California Attorney General Rob Bonta
California’s attorney general Rob Bonta

David Paul Morris/Bloomberg

Attorneys general from 21 states and Washington, D.C. are calling upon the Consumer Financial Protection Bureau to stop servicers from charging consumers fees for using “convenience” payments to satisfy bills.

“We urge the bureau to consider prohibiting mortgage servicers from imposing convenience fees on consumers,” the officials said in a letter sent Monday in response to the bureau’s broader request for information on so-called junk fees.

The AGs also recommended that the CFPB consider limiting the amounts charged to the actual cost of providing the phone or online bill-payment service, and requiring documentation for it.

The letter argues that “pay to pay” fees warrant regulation in part because they tend to be inconsistent. Fees range from nonexistent to a $7.50 charge for an online payment, or a $17.50 for a live operator.

They point out that borrowers do not have a say in who their servicer is after they initially choose their lender, according to the letter.

“After origination many mortgage loans and their servicing rights are sold in secondary markets, and may be sold many times over the course of the loan. In short, consumers don’t and can’t know which company will service their mortgage,” the letter noted.

Signatories to the letter came from California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island and Washington.

In contrast to the AGs in these states, trade groups and others have pushed back against additional regulation of servicing fees in response to the bureau’s request for information, noting housing finance and payment industries already have considerable oversight.

“The CFPB has engaged in extensive rulemaking to ensure consumer understanding of the fees and other costs associated with: mortgage origination, mortgage servicing, international remittances, prepaid cards, and debt collection,” 11 signatories noted in a separate letter sent to the bureau on Monday.

The signatories to that letter included the American Bankers Association, American Financial Services Association, Bank Policy Institute, Community Development Bankers Association, Consumer Bankers Association, Credit Union National Association, Housing Policy Council, Independent Community Bankers of America, Mortgage Bankers Association, National Association of Federally-Insured Credit Union and the U.S. Chamber of Commerce.

Another letter sent separately by the MBA to the bureau argues that consumers do have sufficient choice in the mortgage market.

Mortgage banking is “a highly competitive industry where customers can and do shop from a wide array of providers,” the group said in the letter it sent Monday.

“This is not the captured market the RFI seeks to convey,” the MBA said.

Borrowers can move to a new servicer by refinancing and getting a new loan, but the AGs’ letter dismissed the extent to which this gives borrowers a choice.

“First, refinancing is usually only available for consumers who are current in their existing loan obligations; consumers with delinquent loans typically cannot refinance. Second, the ability to refinance is subject to external market factors like fluctuating property values and interest rates. Third, refinancing presents significant cost barriers to consumers, as they have to pay a new round of origination fees,” the state officials said.

Servicers generally offer a range of payment options, including some that allow borrowers to avoid a charge. However, the attorneys general were dismissive of the extent of choice there as well.

“In most instances, a borrower is choosing to submit a payment by phone or through a website because they want the payment to post immediately; mailing a check would take too long to post to avoid a late fee. And the late fee that a servicer may impose will likely exceed the cost of making a payment by phone or through a website. In this scenario, the convenience fee actually operates as an alternative late fee – perhaps cheaper, but with a shorter grace period,” the AGs said.

“For struggling homeowners trying to make their monthly payment, ‘pay to pay’ fees only rub salt in the wound,” California Attorney General Rob Bonta said in a press release.





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