Have You Paid a Fee to Make a Mortgage Payment by Phone?

If you made a mortgage payment by phone and were charged a fee for this service, the fee may have been in violation of state and federal law.

A number of class action lawsuits have challenged these “pay to pay” schemes, and mortgage companies (which already receive several times the original amount of the loan in repayment) have been held to account.

What is ‘Pay to Pay’?

Pay-to-pay-fees are a relatively new phenomenon in the financial services sector and corporations selling subscription-based consumer services have implemented in order to increase their revenues even more. These fees go by several names, including:

• convenience fees
• processing fees
• speedpay fees

There does not appear to be any real justification for such fees; nonetheless, mortgage companies routinely charge customers anywhere from $5 to $25 a pop for the convenience of making a mortgage payment by phone or online.

Are These Fees Even Legal?

In some cases, pay-to-pay fees are not only illegal; they may violate a mortgage company or bank’s own contracts.  Under most serving agreements, a mortgage company may only charge extra fees as may be necessary to cover their own costs of operation. However, this does not appear to be the situation in most cases.

Michigan-based Flagstar Bank, a defendant in a recent class action lawsuit, reportedly contracts with Western Union to process mortgage payments. The cost to the bank is between 20 cents and 40 cents, yet the California plaintiffs claim that Flagstar is charging customers $15 for making a mortgage payment by phone. According to that complaint, Flagstar is not only violating Fannie Mae serving guidelines, it is also in violation of its state’s Rosenthal Act, which prohibits debt collectors of any kind from charging fees to cover their expenses when collecting the debt in question.

A similar complaint has also been filed against Freedom Mortgage, which claims that the defendant is violating federal law regarding FHA loans. The plaintiffs’ mortgage is insured by the Federal Housing Authority; under the agency’s rules, the loan servicer may only charge fees to cover its out-of-pocket costs. According to that lawsuit, these allegedly illegal practices have affected hundreds of thousands of consumers.

How Can I Avoid Paying Extra for Making a Mortgage Payment Online?

The federal government has become aware of pay to pay fees and is starting to take action. The Consumer Financial Protection Bureau (CFPB) is warning consumers to take a closer look at their mortgage statements in order to make sure they’re not being charged for making their payment over the phone.

The Federal Trade Commission recommends that anyone who has a mortgage carefully read their billing statements to ensure that any extra charges or serving fees are legitimate. This includes any fees that you or the loan service may have authorized when the mortgage was originated. If there is anything you do not fully understand, you have the right to ask for a full explanation (you should do this in writing). If you do ask for services such as providing copies of loan documents or anything else, be certain you also ask if there are any associated fees as well as the amount.

The CFPB’s primary concern is that lending institutions are misleading consumers into making these phone payments without a clear awareness that paying over the phone causes additional fees. Consumers might not be informed about options that are cheaper or have no fees at all to ensure borrowers will continue paying their mortgages over the phone without thinking they have alternatives.

In 2017, the CFPB warned consumers to be mindful of these risks and use caution to prevent being taken advantage of.

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

The CFPB warning included a bulletin informing consumers about potential violations, including failing to disclose fees associated with phone pay fees, misrepresenting payment options or required fees, and a lack of employee monitoring leading to misrepresentations or undisclosed fees. 

The CFPB noted that regulations don’t require businesses to inform consumers of pay-by-phone options or fees. However, according to the agency, companies are responsible for conforming with state and federal laws about any convenience fees they charge.

The Bureau warned businesses that they are expected to review their practices and utilize appropriate risk management and due diligence to make sure they are complying with relevant consumer financial laws. If companies fail to comply, the CFPB can take action to protect consumers.

“The CFPB will continue to monitor the practices of companies that assess pay-by-phone fees for potential violations,” the CFPB statement says. “The Bureau will use all appropriate tools to assess whether supervisory, enforcement or other actions may be necessary.”

One company came under fire from the federal agency for allegedly pressuring consumers to make their payments over the phone or face “immediate foreclosure.” This allowed Green Tree Servicing LLC to collect additional fees in the form of phone charges. In those cases, consumers might have only been told about the speedy payment option that came with a $12 fee.

Consumers should always read the fine print in their mortgage documents and see if any fees have been tacked on. Borrowers should also be prepared to ask questions about whether or not there are other options available besides making a mortgage payment by phone.

Consumers should ask their lender directly what the total fee is, if any, for making payments over the phone or online and see if fee-free alternatives are offered.

If your mortgage company is charging you a fee for making a mortgage payment by phone or through its website, such fees must have been agreed to in advance. If they are not part of the original loan agreement, they are prohibited.

Join a Free Mortgage Payment Fee Class Action Lawsuit Investigation

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

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