[Editor's Note: Our firm typically does not take consumer cases. Our practice is limited to actions where people and businesses have suffered out-of-pocket losses of $5 million or more. We also represent commercial borrowers with mortgage of a similar size or larger.
While we do not typically accept consumer cases, we have taken class action cases against lenders. The average consumer can't afford to hire a lawyer over losses of a few hundred or few thousands of dollars. While those losses are quite real, the legal fees expended to get back that money would be cost prohibitive.
The following lightly edited post appeared on our sister Mahany Law Due Diligence blog:
Can My Mortgage Company Charge Online or Pay by Phone Fees? No!
Most financial service companies give consumers several options to make their monthly mortgage payments. Some consumers may choose to pay bills by phone using an automated system or speaking with a live customer representative. Others continue to mail their payments each month.
Today many people pay their bills today online or by telephone. Giving consumer the ability to pay bills electronically saves the hassle of writing checks and hoping they are received on time. Some mortgage companies, however, are gouging homeowners with ridiculous online fees, “convenience” charges and telepay service charges. In many states, these fees are illegal.
MahanyLaw is investigating these fraudulent practices. Suing your bank over a $15 fee isn’t practical. It would be nearly impossible to find a lawyer to take such a case and the court fees in most jurisdictions are at least $100.
Banks and loan servicers know that even if their fees and surcharges are illegal, homeowners are virtually powerless to do anything about it. That is why we are seeking to launch several class action cases against banks that gouge their customers.
States Where Phone and Online Convenience Fees Are Illegal
Several states have enacted consumer protection statutes that either limit or prohibit so called convenience fees.
States where online fees for mortgage payments are restricted include:
- North Carolina
- West Virginia
If you were charged a pay by phone convenience fee in these states, you may be entitled to a refund of those charges.
What Will a Class Action Do for Me?
We believe pay by phone fees for mortgage payments are either forbidden or restricted in the 8 states listed above. It takes about fifty cents (50¢) to process a mortgage payment by phone but some banks and mortgage companies are charging $15. Other lenders have failed to disclose these fees in their loan documents.
We are planning class actions to claw back these surcharges and return the money to borrowers. In some states, borrowers may also be entitled to damages. Hopefully these lawsuits will teach banks a lesson they won’t quickly forget. By calling the court’s attention to these illegal practices, we hope to prevent similar scams in the future.
The CFPB and Bank Convenience Fees
Banks should know better than to charge excessive pay by phone fees. In July 2017, the government’s Consumer Financial Protection Bureau CFPB warned banks about telepay surcharges. The agency’s director Richard Cordray said, “The Bureau is warning companies about tricking consumers into more expensive fees when they pay bills by phone. 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."
Did bank’s listen? Unfortunately many did not.
States and Pay by Phone Fees
The CFPB doesn’t prohibit pay by phone and other convenience fees. They simply want banks to be transparent about their fees and ensure the fees aren’t excessive. At least eight states (California, Florida, Massachusetts, Michigan, North Carolina, Texas, Washington and West Virginia) have even more restrictions.
We are interested in speaking with homeowners in these states that have paid fees or surcharges to pay their mortgage by phone or online. We call these fees “pay-to-pay” because you are forced to pay a fee simply to pay your bills!
My State Isn’t on the List, Can You Help Me?
The eight states listed above have very consumer friendly laws designed to protect consumers against predatory billing practices. That doesn’t mean homeowners in other states aren’t protected, however.
Most home mortgages written in the United States are backed by the Federal Housing Administration (FHA), Fannie Mae or Freddie Mac. These agencies have rules protecting borrowers from undisclosed fees. Even fees that are disclosed, mortgage companies are not allowed to charge for more than the cost of the service. If it costs 50¢ to process a pay-by-phone fee, they shouldn’t be charging $14.95 for the service.
Homeowner Sues M&T Bank
We have long been involved with investigations into bad practices by mortgage companies. From violations HUD underwriting guidelines to unsolicited robocalling claims, we go after banks and mortgage companies that take advantage of their customers. One of our cases resulted in a $300 million verdict against Allied Mortgage. Another was the largest recovery against a bank in U.S. history, the action filed on behalf of the United States against Bank of America that settled for $16.67 billion.
In August of last year, Lisa Silveira filed suit against M&T Bank company in California. She owns a home in San Luis Obispo County couple.
Lisa often makes her monthly mortgage payments by phone. Each time she did so, she was charged a $15 fee. Over the life of a 30 year mortgage, those fees would add up to $5,400!
Lisa later learned that fees charged by M&T Bank aren’t authorized under state and federal law. She filed. Both a national and California class action case. The national class action is limited to homeowners who were 30 days or more past due on their payments when their loan was transferred to M&T. We believe we can bring actions on behalf of borrowers who were not behind on their payments.
M&T Bank settled the case without even filing an answer. The terms of the settlement have not been publiclly released yet.
A similar California class action case for illegal pay by phone fees is pending against Freedom Mortgage. Freedom denies the charges.
Freedom claims that phone service charges are common in the industry and cite to similar charges imposed by U.S. Bank, Mr. Cooper and PennyMac. (Do you remember when you were a child trying to explain to your parents that you shouldn’t be punished because other kids were doing the same thing?)
Freedom also argues that the fees charged to the Urbinas were somehow their own fault. “[T]o the extent Plaintiffs incurred any convenience fees, they did so not as a result of any breach by Freedom Mortgage, but as a result of their own voluntary decision to use an optional payment method with a fee, rather than any of the myriad of other payment methods available without convenience fees.”
It’s not up to consumers to search through thousands of pages of complex banking regulations to know what charges are legal and what charges aren’t. That is the bank’s responsibility and they were warned about pay by phone fees.
Who Else Is Being Sued?
In addition to the phone surcharge lawsuits against M&T Bank and Freedom Mortgage discussed above, we are aware of similar allegations against both Flagstar Bank (also in California). And let’s not forget perennial serial violator Wells Fargo. We are told that they are doing the same thing in Florida.
I Was Charged Pay by Phone Service Fees, How Do We Get Started?
To bring a class action, we need to show these charges are being universally charged by a specific mortgage company. That is where you can help. We need to hear from you. As part of investigation, we need to show what banks are charging these fees.
Why Mahany Law?
Consumers have choices when filing a lawsuit. Few law firms, however, have successfully brought class action lawsuits and few lender liability firms can say that they never represent banks. We can. We have a long history of suing banks, mortgage companies and loan servicers.
There are several online class action organizations that are actively seeking pay-by-phone cases. One company presently advertising for mortgage pay-to-pay phone fees says, “One of the attorneys working with [name of publication] may then reach out to you directly.” In other words, your name and contact information are being sold to a law firm that isn’t clearly identified.
With Mahany Law, you know who you are dealing with; a law firm that has been successful in bringing claims against mortgage lenders.
To learn more, send us your name, contact information, state where your home is located, the name of your mortgage servicer (company receiving your mortgage payments) and information about the surcharges you are paying. You can contact us online or by email at [hidden email]. All inquiries are kept strictly confidential.
Disclaimer. All inquiries are kept confidential. Remember, this is an investigation. We will respond to everyone who contacts us but that doesn’t mean we are your lawyer. If we believe we can help you, we will let you know and discuss next steps.