On June 12, 2014, the North Carolina Department of Insurance Agent Services Division issued a memorandum, clarifying that it considers the collection of convenience fees by collection agencies to be prohibited under North Carolina law.
The relevant statute, N.C. Gen. Stat. § 58-70-115(2), states that it is an unfair practice for a collection agency to “collect or attempt to collect from the consumer all or any part of the collection agency’s fee or charge for services rendered, collect or attempt to collect any interest or other charge, fee or expense incidental to the principal debt unless legally entitled to such fee or charge.” According to the Department of Insurance, this includes charges imposed for making payments by telephone or credit card.
The Department specifically stated that the phrase “unless legally entitled to such fee or charge” did not allow a collection agency to recover its fees in those cases in which the debtor had contractually agreed to recovery of such fees, and that the only fees that are specifically authorized to be collected are reasonable attorneys’ fees pursuant to a provision in a note or other indebtedness. N.C. Gen. Stat. § 6-21.2.
The Department further noted that it did not matter if the fee was disclosed to the consumer, agreed to by the consumer, and imposed for an optional payment method, if other payments options are available that do not require a fee, and the fees do not exceed the actual cost of providing the service. Rather, the Department has taken the blanket position that “N.C.G.S. § 58-70-115(2) does not allow collection agencies to charge consumers such fees under any circumstances.”
While the North Carolina Collectors Association has indicated that it will look for ways to challenge this interpretation or change the law, there is no immediate change in sight, and collection agencies should stop charging these fees from North Carolina consumers immediately. The Department has warned that it may take administrative action against collection agencies that violate N.C.G.S. § 58-70-115(2).