SAN FRANCISCO—NAFCU and CUNA have joined with several other organizations filed an amicus brief with the United States Court of Appeals for the Ninth Circuit arguing that the CFPB’s hard line interpretation of the phrase “permitted by law” should not be too narrowly interpreted.
The language is included in the Fair Debt Collection Practices Act (FDCPA), as noted by the Bureau’s amicus brief submitted in the Amy Thomas-Lawson, et al. v. Carrington Mortgage Services LLC. Case. The trade groups stated in the brief that the language should not be so narrowly construed as to include only those fees that are expressly authorized by either the mortgage instrument or a statute.
Plaintiffs in the case argued that the collection of convenience fees violated the FDCPA, state debt collection laws, and breached the borrowers’ mortgage agreement.
The CFPB has argued for the interpretation of the phrase “permitted by law” as “prohibiting fees unless a law expressly authorizes such fees.” The Bureau has contended that a convenience fee charged by a mortgage servicer, although fully disclosed to the borrower but may not be explicitly in the original contract between the borrow and lender, therefore violated the FDCPA.
‘Counter to Established Principles’
The groups, which in addition to NAFCU and CUNA, included the Mortgage Bankers Association, American Bankers Association and American Financial Services Association, maintained that such interpretation of the phrase would run counter to established principles of state contract law and ultimately hurt both mortgage servicers and consumers.
“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 groups argued in their brief. “Such a rule would stifle innovation and options for consumers. Mortgage servicers would have no incentive to expand their service offerings for borrowers’ benefit.”
Throughout the amicus brief, the groups shared what they said is pertinent information regarding the use of convenience fees by consumers and limitations on the contents of mortgage loan agreements.
Can’t Foresee Everything
NAFCU and CUNA also sought to highlight 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.”