Why Are Mortgage Servicers Charging Pay by Phone Convenience Fees?

Your mortgage lender may be charging you an unnecessary fee to pay by phone, a fee you may not have agreed to when you signed your loan agreement.

What Are Pay by Phone Convenience Fees?

Banks often tout online banking and banking by phone as convenience services provided to customers. However, a mortgage processing fee assessed when making your payment by phone may be a hidden fee.

These fees may take a number of forms. They may be called a processing fee, a convenience fee, or some other name. Banks sometimes intentionally make the name of the fee confusing, making it difficult for consumers to understand what they are really paying for.

Charging convenience fees is common practice with online payments, so many consumers may be used to it. You’ve probably seen them for things like concert or movie tickets. However, the terms of most mortgage agreements do not allow these kinds of fees, and mortgage lenders that charge pay by phone convenience fees may be violating agreements with borrowers.

How Much Are Pay by Phone Fees?

In some cases, banks and credit unions may charge customers between $5 and $15 to make mortgage payments over the phone. Similar amounts may also be charged to consumers who want to pay their mortgages online. Customers may also be charged a fee for an online transaction, which may be different than the fee for pay by phone options.

In 2017, the Consumer Financial Protection Bureau (CFPB) warned the public about companies that may try to trick consumers into paying higher fees for over the phone transactions.

“The Bureau is warning companies about tricking consumers into more expensive fees when they pay bills by phone,” 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.”

Why Are Mortgage Servicers Charging Pay by Phone Fees?

Since pay by phone fees can have a number of names, it may be hard to understand why banks charge them. The fees may be presented as an unavoidable expense, however, CreditCards.com explains that in most cases, the federal government has determined these fees are not necessary.

Pay by phone fees are a major profit center for banks. In an effort to make as much money as possible, some banks may be charging sky-high pay by phone fees or misleading customers about the nature of the charges. 

Unfortunately, banks may try this tactic with a number of fees. If you are being charged a pay by phone fee, your bank may also be charging other excessive fees. Investopedia advises consumers to be aware that many financial institutions may try to sneak various fees into a mortgage agreement.

Are These Pay by Phone Fees Legal?

Although banks and credit unions are allowed to pass on to consumers the costs of using third-party systems, such as a credit card processing system, they are generally prohibited from inflating the fees and may only pass on the actual cost. Banks may have to pay for payment software and for the worker who processes the transactions, the actual cost to process phone transactions is typically a handful of cents.

In 2020, the average cost to process a credit card transaction ranges between 1.5% to 3.5% of the transaction amount. This figure is often much lower than what mortgage companies charge to process these transactions, allowing lenders to pocket the difference.

Though the fees themselves may be legal, CreditCard.com says that the federal government has cautioned financial institutions against abusing them. The Federal Trade Commission (FTC) has taken action against companies for imposing confusing, misleading, or unfair fee structures on mortgage borrowers.

According to Richard Cordray, the former director of the Consumer Financial Protection Bureau (CFPB), some banks may hide cheaper or free payment options, shepherding customers into thinking their only option is to pay by phone. In 2017, the CFPB released a compliance bulletin on the issue of convenience fees, like pay by phone fees, explaining how these fees could be an unfair, deceptive, or abusive practice that’s prohibited by law.

Some banks may resort to misleading and unlawful tactics to convince customers to pay by phone and incur a fee. And some institutions may go so far as to lie to a customer and tell them that they must make a payment right away, or risk foreclosure. Situations like this exemplify an observation made by CreditCards.com that most of the pressure to pay by phone is made when a company is attempting to collect on a mortgage debt owed by the customer.

Some consumers have reported being told they must pay a fee in order to make a payment by phone, only to find out later that the fee was so that their payment would be expedited and posted the same day. For consumers who do not need their payment expedited, a free option may have been available but was not disclosed by the payment processor.

Intimidating consumers about a debt and lying about its nature may be a violation of the Fair Debt Collection Practices Act, the Unfair Competition Law, the Dodd-Frank Act, other federal laws, and/or a range of state finance codes. Lenders approved by the Department of Housing and Urban Development may be in violation of restrictions set forth by the department if they charge unapproved fees.

A lender may also be in violation of its own contract for charging fees that are not disclosed in a mortgage agreement. Violation of a contract is prohibited by both state and federal laws. Many mortgage agreements include terms prohibiting charging excessive fees, but some lenders may assess them anyway.

Joseph Rideout, a spokesman for Consumer Action, notes that paying by phone can be valuable if a customer needs to pay an expedited fee, “[b]ut customers should never be hoodwinked about the purpose of the extra fee.”

