Twenty-two state attorneys general are calling on the Consumer Financial Protection Bureau to ban mortgage convenience fees. The AGs refer to them as some of the “more exploitative ‘pay to pay’ fees consumers face.”
The coalition specifically cites PHH Mortgage of West Palm Beach, Fla., for its fees. In a news release, the AGs claim PHH “charges individuals $7.50 to make payments online or via the telephone through an automated service. Those who opt to speak to a live operator will be charged $17.50. Other servicers charge more, less, or nothing at all.”
PHH Mortgage could not be immediately reached for comment. In February, PHH was honored with a 2021 Freddie Mac Servicer Honors and Rewards Program (SHARP) Award. PHH won the Gold Award for Group 1, which includes companies servicing 200,000 or more Freddie Mac mortgages. The award recognizes PHH as the top performer among the top tier servicing group.
Illinois Attorney General Kwame Raoul leads the coalition, which wrote a letter to the CFPB in response to the agency’s request for information about various fees imposed on consumers in the financial marketplace.
“That consumers should face additional charges depending on how they pay their bills, for instance by paying online, is absurd. Convenience fees allow mortgage servicers to be paid twice for simply performing their most basic function of accepting payments,” Raoul said.
The coalition also raises concerns that the convenience fees servicers charge exceed their actual cost to accept payments online or over the phone. In their comment letter, Raoul and the coalition cite an industry study, which found that processing a check costs debt collectors between $1 and $4, while processing payments made online or over the phone typically costs debt collectors approximately 50 cents per transaction.
Raoul was not immediately available for follow up comment on how much the fees generate annually or if any changes would be retroactive to existing loans.
Raoul and the coalition of attorneys general argue that a servicer being able to impose an additional fee for performing its core function is fundamentally flawed, according to the news release. Mortgage servicers have already been compensated for the costs of accepting payments when they either enter into the original loan or choose to acquire servicing rights for the loan. By charging convenience fees, mortgage servicers are essentially being compensated twice when accepting a payment.
Alternatively, the attorneys general encourage the CFPB to prohibit servicers from charging convenience fees that exceed the actual cost of processing a borrower’s payment. The coalition further asks the CFPB to require servicers to fully document their costs supporting the imposition of convenience fees.
Joining Raoul in signing the letter are the attorneys general of California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, and Washington, as well as the Hawaii Office of Consumer Protection.