TopClassActions posed the question of the legality of charging consumers a fee for online or phone-based mortgage payment submissions. Although convenience processing fees are common, under most mortgage agreements such fees are unlawful unless they are explicitly stated in their loan agreements.
These online and phone payment fees are also known as:
Top Class Actions reported that "If a mortgage is insured by the Federal Housing Administration (FHA) there are specific regulations that prohibit companies from charging excessive fees. Even if a fee is expressly allowed by the FHA, servicers are only allowed to pass on the out of pocket costs associated with a service. This stops mortgage service companies from hitting FHA loan consumers with excessive fees."
One type of excessive fee that the Consumer Financial Protection Bureau (CFPB) has warned consumers about is the pay-by-phone fee. Companies accept payments through various methods, including payments over the phone. While a small cost can be associated with this process, some businesses have used it as a means to take advantage of people by not disclosing its amount. Some of the borrowers have admitted paying up to $15 per transaction.
"Some companies do not disclose their fees in writing upfront to consumers. Instead, they may depend solely on phone representatives to disclose the relevant fees to consumers before the charge is imposed. These representatives may then fail to inform consumers about significant price differences between available pay-by-phone options."
The CFPB also noted that companies purposely fail to mention payment alternatives. "This may substantially harm consumers who wind up using much more expensive options because they are not informed that significantly cheaper options are available."
“The Bureau is warning companies about tricking consumers into more expensive fees when they pay bills by phone,” then CFPB Director Richard Cordray said at the time of the bulletin. “We are concerned that companies are misleading consumers about pay-by-phone fees or keeping them in the dark about much cheaper or no-cost payment options.”
If you were charged convenience processing fees to compensate your mortgage online, you may be entitled to join an online payment mortgage fee class action lawsuit investigation.
What is a Convenience Fee?
A convenience fee is generally used to help a business to cover the costs associated with electronic payment processing. Companies sometimes absorb this as a cost of doing business, while others pass this cost off to the customers. Some use convenience fees to incentivize customers to pay with cash.
Convenience fees differ from a surcharge. A surcharge is typically added to a product or service when a consumer pays with a credit card.
Why Do Mortgage Companies Charge Convenience Fees?
It's not unusual for banks and mortgage companies to assign convenience fees to online mortgage payments. However, under both California and federal laws, "charging 'pay-to-pay' fees for processing mortgage payments may be illegal, illustrating how banks are simply using these add-on fees to generate substantial additional profit."
Mortgage Payment Fees Class Action Lawsuit
Homeowners across the country have sued their mortgage companies for charging "pay-to-pay fees,” which is the practice of imposing a fee to process bill payments.
Last year, a group of homeowners in Florida filed a class-action lawsuit against Seterus Inc. They allege that the bank unlawfully charged convenience fees of $5.00 for online payments and $10.00 for paying over the phone. According to the claim, the mortgage agreements prohibited "excessive" transaction fees.
In another lawsuit filed in California, a woman alleged that M&T Bank charged her $15 per online payment transaction. In that case, since the plaintiff was making past-due payments, M&T was considered a “debt collector.” Therefore, the bank was subject to debt collection standards under the Fair Debt Collection Practices Act (FDCPA) and the California Rosenthal Fair Debt Collection Practices Act. According to the article, "The FDCPA generally prohibits abusive debt collection practices while the Rosenthal Act specifically forbids collecting 'the debt collector’s fee or charge for services rendered.'"
What Type of Damages Can I Receive?
Top Class Actions indicated that "If you have been subject to illegal mortgage payment processing fees then you may be eligible to join a class-action lawsuit. The amount of damages you can receive will vary on a case-by-case basis, and depends on how many valid claims were submitted in the class action."