Joanna Szabo  |  December 4, 2020

Category: Fees

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Online payment fees may violate a mortgage agreement.

Consumers are getting savvier about fees they pay on a recurring basis, including those assessed by mortgage servicers.

Theoretically, a mortgage company can legally charge a mortgage payment processing fee for online payments or telephone payments to cover the actual administrative costs of providing this convenience. That said, fees must be clearly delineated in the deed of trust and not be in violation of the U.S. Federal Housing Administration (FHA) rules if the loan is backed by this government entity.

According to the FHA, the purpose of the agency-backed program is to get more people into homes at fair prices. The agency warns, “you should not pay above and beyond the normal fees associated with buying a home.”

The FHA claims that they have strict guidelines and that there are a number of city, county, state, and federal laws that might also come into play. The FHA says that you should never pay “unearned fees” as these are illegal under the agency’s program.

But some borrowers complain that mortgage servicers across the country are forcing borrowers to pay an extra fee for paying their mortgage over the phone or online.

We see these kinds of convenience fees all over the place, such as for online movie or concert ticket purchases. These online payment fees might be characterized as processing fees, speed pay fees or convenience fees. However, many of these fees are specifically prohibited in a majority of mortgages, and mortgage lenders may be violating their own agreements with borrowers by charging these kinds of fees.

Plus, using these different names for convenience fees may mislead consumers as to the nature of the fees—for instance, referring to a “processing fee” may suggest to consumers that the fee is unavoidable if they want the transaction to be processed at all. The Consumer Financial Protection Bureau (CFPB) noted that this kind of misleading information can “result in consumers incurring charges for services they don’t need.”

This is different from a possible servicing fee, which might be rolled into a mortgage when the servicer collects and makes escrow payments while also passing on the interest and principal payments to the holder of the note.

What Are the Typical Online Payment Fees Required?

Regardless of how your mortgage servicer might assess these fees, it is important to review your mortgage documents to ensure that the lender is not crossing any legal lines. Mortgage payment fees vary from lender to lender, but Creditcards.com reports that some borrowers have reported being charged anywhere from $5 to $15 for every transaction made, either online or over the phone. In some cases, the fee a mortgage servicer charges for an online transaction may differ from the fee the company would charge for a transaction made over the phone.

The CFPB warned in 2017 that companies may try to trick consumers into paying costlier fees when paying by phone, misleading consumers about the purpose and cost of pay-by-phone fees, or not alerting them of any potentially cheaper payment options.

“The Bureau is warning companies about tricking consumers into more expensive fees when they pay bills by phone,” said CFPB Director Richard Cordray in a statement. “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.”

While the CFPB did not use its bulletin to mandate a particular method of informing consumers about convenience fees, the Bureau noted it expected companies to “review their practices for potential risks of violating consumer financial laws and to address any issues.”

Even though online bill pay is frequently associated with convenience fee charges, many mortgage agreements in the United States prohibit these fees. This means that the borrower could hold the mortgage servicer accountable for violating the mortgage agreement.

Online payment fees may violate a mortgage agreement.Have Any Lawsuits Been Filed Over Online Payment Fees?

Several groups of homeowners have begun pursuing litigation against their own mortgage services for adding on these convenience fees to their mortgage payments.

A group of Florida homeowners, for example, initiated a class action lawsuit for what they believe are illegal convenience fees due to established federal and state laws. Those consumers claim that they paid as much as $10 for making their mortgage payments over the phone, and as much as $5 for paying their mortgages online.

These consumers argued that the mortgage servicing company directly violated the terms of their respective mortgage agreements by assessing these fees.

Another lawsuit, filed by a California woman against M&T Bank, alleges that the bank charged her and other California homeowners excessive pay-to-pay convenience fees on top of mortgage payment transactions via phone and online. The plaintiff claims that the cost for M&T to process the mortgage payment transaction is only a few cents, yet the bank charges her others like her a $15 fee to make the payment. The M&T Bank lawsuit alleges that the difference goes straight into the bank’s pockets. According to California law, the plaintiff alleges, banks are not allowed to charge a convenience fee in excess of the actual cost of the transaction process.

A similar lawsuit filed this year in California federal court alleges that a couple paid illegal and unearned fees for the purported right to pay their Freedom Mortgage house payment online each month for at least a year. The fee for this service was allegedly $15 each time, even though they say they never agreed to these charges and there was never any disclosure of the fees in the mortgage deed of trust.

How Do I Know If I Have Been Overcharged?

Several groups of homeowners have begun pursuing lawsuits against their mortgage servicers for adding these convenience fees onto their mortgage payments without notice.

If you have been assessed this type of fee, particularly if you were in default on your mortgage at the time that your current servicer took over your mortgage, you could be eligible to initiate a class action lawsuit or get further support for your legal claim with the help of a knowledgeable attorney.

Filing a lawsuit can help recover compensation, as well as hold those responsible accountable for their actions. Pursuing litigation can be a daunting prospect, so Top Class Actions can help to connect you with an experienced consumer protection lawyer who can verify whether or not your mortgage servicer was in violation of your existing agreement at the time that you were charged with these additional fees. Consulting a lawyer can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

Join a Free Mortgage Payment Fee Class Action Lawsuit Investigation

If you were charged a payment fee for paying your mortgage online or over the phone, you may qualify to join a FREE online payment mortgage fee class action lawsuit investigation.

Learn More

This article is not legal advice. It is presented
for informational purposes only.

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21 thoughts onCan a Mortgage Servicer Charge Online Payment Fees?

  1. Shane says:

    I thought there was a law passed where lenders can not charge fees to pay your bill online!

  2. Teresa Powers says:

    SPS (Select Portfolio Servicing) now charging $15 to make monthly payments online which you have to agree to in order to get a timely payment made. Unfair and outrageous extra burden and hardship on consumer during difficult financial times. Shame on them! Count me in if class action ever filed.

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