Freedom Mortgage Corp. Facing Class Action Over Alleged ‘Pay-to-Pay’ Fees on Mortgage Payments

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A proposed class action lawsuit claims that Freedom Mortgage Corporation (FMC) has violated state and federal debt collection laws by charging “pay-to-pay” fees for online and over-the-phone mortgage payments.

The lead plaintiffs, who took out a mortgage loan with FMC in August 2016, claim they attempted to make multiple electronic payments on their mortgage and were assessed a $15 pay-to-pay fee each time. The lawsuit argues that these fees were not authorized by the plaintiffs’ deed of trust and were therefore unlawful under state and federal debt collection law.

The case stresses that the Fair Debt Collection Practices Act (FDCPA) prohibits lenders from collecting “any amount” of debt “unless such amount is expressly authorized by the agreement creating the debt or permitted by law.”

Moreover, according to the case, loans made by the defendant are insured against default by the Federal Housing Administration (FHA). In order to maintain FHA protection, the lawsuit states, a lender must abide by Department of Housing and Urban Development (HUD) regulations. The complaint claims that HUD regulations do not allow for pay-to-pay fees to be charged by FHA-approved entities such as the defendant.

The case goes on to claim that even if pay-to-pay fees were expressly allowed, the defendant’s fees would still violate FHA regulations. For fees that are explicitly permitted under the FDCPA, the complaint states, FHA rules “permit passing along to borrowers only the lender’s actual costs for offering the service.” The complaint argues that the defendant charges more than enough to cover its costs for processing online or over-the-phone payments, however, and pockets the remainder as profit.

“Here, FMC charges borrowers between $10.00-$15.00 for making their mortgage payments online or over the phone,” the lawsuit reads. “On information and belief, the vast majority of that fee is pure profit for FMC.”

The suit seeks the restoration of all money improperly collected by the defendant in the form of pay-to-pay fees. The proposed class may include all persons with a California address who paid FMC a fee for making loan payments by phone or online during the statute of limitations.

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