Client Alert: Eleventh Circuit Affirms SpeedPay Fee Ruling

Key Takeaway

The Eleventh Circuit Court of Appeals recently upheld a ruling that stated charging optional fees for expedited payments in the collection of a debt made online or by phone violated the Fair Debt Collection Practices Act (FDCPA). Loan servicers and debt collectors should review their fee practices to ensure compliance with evolving legal standards, especially when collecting payments on mortgages.

Background

Debt collectors often partner with SpeedPay, Inc. or similar third-party providers to offer borrowers the option of making expedited payments via phone or online, rather than by mail, charging a convenience fee (usually around $10.00). The third-party provider retains a small portion of the fee, and the servicer keeps the rest as fee income.

In a recent case, plaintiffs paid these types of fees more than thirty times. However, neither their loan agreements nor promissory notes disclosed fees for making payments through these expedited channels.

Court Ruling

In this recent case, the court ruled that the loan servicer/debt collector could not assess these fees unless the fees were explicitly disclosed in the original financing agreement. Key points from the ruling include:

• Debt collector definition: The servicer qualified as a “debt collector” under the FDCPA because it acquired servicing rights to the plaintiffs’ loans after they were in default.
• Unauthorized fees: The SpeedPay fees were not “expressly authorized by the agreement creating the debt or permitted by law,” rendering their collection a violation of 15 USC Section 1692f(1).
• Optional nature of fees: While it was argued that the fees were optional and only applied to expedited payment methods, the court found that borrowers often had no practical alternative to make the expedited payments, effectively making the fees unavoidable.

Why This Matters

This ruling reinforces the legal risks of charging convenience or expedited payment fees not explicitly authorized in the original loan agreement. Even optional fees can be unlawful if not contractually permitted. The decision suggests that merely disclosing free payment options may no longer suffice if circumstances—such as past-due payments—effectively force borrowers into using expedited methods.

Next Steps

Loan servicers and debt collectors are advised to:

• Review loan agreements/contracts: Examine existing loan agreements and disclosures to determine whether SpeedPay or similar fees are explicitly authorized.
• Review portfolio acquisitions carefully: The FDCPA and recent rulings emphasize that if loans are in default at the time of acquisition, the stricter debt collection provisions of the FDCPA apply.
• Ensure regulatory compliance: Assess whether their fee practices align with applicable legal and regulatory requirements.
• Adjust fee structures: Consider proactive revisions to disclosures and fee structures to minimize potential legal exposure and litigation risks.

For further guidance on compliance and risk mitigation strategies, please reach out to our team.