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Is Your Small Business Charging Customers Illegal Fees?


The federal government instituted the Consumer Financial Protection Bureau (CFPB) in 2010, when most working adults were reeling from the 2008 financial crisis.  The goal was to protect consumers from abusive and unfair business practices, predatory loans, and excessive fees.  Debt is still a widespread problem in American society; more than half of U.S. adults would not be able to afford an unexpected expense of several hundred dollars without charging it on a credit card for example.  The blame for this situation does not lie with small businesses, but all businesses have a responsibility to treat consumers fairly.  Last month, the CFPB issued an advisory opinion in which it declared that some common practices associated with payment for services could be illegal.  To make sure that the payment collection policies of your small business are in compliance with the law, contact a Washington DC small business lawyer.

Surprising Customers With “Pay to Pay” Fees Is Against the Law

One of the first things that you learn when operating a small business is that you have to be creative to set policies that keep customers wanting to come back while making your business profitable.  A lot of thought must go into deciding how much to charge for each of your products or services, but setting your company’s payment policies also requires planning.  Credit card readers cost money, but it would be inconvenient for customers to pay for everything in cash or my automatic debits from their bank accounts.  Likewise, it is simpler for businesses that offer subscription services and installment payment plans when customers pay with autopay, but many consumers are on such a tight budget that the last thing they want is another predictably recurring expense.

Therefore, some businesses charge customers an additional fee to process a one-time credit card payment.  The fee is usually just a dollar or two, but according to the CFPB’s most recent advisory opinion, it might be a violation of federal law to charge these fees.  Specifically, these “pay to pay” fees are illegal if they are not mentioned in the service agreement or loan agreement.  Therefore, you might need to eliminate these fees for your existing customers, you might need to stop.  Since attaching additional fees to the company’s non-preferred payment method is legal as long as the customer knows about it when they sign up to do business with you, you may be able to charge them to future customers if you rewrite your terms of service agreements now.  Meanwhile, autopay could become an attractive prospect for many customers, now that new regulations have made it more difficult for banks to charge overdraft fees.  In any case, the best way to avoid payment disputes with customers is to review your payment collection policies with a small business lawyer.

Contact Tobin O’Connor Concino P.C. About Complying With Ever-Changing Regulations

A small business lawyer can help you keep up with current regulations when your company is not big enough to have its own compliance department.  Contact Tobin O’Connor Concino P.C. for help.



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