In Which States Are Pay by Phone Fees Illegal?

Many states have laws limiting the type of mortgage processing fees lenders can charge. Georgia, Kansas, Indiana, and Oklahoma expressly prohibit convenience fees, and North Carolina and Massachusetts expressly or arguably prohibit the charging of these fees.

Other states with laws that more broadly regulate these fees include Florida, Washington, California, and West Virginia. 

In Florida, the Florida Consumer Collection Practices Act limits the kinds of fees lenders can tack onto mortgage payments. This law regulates fees used to pay via certain methods.

Washington’s Fair Debt Collection Practices Act and the Washington State Collection Agency Act regulate these fees. Similarly, the California Rosenthal Act and the West Virginia Consumer Credit Protection Act may offer protection to consumers charged unfair fees. 

Which Lenders Charge Pay by Phone Fees?

Many banks may be charging customers excessive fees for paying their mortgage online or over the phone. While some banks and other financial institutions are upfront about the fees, others may be using deceptive methods to hide the nature of the charges.

You may be able to determine whether your mortgage lender charges pay by phone fees by reading your mortgage documents or looking at the lender’s website. Some companies, such as Carrington Mortgage, list the different fees associated with each accepted method of payment online.

This upfront disclosure may make it easier for customers to determine which method of payment is right for them. Other banks, including Wells Fargo, list the acceptable methods of payment but do not disclose which methods are free and which may come with additional processing fees.

Attorneys may be investigating several lenders for potentially charging deceptive fees. If you have been charged pay to pay fees by Nationstar Mortgage, Arvest Central Mortgage, Ocwen, AmeriHome Mortgage, or PHH Mortgage, you may be able to speak with an experienced attorney about the details of your case.

Have Any Mortgage Payment Convenience Fee Lawsuits Been Filed?

Both governmental agencies and consumers have filed lawsuits against financial institutions over pay-by-phone fees. 

Carrington Mortgage, one of the largest U.S. residential mortgage servicers, has faced such claims. Customers alleged that Carrington led them to believe that pay by phone and pay online fees were charged by a third party when it was actually Carrington that was pocketing most of the fee. According to customers, Carrington charged $5 to pay online, and between $10 and $20 to pay by phone.

PennyMac Loan Services was hit with customers claiming that the loan servicer disguised excessive payment fees as necessary processing fees. 

In 2018, Nationstar reached a $3.8 million settlement with customers claiming the lender had a practice of charging improper convenience fees when customers were late on payments. The class action settlement covered at least 182,000 people and paid a percentage of the settlement to each class member based on the number of times they were assessed a convenience fee. Class members were estimated to receive between $8 and $15 in reimbursement for each fee.

Arvest Central is also the subject of a convenience fee class action lawsuit. The Arvest allegations were filed by customers who claimed the company charged excessive fees for paying their mortgages by phone. The company allegedly charged customers $10 to pay mortgages over the phone, with the assistance of a customer service representative. The financial institution charged $5 to pay over the phone using an automated system. Customers claimed they were also charged $5 to pay online.

Many banks and mortgage lenders continue to be accused of charging deceptive fees to customers who choose to pay by phone or online. Earlier this year, mortgage lenders Ocwen and PHH Corp. agreed to pay more than $12.5 million to resolve claims that the companies had charged improper processing fees when plaintiffs attempted to make mortgage payments online or by phone.

Filing a Mortgage Payment Fee Lawsuit

Many consumers are coming forward with allegations of illegal or improper convenience fees. If you have been charged extra mortgage payment fees after making a payment online or by phone, you may be able to join this class action lawsuit investigation and pursue compensation.

Filing a lawsuit can be a daunting prospect, so Top Class Actions has laid the groundwork 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 Navistar Mortgage Fee Class Action Lawsuit is Garcia v. Nationstar Mortgage LLC, Case No. 2:15-cv-01808-TSZ, in the U.S. District Court for the Western District of Washington.

The PennyMac Mortgage Payment by Phone Lawsuit is Case 5:20-cv-01052, filed in the U.S. District Court for the Central District of California.

The Carrington Mortgage Payment Fee Class Action Lawsuit is Victoria Dawkins v. Carrington Mortgage Services LLC, Case No. 0:20-cv-60998-RAR, in the United States District Court for the Southern District of Florida.

The Arvest Central Mortgage Pay By Phone Fee Class Action Lawsuit is Robert Lange v. Arvest Central Mortgage Co., Case No. 4:20-cv-00293-LPR, in the U.S. District Court for the Eastern District of Arkansas.

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.