U.S. Court of Appeals. (Source: Shutterstock)
A group of credit union and banking associations, including NAFCU and CUNA, filed an amicus brief with the U.S. Court of Appeals for the Ninth Circuit to provide their views of the term "permitted by law" in a court case involving the Fair Debt Collection Practices Act (FDCPA).
The amicus brief, filed Tuesday by NAFCU, CUNA, the Mortgage Bankers Association, the American Bankers Association and the American Financial Services Association, explained the organizations' interpretation of the three-word phrase in the case of Amy Thomas-Lawson, William Green, et al. v. Carrington Mortgage Services, LLC. The original lawsuit was filed in May 2021.
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According to court documents, the plaintiffs stated the mortgage company's collection of convenience fees violate state collection laws, as well as the FDCPA. The credit union and bank organizations filed the brief in response to an amicus brief recently filed by the CFPB in which the bureau appeared to take a narrowly defined stance of the phrase "permitted by law" as "prohibiting fees unless a law expressly authorizes such fees."
In court documents and a statement released by NAFCU, the CFPB argued a convenience fee charged by a mortgage service provider "although fully disclosed to the borrower but may not be explicitly in the original contract between the borrower and lender, therefore violated the FDCPA."
The credit union and banking groups argued in their filing that a hardline interpretation of "permitted by law" runs counter to current law and such a stance could hurt consumers and mortgage providers.
"It is unrealistic to expect that an enacted statute or uniform loan agreement would anticipate and keep up with changes to available services, servicing costs, and regional differences," the brief stated. "Such a rule would stifle innovation and options for consumers. Mortgage servicers would have no incentive to expand their service offerings for borrowers' benefit."
While the groups laid out historical information concerning the use of convenience fees in the court filing, NAFCU stated that "loan agreements that govern mortgage originations list out basic terms regarding the loan's duration, interest rate, payment period and late fees, but cannot forecast all possible fees that could arise over the life of the loan, such as convenience fees incurred through online payment methods."
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Michael Ogden
Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.
