34 SEPTEMBER / OCTOBER 2021 Expedited Payment Services Permissible under Indiana law? COMPLIANCE CONNECTION Brett J. Ashton Partner Krieg DeVault LLP bashton@kdlegal.com Krieg DeVault LLP is a Diamond Associate Member of the Indiana Bankers Association. Question: Our chief lending officer would like to enter into an agreement with a service provider that will provide an “expedited payment” service allowing consumer loan customers to make loan payments over the phone for a $5 fee. The reasoning is that this service will not only add fee revenue, but would also help streamline collections efforts on delinquent accounts. Does Indiana law allow us to collect a fee to process payments? Answer: Generally yes, with appropriate disclosure to the customer. Indiana law provides that a lender may contract for and receive a charge not to exceed $10 for an optional expedited payment service, subject to the following: 1. The charge may be assessed only upon request by the consumer to use the expedited payment service. 2. The amount of the charge must be disclosed to the consumer at the time of the consumer’s request to use the expedited payment service. 3. The consumer must be informed that the consumer retains the option to make a payment by traditional means. 4. The charge may not be established in advance, through any agreement with the consumer, as the expected method of payment. 5. The charge may not be assessed with respect to any payment for which a delinquency charge has been assessed.1 While your loan agreement doesn’t have to contain language authorizing this service per se, before implementation you should review your existing loan agreements to ensure they don’t contain language contradictory to the required disclosures. Next, you should develop a customer service script for employees to folThis information is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation. 1 Ind. Code § 24-4.5-3-202(j). 2 Lindblom v. Santander Consumer USA Inc., No. 1:15-cv-0990-BAM, 2018 WL 500347 (E.D. Cal., Jan. 22, 2018); Majors v. Professional Credit Management, Inc., No. 4:17–cv–00270–AGF, 2018 WL 1251914 (E.D. Miss., March 12, 2018); Roe v. Totleca Enterprises, Inc., No. 6:17cv42, 2018 WL 1900532 (E.D. Texas, April 20, 2018) low when offering the service to customers, and ensure the expedited payment disclosures detail not only the fee for the service, but also the fact that customers have the option to make payment via other avenues without incurring a fee. Often service providers will have their own disclosure forms you can use as a starting point when developing the required compliance process around this product. While Indiana law is clear that an expedited payment fee is generally permissible, assessing a late charge at the same time is prohibited. Most banks will hard-code their systems to prevent both fees being assessed in one month. Finally, while an expedited payment service is generally permissible under Indiana law, the service and its fees have been the focus of scrutiny from both the Consumer Financial Protection Bureau and class action plaintiff’s lawyers2 in the past. In Compliance Bulletin 2017-1, the CFPB noted that charging customers “phone-pay” fees may be considered an unfair, deceptive, abusive or unfair practice under the Dodd Frank Act if the lender failed to: • Disclose the prices of all available phone-pay options if more than one exists; • Adequately disclose that a fee would be charged for taking a payment by phone; or • Adequately disclose that a fee for the service existed at all. HB
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