Loandepot faces class action lawsuit over pay-to-pay charges

A West Virginia couple is suing Loandepot, alleging it illegally charged them for payments made by phone, in the latest of a series of recent court actions surrounding pay-to-pay fees.  

David and Patricia Warren of Seth, West Virginia, were named as plaintiffs representing a class of Loandepot customers who were charged fees when remitting payments electronically or by telephone. Neither the Warrens' note nor deed of trust authorized Loandepot to assess the charges. Additional fees beyond principal and interest also run afoul of the West Virginia Consumer Credit and Protection Act, attorneys for the plaintiff claimed.  

"Defendant created an unlawful profit center through charging pay-to-pay fees for every monthly mortgage payment made by phone or internet," the lawsuit said.

The lawsuit revolves around a $161,500 purchase mortgage the Warrens took out in 2019 with Loandepot. For each payment made by phone, the lender and servicer tacked on an additional $2.00 charge, which is prohibited by the state's consumer protection laws, attorneys claimed. They also added that Loandepot "routinely" violated such laws with the Warrens and other clients of the class who made similar payments, while noting the typical cost for a servicer to process that type of transaction would be approximately 30 cents. 

"Plaintiffs are greatly annoyed at being the victims of defendant's illegal and fraudulent conduct and wish to see that wrong remedied," the lawsuit stated.

No monetary damages were specified, but attorneys asked the court to "award appropriate and necessary equitable relief for the plaintiffs and class members," as well as a civil penalty for each violation. The lawsuit was filed in U.S. Southern District Court of West Virginia, with the plaintiff represented by counsel from Bailey & Glasser and Bordas & Bordas.

Loandepot declined comment on the matter due to the pending litigation. 

The filing is the latest in a series of cases revolving around pay-to-pay charges at mortgage servicers, which are often categorized as "junk fees." The Biden administration and both state and federal regulators have advised the financial services industry of heightened regulation surrounding the collection of these types of fees over the past two years. 

The Warrens' case is at least the second suit filed this year in the same West Virginia court seeking damages for unauthorized servicing fee charges. In the spring, similar allegations were lodged against Bank of America for fees collected on a mortgage originated more than two decades earlier, but whose servicing was later transferred to the financial services giant. Court representation for the plaintiff in that lawsuit is also being provided by Bailey & Glasser.

Earlier this fall, two companies also saw a judgment against them in Texas, after a court review affirmed an earlier decision that found Lakeview Loan Servicing and LoanCare had illegally charged borrower fees in the Lone Star State. A subservicing agreement between the two companies did not absolve Lakeview from liability, nor did refunds of the fees to plaintiffs in that case.

More recently, Mr. Cooper found itself facing a $3.6 million settlement to resolve federal claims it had charged additional fees to borrowers making online or phone payments. The company said it had ceased that practice beginning in 2018.