Payments Company Settles with DFPI Over Alleged Junk Fees

​On January 9, 2024, the California Department of Financial Protection and Innovation (DFPI) announced that it entered into a consent order with an internet-based financial services company that allows online merchants to offer payment in installments to its customers.  The DFPI alleged that the company violated the California Consumer Financial Protection Law (CCFPL) by failing to disclose certain convenience fees a consumer might incur. The DFPI further alleged that although the company offered a free option for consumers to make their monthly payments and disclosed this option in its contract, the company also offered payment methods, such as paying over the phone or paying electronically, which would incur service fees and were not disclosed in its contract.  The DFPI categorized these “hidden fees” as junk fees that the company was obligated to disclose up front by CCFPL.

​The company had already revised its online form contract in 2022 to disclose that its online payment servi​​cer could offer additional payment options that would incur a convenience fee, as well as the amounts of those optional convenience fees. Under the terms of the consent order, the company also agreed to pay a $50,000 penalty.