CFPB weighs in on Mr. Cooper's 'pay to pay' suit

The Consumer Financial Protection Bureau has chimed in with comments regarding a lawsuit facing Mr. Cooper, which accuses the mortgage lender and servicer of charging borrowers a $25 "junk fee" for payoff quote statements.

The financial watchdog put its support behind the plaintiffs, claiming Mr. Cooper violated the Fair Debt Collection Practices Act by charging customers with a fee that they were not previously aware of.

Mr. Cooper did not mention this specific fee in its mortgage agreement with consumers, so therefore, it can't legally charge it, the CFPB said in an amicus brief filed with a Washington federal court August 8. 

Furthermore, the consumer finance regulator argues customers have a right to sue Mr. Cooper over this – despite their mortgage contracts requiring them to first notify the company prior to doing so – because a notice-and-cure provision does not bar an FDCPA claim. Law360 first reported on CFPB's amicus brief.

"While these contract terms may sound innocent, they allow companies to silence or buy-off anyone who complains and sidestep broader accountability or the need to fix problems company-wide," the CFPB said in a blog addressing the matter. "Allowing companies to make consumers give up fundamental protections in this manner would interfere with the law, which is supposed to let consumers hold debt collectors accountable for their actions and protect consumers from unauthorized charges."

Borrowers in the original complaint filed in April called the $25 charge a "junk fee" and alleged that it takes the lender and servicer seconds to process payoff fee statements, and the cost to the company to produce such a statement is "a matter of pennies."

"While these sums may appear small in the individual situation, in the aggregate they amount to a substantial profit center for Nationstar, paid for by consumers who do not assume they are dealing with a scoundrel," wrote attorneys on behalf of three borrowers who filed the complaint earlier this year.

The plaintiffs say the fees, which are disclosed on Mr. Cooper's website, violate the FDCPA.

Mr. Cooper declined to comment on pending litigation. The company argued that plaintiffs "artfully omit[s] the fact that every one of the payoff quotes were requested on an expedited basis, thereby justifying the fee," in a motion to dismiss the case filed May 9.

The FDCPA, which the CFPB has purview over, prohibits debt collectors from charging borrowers fees unless there is a law allowing them or the amount is authorized by the borrower.  The government agency has recently upped its rhetoric on combatting junk fees and enforcing the FDCPA, some of that discourse has been around servicing fees.

The mortgage industry has not welcomed the attention. Bob Broeksmit, the CEO of the Mortgage Bankers Association, said in a recent speech that the CFPB doesn't clearly understand how servicing fees work.

"These fees they are targeting? By the White House's own definition, none of them are junk fees. What's more, many of them are for services required by other federal agencies," he said in a speech in May.

The MBA's head added homeowners know early in the homebuying process that they'll have to cover things like appraisals, credit reports, and flood certifications "because of CFPB regulations, on forms designed by the CFPB itself."