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NAFCU, along with several other organizations, Tuesday 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” in the Fair Debt Collection Practices Act (FDCPA), as explained in the bureau’s amicus brief submitted in the Amy Thomas-Lawson, et al. v. Carrington Mortgage Services LLC. case, 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 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. 

NAFCU, joined by the Mortgage Bankers Association, American Bankers Association, Credit Union National 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,” argued the group. “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 pertinent information regarding the use of convenience fees by consumers and limitations on the contents of mortgage loan agreements. Mortgage servicers typically offer borrowers many ways to make monthly loan payments, and allow consumers to make informed choices on payment methods through which they will be charged a convenience fee.

NAFCU highlighted 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. 

NAFCU will continue to monitor FDCPA regulations and litigations and share updates with credit union members.