The Maryland Commissioner of Financial Regulation has issued a notice to lenders and servicers, calling on them to review their practices with respect to charging fees when accepting payments and to check whether any improper fees have already been collected, in the wake of a ruling from the Court of Appeals for the Fourth Circuit.
The ruling — in the case of Alexander v. Carrington Mortgage Services — reversed the dismissal of a class action that accused the defendant of violating state law in Maryland by charging a convenience fee for payments made online.
For companies that route consumers to a payment platform that is associated with the lender or servicer and collects a payment fee, they too, may now find themselves in violation of state law, the guidance noted.
“… any fee charged, whether for convenience or to recoup actual costs incurred by lenders and servicers for loan payments made through credit cards, debit cards, the automated clearing house (ACH), etc., must be specifically authorized by the applicable loan documents,” the guidance pointed out. “If such a fee is not provided for in the applicable loan documents, it would be deemed illegal.”
Since the state law in question — the Maryland Consumer Debt Collection Act — was amended in 2018, the potential illegal activity could go back that far. The guidance warns companies that the Commissioner is issuing a consumer alert about this situation. “Lenders and servicers should commence a review of their records to determine whether any improper fees have previously been assessed and undertake appropriate reimbursements to affected borrowers,” the notice said.