CFPB Supports Homeowners in Lawsuit Against Mortgage Servicer

The CFPB has filed an amicus brief supporting homeowners in a lawsuit against a prominent nationwide mortgage servicer.

The lawsuit alleges that the servicer illegally charged payoff statement fees, violating the Fair Debt Collection Practices Act (FDCPA). The mortgage servicer argued that a “notice-and-cure provision” in the homeowners’ deeds of trust precluded the proposed class action.  The notice-and-cure provision in the servicer’s security instrument requires a borrower to notify the servicer about a potential breach of contract so that it has an opportunity to resolve the problem before the borrower files a suit.

In its amicus brief the CFPB contends that:

• The notice-and-cure provision does not apply to FDCPA claims.

• The servicer’s use of the provision to avoid FDCPA liability is an illegal waiver of consumer rights and would undermine a consumer’s ability to pursue statutory remedies against debt collectors who engage in unlawful practices.

• Charging payoff statement fees without authorization constitutes an FDCPA violation.

The CFPB’s amicus brief strengthens the homeowners’ case and has implications for debt collectors and creditors relying upon similar contractual provisions.