CU Trades Step Into Court Case Involving Mortgage Fees
NAFCU, CUNA file an amicus brief over the interpretation of a three-word phrase.
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.
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.”