Can a New Mortgage Service Company Charge Online Payment Fees?

A mortgage service company may or may not be able to charge pay to pay fees depending on loan agreement terms and other factors.

Can a New Mortgage Service Company Charge Online Payment Fees?

In some cases, pay to pay fees such as online payment fees are not illegal although they are annoying. If a mortgage company outlines these fees in their loan agreements, they are not violating these terms by charging additional fees.

However, 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.

“Pay to Pay” fees have been an issue for years. In July 2017, the Consumer Financial Protection Bureau (CFPB) issued a warning against expensive pay by phone fees charged to certain customers. According to the CFPB, some companies charge these fees in a misleading way – calling them “processing” charges instead of identifying them as pay to pay fees.

“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.”

In order to avoid deceptive fees, the Federal Trade Commission (FTC) recommends that consumers read their billing statements carefully to be sure that any charged fees are legitimate.

Have Consumers Taken Legal Action Over This Issue?

In October 2019, husband and wife duo Neri and Leonila Urbina filed a class action lawsuit against Freedom Mortgage, claiming that the mortgage service company violated various laws by charging pay to pay fees.

Freedom Mortgage allegedly charges between $10 and $15 to consumers when they try to pay their mortgage by phone or online. These fees are reportedly not laid out in the company’s mortgage agreement, meaning that they allegedly cannot charge them.

The Urbinas also claimed that Freedom Mortgage services their FHA loan which is under additional protection. Instead of passing on only the out of pockets costs, Freedom Mortgage allegedly charges their consumers for additional money. In fact, the mortgage service class action lawsuit claimed that “the vast majority of that fee is pure profit for [Freedom Mortgage].”

Another mortgage pay to pay fee class action was filed in October against Flagstar Bank. In this class action, plaintiffs Arthur and Catherine Mariscal claim that they were illegally charged $15 pay to pay fees when they try to pay their mortgage over the phone.

Allegedly, only $1 of this fee constitutes the cost of processing a payment. The rest of the fee is allegedly pocketed as profit. The Mariscals claim that these fees are “expressly prohibited” by Fannie Mae’s servicing guidelines.

Earlier in April 2020, plaintiffs Tyrus D. and Christopher B. filed a class action lawsuit against Caliber Home Loans, alleging that the company breached a slew of state debt collection laws. Caliber is a national home mortgage company that does business all across the United States.

The lawsuit alleges that Caliber “routinely violates state law” by charging these kinds of illegal pay to pay fees for mortgage payments made via certain channels, such as an ATM or online. The lawsuit alleges that to process these transactions, the actual cost for Caliber per transaction is about $0.40. However, Caliber charges much higher pay to pay fees, between $3.50 and $8.00, so that they can pocket the difference, the lawsuit alleges.

Under both North Carolina and Maryland law, the lawsuit claims, Caliber is prohibited from collecting anything other than the principal obligation of the loan “unless such amount is explicitly stated in the agreement creating the debt or permitted by law.” Pay to pay fees, the plaintiffs claim, are not included in the agreement, nor under state law.

U.S. Bank has also come under fire for allegedly requiring consumers to pay fees in order to pay their mortgage through the bank’s online portal or automated phone system. According to one customer who claims they were charged a $5 processing fee at least 44 times, it costs much less for the financial institution to process these payments, meaning that the fee is almost entirely profit for U.S. Bank.

According to some research into pay to pay mortgage fees, these charges may bring in millions in profit for banks. Citi’s store-card unit Department Stores National Bank allegedly collected almost $24 million through pay to pay fees over the course of several years beginning in 2009. As many customers do not realize that these fees may be against the law unless they are spelled out in their mortgage agreement, banks may be bringing in a steady profit.

Other mortgage service companies have allegedly used more deceptive methods to pressure customers into making payments through methods that come with additional fees. In one case, Green Tree Servicing was accused of falsely telling customers that unless they used a service that required a $12 processing fee, their mortgage would go into foreclosure.

Filing a Mortgage Payment Fee Lawsuit

If you have been charged predatory pay to pay processing fees by your mortgage service company when you paid your mortgage over the phone or online, you may be eligible to hire an attorney and join a class action investigation into these fees. Victims of pay to pay fees may be able to recover compensation and reimbursement.

Filing a lawsuit can be a daunting prospect, especially while dealing with your mortgage service company, so Top Class Actions has laid the groundwork for you by connecting you with an experienced attorney. Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

The Mortgage Service Payment Fee Lawsuit is Case No. 1:20-cv-338, in the U.S. District Court for the Middle District of North Carolina.

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.

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