Billers Beware: CFPB Warns Companies against ‘Tricking’ Consumers into Expensive Pay-by-Phone Fees

The CFPB issued a bulletin today (July 31) warning companies about tricking consumers into expensive pay-by-phone fees. The bureau says it’s concerned about companies potentially misleading consumers about the purpose and amount of certain pay-by-phone fees or “keeping them in the dark” about much cheaper payment options.

The bulletin also reviews guidelines to help consumer financial companies comply with current law.

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 live customer 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. In its supervision and enforcement activities, the bureau identified harmful practices regarding pay-by-phone fees such as:

  • Misleading consumers about pay-by-phone fees: The bureau is concerned about companies misrepresenting the purpose and amount of pay-by-phone fees. For example, a recent CFPB enforcement action alleged that a company and its service provider misled consumers into paying a $14.95 pay-by-phone fee by deceptively calling it a “processing” charge. The fee was actually for posting payment to the account the same day. Consumers paying by phone ended up being charged for expedited payment even though most of them did not need to post payment on the same day, according to the agency.
  • Not disclosing cheaper payment options: Some companies don’t disclose their fees in writing up front to consumers, the CFPB says. Instead, they may depend solely on phone representatives to disclose the relevant fees to consumers before the charge is imposed. If representatives fail to inform consumers about significant price differences between available pay-by-phone options, consumers may be harmed.

The CFPB doesn’t mandate any particular way to disclose pay-by-phone options and fees, but the bureau says it expects companies to review their practices for potential risks of violating consumer financial laws and to address any issues.

The CFPB recommends that financial institutions take steps to ensure that they are following federal and state laws related to pay-by-phone fees. Companies should also review consumer complaints about fees, the bureau suggested.

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paysafecard Enters UAE to Enable Online Payments with Cash

Prepaid pioneer paysafecard, part of Paysafe Group plc, announced its entrance into the United Arab Emirates, with its flagship prepaid payment solution, which enables consumers to pay cash in retail stores for a prepaid PIN they can use to shop online.

The UAE continues to embrace technology innovation in line with its government’s Smart Dubai initiative to transform Dubai into the world’s smartest city. With Samsung, Apple and many other international technology companies taking advantage of the governments initiative and support, digital payment systems have become a key area of focus, which made moving into the UAE a logical step for paysafecard, according to the Austria-based company.

High Internet usage (more than 93 percent) and low credit card penetration also make the UAE an attractive market for paysafecard. 

“By offering an established prepaid payment method, such as Paysafe’s paysafecard, a bridge is created between e-commerce and the brick-and-mortar shops,” said Udo Müller, CEO, paysafecard. “By selling paysafecard, shops can not only generate new customers, increase customer satisfaction and customer loyalty, but they can also earn money in what is a classic e-commerce process. In addition, customer traffic increases because paysafecard users are regular customers for the most part.” 

paysafecard, which already is available in Saudi Arabia and Kuwait, is working with sales partner uPay to offer the payment method at 300 vending machines in the UAE.

paysafecard is a prepaid online payment method available in 44 countries and at more than 500,000 sales outlets. In 2016, paysafecard reached 2.8 billion in prepaid transaction volume. 

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Mexico-Based MIT Taps Featurespace for Payments Fraud Prevention

Shutterstock/Dirk Ercken

Machine learning continues to take center stage in fraud prevention for the payments industry. Mexico-based payments processor Mercadotecnia Ideas y Tecnologia (MIT–Marketing, Ideas and Technology) is partnering with U.K.-based Featurespace to help its 17,000 merchants prevent payments fraud.

Featurespace, which is entering the Latin American market for the first time, will provide MIT with real-time merchant monitoring and protection to prevent fraud and reduce chargebacks and false alerts, the companies said.

MIT optimizes and secures payment channels for merchants by facilitating the handling of card transactions across all sales channels. Featurespace’s real-time, machine-learning ARIC platform detects anomalies in individual behavior for fraud and risk management.

“The growth in fraud, as well as the sophisticated forms that attacks take, forces payments ecosystem participants to seek innovative and disruptive solutions to reduce fraud and make manual processes more efficient, without sacrificing customer experience,” said MIT CEO Juan Carlos Viramontes.

The ARIC platform will enable MIT to monitor risk across its merchant portfolio for increased fraud detection, reduced false positives and increased transaction acceptance, according to an announcement.

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Kakao Bank Attracts 820,000+ Clients in Four Days Since Launch

Kakao Bank, one of South Korea’s first digital-only banks, says it has attracted KRW 535 billion ($477 million) worth of business in deposits and loans in just four days since its launch, reports Paybefore sister publication Banking Technology.

It has also attracted more than 820,000 customers, and its mobile app has been downloaded nearly 1.5 million times.

Kakao Bank has lent KRW 260 billion ($232 million) to date and accepted the deposits of KRW 275 billion ($245 million).

The bank says its performance has far surpassed that of its rival K Bank, another digital-only bank launched around the same time as Kakao Bank.

The two announced their plans to open virtual doors last year.

Kakao Bank is backed by a domestic Internet company, Kakao Corp. (the provider of the country’s most widely used digital messenger platform Kakao Talk). Tencent and Ebay have also invested in the startup bank.

K Bank, meanwhile, is supported by South Korea’s telecom company, KT Corp.

Both banks enable account opening via the app—without visiting a bank branch—using a mobile phone number and an ID.

July 31 is the last day to vote for the 5 Best Challenger Banks. Kakao is not on our short list, but write-ins are welcome.

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IMA Honors Brian Dunne with Karen Renk Fellowship Award

The Incentive Marketing Association (IMA) honored Brian Dunne, CPIM, managing director, Giftcard Consulting, with the Karen Renk Fellowship Award. The prestigious award was established in 2014 to honor Renk, who served as the IMA executive director for its first 14 years. The award was presented at the annual IMA Summit last week.

Renk guided the IMA, championed the business case for incentives and mentored a wide group of individuals for the betterment of the industry and the association. She was known for a number of qualities including mentoring, character, collaboration and professionalism. The Karen Renk Fellowship is awarded to the IMA member who best exemplifies these qualities in service to the association, either through his or her work within the organization or through outreach to the community at large.

Dunne was recognized for championing the IMA and the incentive industry. He is a frequent speaker on gift cards, loyalty, incentives and motivation. In 2016, he was recognized as a Retail & Loyalty Pioneer in Pay Magazine. Dunne was a leader in establishing and growing the IMA Europe chapter, where he served as president of IMA Europe for eight years. In 2016 he was instrumental in spearheading the transition from a Strategic Industry Group to a Chapter of the IMA which has served as the catalyst for the IMA Europe’s recent growth and success. Dunne also served on the IMA board.