AGs Seek to Stop Settlement in FDCPA Processing Fees Case

A group of 33 state attorneys general are attempting to intervene and stop a settlement in a class-action Fair Debt Collection Practices Act case in which a mortgage servicer was accused of charging processing fees when taking payments over the phone or via its website.

A copy of the brief in the case of Morris v. PHH Mortgage Corp. can be accessed by clicking here.

The defendant did not charge processing fees when making payments by check or when signing up for automatic withdrawals from consumers’ bank accounts. The class includes nearly 1 million borrowers, for whom the defendant is still servicing 80% of their loans.

“The Proposed Settlement fails to satisfy these factors because its unwritten mass amendment permitting PHH to charge exorbitant fees is a windfall to PHH and violates most states’ laws,” the AGs wrote in their brief. “Class members receive a nominal monetary amount in exchange for PHH’s ability to profit from thousands of dollars-worth of future and likely illegal fees to be charged to these class members. The Attorneys General are also concerned about the speed with which this case was settled. This has deprived the Court – and the Attorneys General – of the ability to determine the adequacy, fairness and reasonableness of the settlement.”

The lawsuit was originally filed last March and the plaintiffs filed a motion for preliminary approval of a settlement in August. The AGs argued that entering into a settlement so “hastily” during the middle of a pandemic, especially with terms more favorable to the defendant, is not in the plaintiffs’ best interests. The defendant would still be allowed to charge the fees in question, and for plaintiffs whose loans are still serviced by the defendant, instead of receiving a monetary payment, they would receive a credit on their accounts.

“The job of attorneys general is to protect the residents of our states against abuse,: said Keith Ellison, the Attorney General of Minnesota, in a statement. “I’m proud that more than 30 of us have rallied to stand up for our homeowners and push back on this proposed settlement that benefits the abuser.” 

In a published report, the defendant denied the allegations made by the attorneys general.

“We strongly disagree with the arguments raised by the Attorneys General, and we look forward to filing our responsive brief to refute those arguments and to assert our belief that PHH has not violated any applicable laws, ” said a spokesperson from Ocwen — which acquired the defendant in 2018. “PHH’s actions are in compliance with a 2018 consent order (executed by 32 of the 33 Attorneys General joining the amicus brief), which sets forth the specific requirements PHH was to follow to charge borrowers convenience fees for using optional expedited payment methods.

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