Unlawful fees in the mortgage market

Mortgage fees and other costs have risen significantly in recent years. The Consumer Financial Protection Bureau is focused on how these costs affect the affordability of home ownership as well as household balance sheets. And costs for homeowners are driven up if companies in the mortgage industry can pad their profits with illegal junk fees. The CFPB is working to combat the proliferation of junk fees in consumer financial markets and to ensure that mortgage companies don’t tack on unlawful fees.

The CFPB is the primary enforcer of the Fair Debt Collection Practices Act (FDCPA). We are committed to protecting consumers from debt collectors that break the law, including mortgage servicers which often act as debt collectors and must follow the same rules when they do. As the CFPB has advised, the FDCPA prohibits debt collectors from charging fees that borrowers didn’t agree to upfront unless Congress or a state has passed a law affirmatively allowing them.

The CFPB and the Federal Trade Commission, which shares enforcement responsibility for the FDCPA, found that one mortgage servicer is arguing in court that it can charge people fees for paying their mortgage online or by phone, instead of by mailing a check, even though the borrowers didn’t agree to those fees when they took out their loans and there isn’t any law affirmatively allowing them. That isn’t right, and we have filed an amicus brief in the U.S. Court of Appeals for the Eleventh Circuit to help ensure people can hold covered mortgage servicers and other debt collectors responsible when they charge prohibited fees.

In the case, Ocwen Loan Servicing charged two mortgage borrowers “convenience” fees ranging from $7.50 to $12 on dozens of occasions for payments made online or by phone. When the borrowers realized these fees were illegal, they each sued to hold Ocwen accountable for charging them. Both borrowers won in court, and now Ocwen is appealing those rulings. Among other things, Ocwen is arguing that the FDCPA’s protections don’t apply to this type of fee. Ocwen is also arguing that they should be able to charge these fees because people agree to pay them once it’s time to make their payment.

Ocwen is wrong. As the CFPB and FTC’s amicus brief explains, the FDCPA applies to all fees related to collection of a debt. Only fees that were agreed to when the person took out the loan or that are affirmatively permitted by a law can be charged. Numerous courts have agreed with this clear interpretation, and it is what Congress intended.

The CFPB will continue to do everything we can under the law to ensure that illegal junk fees don’t drive prices up in the consumer financial marketplace.

The case is Glover and Booze v. Ocwen Loan Servicing, LLC, Nos. 23-1257-J, 23-12579-H (11th Cir.).

Read the CFPB and FTC’s amicus brief.

If you have encountered problems with mortgage servicing, you can submit a complaint with the CFPB.