Does Your Mortgage Servicer Charge Pay-by-Phone Fees?

Pay-by-phone fees, while annoying, are ubiquitous and, in most cases, legal, but mortgage companies who charge “convenience fees” may be violating their own contracts. If you are a homeowner who has been charged extra for making mortgage payments by phone or online, you may have cause to take legal action against your loan servicer.

What Are “Convenience Fees”?

Normally, a “convenience fee” is charged by merchants when customers choose to pay for goods or services when using a credit card or some other non-cash payment method. In many cases, merchants charge these fees in order to discourage customers from using credit cards.

For example, back in the 1980s, many gasoline stations began offering cash customers discounts on their purchases, meaning that customers paying with credit cards are being charged convenience fees. Another example is an online ticket broker, such as Ticketmaster or Ticket Tomato, both of which add convenience fees to the price of event tickets.

In these cases and others, such fees are allowed by law. However, the specific terms of many mortgage agreements prohibit the charging of “convenience,” or pay-by-phone fees. Despite this, homeowners have complained that their mortgage loan servicers charge as much as $5.00 for online payments and up to $20.00 for phone payments.

Why Are There Convenience and Pay-by-Phone Fees?

In some cases, businesses that charge convenience fees do so in order to recoup their own costs, since processing some types of credit transactions involve expenses – such as hardware, software, and labor. However, these expenses are far less than what some businesses, such as banks and mortgage companies, would have you believe.

For example, the defendant in a current class action lawsuit in California is a mortgage loan servicer that charges a $15 “Pay-to-Pay” fee for customers who submit payments over the phone. According to the complaint, however, the defendant’s actual costs for processing phone payments are only a few cents – and the company pockets the difference. Furthermore, such expenses are a legitimate tax deduction for businesses, but generally not for individuals.

How are Mortgage Companies Violating the Law?

Standard form mortgage agreements allow loan servicers to pass along only the actual costs of processing payments (as noted above, a usually no more than a few cents). By tacking on excessive amounts, these companies are violating the Fair Debt Collection Practices Act and the Rosenthal Act as well as their own contractual agreements.

Investopedia warns customers to watch out for a range of bogus fees that can pop up in mortgage agreements. If you are being charged a convince fee that is too high, you may be being over-charged in other areas. Many customers may not read the fine print of their agreement, or may be so overwhelmed by the paperwork of buying a house and getting a mortgage that they end up paying too much in fees.

Some mortgage lenders may rely on a customer’s lack of knowledge of the mortgage process to change them too much in fees. High convenience fees may come along with other misleading or unnecessary fees like application fees, underwriting fees, mortgage rate lock fees, loan processing fees, and broker rebates.

Investopedia explains that a seller should disclose a convenience fee at the point of sale, as opposed to charging a customer the convenience fee without informing them. As you are signing a contract, it is important to ask about any convenience fees that might be charged, and keep an eye out for unexpected charges after you do take out a mortgage. Undisclosed or hidden fees may be one way in which your lender may take advantage of you.

Are Pay-By-Phone Fees the Same as Surcharges?

While the term “convenience fee” is often used interchangeably with “surcharge”, they are actually two different things. A surcharge is assessed by merchants when a customer uses a credit card, whereas a convenience fee is essentially “padding”.

Credit card surcharges are illegal in a number of states; however, merchants get around this by offering cash discounts to customers. Usually, surcharges are around one and two percent. However, they are usually capped at around 4 percent, explains Investopedia. In contrast, convenience fees can either be a flat rate or a percentage of a sale, which can lead borrowers to pay convenience fees much higher than they should be. 

Why Pay Online or by Phone at All?

Many individuals make one time payments by phone if they are running late on a mortgage statement. They may accept the pay-by-phone fee as part of the cost of lateness.

One reason that people choose to make online payments, in addition to ease of use, is that it generates a receipt and provides a clear record that payment was made in case of a dispute. The receipt, however, can be one way that customers can identify fees that may be too high or charged where they should not be.

What Are My Rights as a Borrower?

As a borrower, it’s easy to assume that you have done everything you can to stay current with your mortgage payments, even if that means paying fees. However, as a borrower, you also have plenty of rights. You should know your borrower rights so that you can raise concerns if you believe that they have been violated.

When it comes to fees, you should always review your billing statements closely and ask questions about any fees that seem out of the ordinary. If you’re not sure where a fee came from, contact the mortgage servicer in writing to ask for a further explanation. Be aware that your mortgage company might also charge some fees for certain services, like faxing documents. In some cases, you may be able to negotiate down fees that seem unfair.

Borrowers also have rights in relation to escrow accounts, transfer of servicing, transfer of loan ownership, the posting of payments made by the borrower, and force placed insurance.

If you think that something is off about the way your lender has handled your situation or payment, it’s best to ask in writing as well. This is because you’ll have evidence to help support your claim if you do need to bring legal action in the future. Also, you’re protected by federal laws that require mortgage services to respond to written inquiries in a timely fashion.

If you think that any fee was added on to your account improperly, it’s up to you to reach out to the mortgage company about this situation. You have the right to get a written notice of their acknowledgment no later than 20 business days after they receive your note.

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.