While Mr. Cooper Group is still trying to recover from a cyber attack it was dealt with more bad news last week when a federal court judge gave preliminary approval for a $3.6 million settlement in a class action.
The lawsuit, filed in the U.S. District Court for the District of Columbia, alleges that Mr. Cooper imposed unlawful servicing fees when customers were making monthly payments on their mortgages via phone or online.
"The nationwide class consists of borrowers who paid convenience fees to make payment by telephone, less refunds in the amount of $5,617,750," the lawsuit states.
The D.C. class consists of borrowers on 780 accounts who in 5,767 instances paid convenience fees to make payment by telephone.
According to the suit, this practice violated several state consumer protection laws and the Federal Fair Debt Collection Practices Act.
The original complaint filed in 2020 alleges that each time a mortgage borrower made a payment over the phone, Mr. Cooper charged the borrower a pay-to-pay fee of up to $14 for using the interactive voice response system and $19 for speaking directly with a representative.
“Cooper frequently, intentionally, and persistently collects Pay-to-Pay Fees even though such fees are not authorized by the mortgages and it therefore had no right to collect them,” the complaint states.
Mr. Cooper did not respond to requests for comment on the litigation.
A final approval hearing will take place on March 8, 2024.
The preliminary approval arrives amidst heightened public discussions concerning the oversight of extraneous fees. Over the past year, the Biden Administration, the Consumer Financial Protection Bureau (CFPB), and multiple state governments have joined the conversation. The financial services sector has frequently faced criticism from the CFPB for its reliance on extraneous fees as a revenue source. Additionally, in the previous year, numerous state regulators advocated for the discontinuation of pay-to-pay practices in mortgage and other loan servicing, which the CFPB classifies as a form of extraneous fee.