Can Banks Charge a Fee to Make a Mortgage Payment?

It’s expected that when taking out a mortgage, you will be responsible for making regular mortgage payments. The amount of these payments will be specifically associated with the cost of your house, your interest rate, the length of the mortgage, and other factors. This leads many to wonder whether or not banks can charge a fee to make a mortgage payment since every person who has a mortgage must make regular payments.

Many people turn to online or over the phone options to make their payments easily, but they might be hit with additional fees for doing so. For example, mortgage payments made with a credit card could lead to fees, according to Investopedia.

When Are Fees Charged?

Many banks and lenders do not require a fee to be paid by someone who is making a payment on their mortgage, but recent lawsuits have highlighted that this practice does occur at some financial institutions.

Two California residents recently filed a lawsuit against Flagstar Bank arguing that California laws were violated because the consumers were charged additional fees simply for making their mortgage payment on the phone rather than in some other manner.

Within the lawsuit, these customers claim that every time they made a phone-based payment of their mortgage cost, Flagstar Bank added on a $15 mortgage payment processing fee. The customers allege that these fees were illegally applied and are not specifically allowed by the mortgage deed of trust.

The proposed class action lawsuit filed against Flagstar is seeking statutory and actual damages.

What Is the Rosenthal Fair Debt Collection Practices Act?

In California, there is a specific law that governs the collection of debts. The Rosenthal Fair Debt Collection Practices Act ensures that debt collectors are prohibited from collecting expenses, fees, or charges related to the collection of the debt. This law forbids additional charges for consumers to make their mortgage payments over the phone unless those fees were specifically outlined and included in the contract.

While this law is specific to California residents, this means that consumers in California might be able to file lawsuits over improper charging of these hidden fees if those fees were charged for over-the-phone mortgage payments or online payments.

Have Other Lawsuits Been Filed by People Who Had to Pay a Fee to Make a Mortgage Payment?

Other customers with different financial institutions claim that they also had to pay a fee to make a mortgage payment. A separate class action lawsuit argues that Freedom Mortgage assesses unreasonable mortgage payment fees for online transactions or over the phone payments.

According to two plaintiffs in California, borrowers are charged somewhere between $10 and $15 when trying to pay their mortgage over the phone or online.

This has not only been happening in California, nor is it a recent phenomenon.  In 2015, the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB)  file a lawsuit in Minnesota against Green Tree Servicing LLC over its questionable practice of charging a fee to make a mortgage payment.  According to the complaint, Green Tree would exert undue pressure on its customers to make immediate phone payments, typically by threatening them with foreclosure if they failed to do so, which they had no legal right to do.  They were also accused of lying to their customers, telling them that their SpeedPay service (at $12 per transaction) was their sole option for making a payment.

These extraneous and often illegal fees are not only charged by mortgage companies. That same year, an investigation by the CFPB found that Citibank, a credit card issuer, along with one of its store units, was deceiving consumers into paying nearly $15 for making phone payments, calling it a “processing charge.” That fee was not in itself illegal, however, it was intended for consumers who needed to have their payment posted the same day. Those who did not require immediate processing should not have had to pay the fee. 

So “Pay to Pay” Fees Are Legal?

Under limited circumstances, charging a fee to make a mortgage payment or similar transaction can be done because the consumer wishes to have the payment posted right away in order to avoid a late fee or possible black mark on their credit record. However, the mortgage company must clearly disclose this in any written agreement.

Borrowers should be aware that a fee to make a mortgage payment may be hard to spot. Some lenders may rely on bowers being confused by extensive paperwork and bureaucracy to charge them fees without their knowledge. Many borrowers may not read the fine print of their mortgage agreement, or may not have much knowledge of how buying a home works. Unfortunately, companies may take advantage of this lack of knowledge.

As you learn about what kind of montage payment fees are imposed, Investopedia advises borrowers to determine how their fee is being charged. Convenience fees can be charged as either a percentage of a sale or a flat rate. If a borrower does not know how their fee is charged, they may inadvertently agree to paying a fee that is too high. 

To make matters worse, if your lender charges you a fee to pay your mortgage, you may want to look out for other fees. Investopedia explains that lenders can charge a range of bogus fees to help their bottom line, including underwriting fees, application fees, mortgage lock rate fees, broker rebates, loan processing fees, and others.

Sellers should disclose all of the fees related to a mortgage at the point of sale, but unfortunately, this does not always happen.

Even if you have done the hard work of uncovering all of the hidden fees associated with your mortgage, unfortunately, your situation may change. Like other kinds of debts, mortgage lenders sometimes buy and sell loans and the rights to service them. If you take out your loan with one provider and your loan is sold to another provider, the second provider may charge you fees that your first provider did not. It is important to review any changes that may occur if your loan is transferred to another provider. 

What Are Pay to Pay Fees?

Many of these cases involving claims of a fee to make a mortgage payment involve allegations of pay to pay fees. These fees are charges tacked on to an underlying payment that a debtor or borrower is making and are often pocketed directly by the company charging the fee.

If you live in California and were recently charged a fee to make a mortgage payment, you could be eligible to file your own class action lawsuit against the lender.

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.