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Attorney General Tong Calls on CFPB to Ban Mortgage Managers from Charging Convenience Fees

By on April 12, 2022 0

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04/12/2022

Attorney General Tong Calls on CFPB to Ban Mortgage Managers from Charging Convenience Fees

(Hartford, CT) – Attorney General William Tong today joined a coalition of 22 attorneys general urging the Consumer Financial Protection Bureau (CFPB) to ban mortgage officers from charging convenience fees. Convenience fees charged by mortgage managers are one of the most abusive “pay to pay” fees consumers face, according to the coalition.

In their letter, the attorneys general highlighted the convenience fee in response to the CFPB’s request for information on the various fees imposed on consumers in the financial market. In its letter, the coalition urges the CFPB to assess convenience fees in the mortgage industry and says they are particularly unfair and abusive because, unlike most markets, homeowners have no choice over their mortgage officers. .

“These convenience fees are just another burden on Connecticut families who are already squeezed by the rising cost of living. The last thing consumers need are additional fees on top of their monthly mortgage payments. Our coalition is calling on the CFPB to prohibit mortgage servicers from charging these fees, which add up over time and are often many times the cost of actually processing the mortgage,” said Attorney General Tong.

In their comments, the Attorneys General point out that when taking out a mortgage, many consumers believe they are entering into a long-term relationship with a particular financial institution. However, after origination, many mortgages and their servicing rights are sold in secondary markets and may be sold multiple times over the course of the loan. As a result, consumers do not know which company will service their mortgage and have no ability to switch services. The letter states that the CFPB’s further assessment of the discretionary fees charged by repairers is warranted due to the length of mortgages associated with consumers’ lack of choice of repairers and the fact that some repairers have attempted to impose convenience charges even when not authorized by the original loan documents.

The coalition also points to the inconsistency of convenience fees in that some repairers charge them, while others do not. Also, the charges add up. As an example, the attorneys general cite PHH Mortgage, which charges individuals $7.50 to make payments online or over the phone through an automated service. Those who choose to speak to a live operator will be charged $17.50. Other repairers charge more, less or nothing at all. Additionally, borrowers do not have the option of switching to another manager to avoid fees.

The coalition is also concerned that the convenience fees charged by repairers exceed their actual cost to accept payments online or over the phone. In its comment letter, the coalition cites an industry study, which found that processing a check costs collectors between $1 and $4, while processing payments made online or over the phone typically costs debt collectors about $0.50 per transaction. When the most basic function of a mortgage manager is to accept payments, the attorneys general argue that a manager who can charge extra fees for performing their primary function is fundamentally flawed. Mortgage managers have already been compensated for the costs of accepting payments when they enter into the original loan or choose to acquire service rights for the loan. By charging a convenience fee, mortgage servicers essentially get paid twice when they accept a payment.

The Coalition of Attorneys General, led by Illinois Attorney General Kwame Raoul, is urging the CFPB to consider banning mortgage officers from charging consumer convenience fees. Alternatively, the attorneys general are encouraging the CFPB to prohibit repairers from charging convenience fees that exceed the actual cost of processing a borrower’s payment. The coalition further requests that the CFPB require repairers to fully document their costs in support of the imposition of convenience fees.

The attorneys general of California, Colorado, Delaware, District of Columbia, Hawaii, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico and New York join Attorneys General Raoul and Tong in sending the letter. , North Carolina, Oregon, Pennsylvania, Rhode Island and Washington, as well as the Hawaii Office of Consumer Protection.

Twitter: @AGWilliamTong

Facebook: CT Attorney General


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