumer. It also may not claim the consumer owes additional money for attorney s fees, services, or investigation costs that are not authorized by law. 7 Georgia- Collection fee must be included in the contract. 8 Idaho- The Idaho Department of Finance interprets the term principal obligation, as used in Section A of the Idaho Collection Agency Act, to never include any interest or other charges, fees, or expenses, however labeled, and therefore, such charges always are incidental to the principal obligation. Thus, to comply with the Act, it is the Department s position that no collection agency, including debt buyers, operating in Idaho, may lawfully collect, or attempt to collect, any interest or other charges, fees, or expenses, no matter how labeled, against an Idaho debtor that are incidental to the debtor s principal obligation, without first qualifying to do so by application of one or more of the exceptions set forth in Section A(4). 9 Illinois- Collection fee must be included in the contract. 10 Kanas- Collection fees can be charged if authorized by the agreement and does not exceed 15% of the debt. This fee cannot include costs incurred by a salaried employee of the creditor. 11 Louisiana- An extender of credit may not contract with a consumer for the reimbursement of fees paid to a collection agency employed to collect the consumer's indebtedness. 12 Maine- Collection fee must be included in the contract. 13 Massachusetts- 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. 14 Minnesota- No collection agency or collector shall attempt to collect any amount of money from a debtor or charge a fee to a creditor that is not authorized by agreement with the client CT Dept. of Banking January 14, Del. Code Regs section D.C. Code Ann Ga. Comp. R & Regs. R (h) 9 ID Dept of Finance July 29, Ill. Comp. Stat. 425/9(a)(29) 11 Kan. Stat. Ann 16a La. Rev. Stat. Ann. 9: Me. Rev. Stat. Ann tit (2)(B)(2) CMR Minn. Stat (19) PaymentVision White Paper 2

4 Missouri Collection fees expressly prohibited for credit of $1,000, or less intended to be used for personal, family or household purposes. (Law is silent as to debts over $1,000 and commercial debts of any value.) 16 Nebraska- Collection fee must be authorized by loan agreement. 17 Nevada- Collection fee must be included in the agreement. 18 New Hampshire- Collection fee must be included in the contract. 19 New York- In Quinteros v. MBI Associates 20, 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. North Carolina- A convenience fee or other charge imposed on the consumer for making payments to a collection agency by phone, check, credit card, or any other method is essentially a fee for the collection agency s services and is thus prohibited by the first clause of N.C.G.S (2). 21 North Dakota- Collection fees expressly prohibited. 22 Oklahoma- Collection fees expressly prohibited for consumer loans. 23 Oregon- Collection fees must be included in the contract. 24 Pennsylvania- Collection fees must be included in the contract. Puerto Rico- Expressly prohibited. 10 P.R. Laws. Ann. 981p(12). 25 Rhode Island- Collection fees must be include in the contract. 26 South Carolina- Expressly prohibited. 27 Tennessee- Prohibited Mo. Ann. Stat Neb. Rev. Stat. Ann (2)(k) 18 Nev. Rev. Stat (2) 19 N.H. Rev. Ann C:3 (VIII)(X) 20 Quinteros v. MBI Associates, Inc., 2014 WL (E.D.N.Y. Feb. 28, 2014) 21 NC Dept of Insurance June 12, N. D. Admin. Code (3), (4) 23 Okla. Stat.tit. 14A Or. Rev. State (2)(n) Pa. Cons. Ann (b.1) 26 R. I. Gen.Laws (i) 27 S. C. Code Ann Tenn. Code Ann (b)(2) PaymentVision White Paper 3

5 Utah- Creditor can require debtor to pay collection fee if collection agency hired by creditor is registered I Utah and collection fee is include in the agreement between creditor and debtor. The fee cannot exceed whatever amount is less: (a) the actual amount the creditor is required to pay a third party debt collector; or (b) 40% of the principal amount owed to the creditor. 29 Vermont- Collection fee must be included in the agreement. 30 Washington- A licensee may collect or attempt to collect collection costs and fees, including contingent collection fees, as authorized by a written agreement or contract, between the licensee's client and the debtor, in the collection of a commercial claim. The amount charged to the debtor for collection services shall not exceed thirty- five percent of the commercial claim. 31 Wisconsin- (2) Fees. (a) Except as set forth in pars. (b) to (e) and s. DFI- Bkg 74.11(8), a licensee may not charge the debtor any fee, handling charge, mileage costs or other out- of- pocket expenses incurred in the collection of any account. In no case may a licensee divide a debtor s payment to increase the fees. The fees permitted under par. (d) may only be assessed if the fee is disclosed to the debtor prior to the transaction being processed and the debtor is not required to make payment via the method described therein. (b) Actual charges assessed by a financial institution on a check returned to a licensee for any reason may be added to the account of the debtor provided the charge is not the result of a licensee prematurely depositing a post- dated check. (c) Actual charges assessed by a financial institution on an Automated Clearing House transaction reversed for any reason may be added to the account of the debtor provided the charge is not the result of a licensee debiting the debtor s account prematurely, for an incorrect amount, or without proper authorization. (d) A fee not to exceed the lesser of $25 or 3% of the payment amount, not including the fee, may be added to the account of a debtor when the debtor makes a payment using a credit card. 32 Wyoming- The Wyoming Attorney General issued a letter, referring back to AG Opinion , finding that convenience fees are not application fees, finance charges, specified additional charges, delinquency charges, deferral charges or limited collection charges. It state that it does not appear that a collection agency operating in Wyoming is authorized to charge a convenience fee to a Wyoming debtor if the debt arose from a consumer credit transaction. 33 REMEMBER THIS DOCUMENT IS CREATED IN REFERENCE TO CONVENIENCE FEES, NOT SURCHARGES. If you have any questions in regards to the differences between the two, please refer to the March, 2015 webinar or contact Autoscribe s compliance officer. Although the two types are very different one must proceed with caution in any state where surcharges are prohibited to ensure the convenience fee is not labeled as a surcharge especially if the only 29 Utah Code Ann Vt. Code R Rule CF (b)(c) 31 Wash. Rev. Code (21) 32 Wis. Admin. Code DFI- Bkg 74.11(2 33 WY AG March 15, 2010 PaymentVision White Paper 4

6 method where you accept credit cards happens to be the alternative method that you are charging a convenience fee for. Disclaimer This document is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. For More Information PaymentVision Solutions: PaymentVision San Jose Blvd Suite 624 Jacksonville, FL USA PaymentVision, the PaymentVision logo, Autoscribe, and the Autoscribe Logo are either registered trademarks or trademarks of Autoscribe Corporation Incorporated in the United States. All other trademarks, service marks, and trade names referenced in this material are the property of their respective owners PaymentVision, a division of Autoscribe Corporation. All rights reserved. Printed in the USA. PaymentVision White Paper 5