Ocwen seeks to separate payment charges from debt in appeal

In appealing a previous court decision, Ocwen, which recently rebranded as Onity, is questioning the legal tie between fees charged to use certain payment methods and the collection of debt.

The mortgage company sought to disconnect the two in the context of the Fair Debt Collection Practices Act. The statements were part of oral arguments on Nov. 22 in the Eleventh Circuit Court of Appeals case, Sheryl Glover v. Ocwen Loan Servicing. Law360 previously reported on the arguments.

The industry is watching legal and regulatory developments around so-called pay-to-pay charges amid speculation the incoming Trump administration will scale back the Consumer Financial Protection Bureau, which has sided with plaintiffs.

Plaintiffs in the Ocwen case have argued that the fees charged for using certain payment types run counter to a FDCPA prohibition on collections "unless such amount is expressly authorized by the agreement creating the debt or permitted by law."

Scott Burnett Smith, a Bradley Arant Boult Cummings attorney representing Ocwen said there are reasons to question that assertion.

"The issue in this case is, does the Act cover a convenience fee for an optional, avoidable service distinct from debt collection, namely, the same-day processing of payments by phone or online?" Smith said in recorded oral arguments that are part of court filings.

(The CFPB's amicus brief previously took issue with Ocwen's description of its fees as voluntary given that consumers don't choose their servicers and the fee-for-service payment options weren't disclosed at origination, when borrowers could shop among different companies.)

Smith asserted that the FDCPA does not apply to what he called optional payments because the debt as such payments are "incidental" to each other.

"The underlying debt instruments define how payment is to be made, and that's by mail in a check or another paper instrument, and here, this is a separate service," Smith said.

Glenn Edward Chappell, a Tycko & Zavareei attorney representing the plaintiffs in the case, argued the charges associated with certain payment methods aren't disconnected from the debt.

"If someone goes into Ocwen's hypothetical office to make a payment, and they're selling candy at the front desk, and they purchase the candy, that's not sufficiently connected. It's not a means by which they're collecting a debt. But here it is a means by which you're collecting," Chappell said.

"They are telling customers, or borrowers … that you've got to make a payment on this debt, and if you make that payment over the phone or by online, you've got to pay this fee. So it is a means by which they collect those payments," he added.

Whether the legislation prohibits such fees could have broader importance to the extent it applies to other similar litigation in the industry that other mortgage companies face. 

Other mortgage companies that have faced litigation over what the CFPB has called "junk fees" in recent years include Bank of America, which also charged for phone and online payments; and Mr. Cooper, which has faced a lawsuit related to expedited payoff quotes.