Thomas-Lawson v. Carriage Mortgage

FAIR DEBT COLLECTION PRACTICES ACT
Thomas-Lawson v. Carrington Mortgage Services
Date: Feb. 22, 2022

Issue: Do convenience fees, or “pay-for-pay” fees, violate the Fair Debt Collection Practices Act? 

Case Summary: The American Bankers Association, American Financial Services Association, Mortgage Bankers Association, National Association of Federally-Insured Credit Unions and Credit Union National Association (Amici) filed an amicus brief in the Ninth Circuit arguing the Fair Debt Collection Practices Act (FDCPA) does not prevent mortgage servicers from charging a convenience fee for expedited payments.

Carrington is a mortgage servicing company that collects mortgage loans made to the class-action borrowers. Carrington allowed borrowers to make payments online or by phone by paying a $5 convenience fee. The borrowers filed a class-action complaint, arguing Carrington’s convenience fees violate FDCPA Section 1692f(1), which prohibits a debt collector from “collect[ing] . . . any amount (including any interest, fee, charge or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” In response, Carrington argued its convenience fees are not “incidental to” the underlying mortgage obligations and thus do not violate the FDCPA. In Carrington’s view, consumers enter a valid, separate agreement for the expedited service and pay the fee.

The district court ruled Carrington’s convenience fees are "permitted by law” and dismissed the borrowers’ FDCPA claim. Carrington argued consumers enter a valid, separate agreement by choosing to pay the expedited service. On appeal, CFPB filed an amicus brief urging the Ninth Circuit to reverse. CFPB argued the phrase “permitted by law” under Section 1692f(1) of the FDCPA refers only to amounts expressly or affirmatively authorized by law. CFPB contended its FDCPA interpretation is entitled to Skidmore deference, meaning deference applies when the interpretation has the “power to persuade.”

Amici urged the Ninth Circuit to affirm the district court’s ruling for several reasons. First, the brief argued consumers make informed choices on the applicable fees when deciding how to pay their mortgage. The brief emphasized consumers knowingly elect to use a payment method for which they will be charged a convenience fee. Second, the brief argued the Ninth Circuit should not defer to CFPB’s interpretation of Section 1692f(1). According to Amici, CFPB’s interpretation is contrary to the plain language of the FDCPA, and Section 1692f(1) does not eliminate the freedom of borrowers and servicers to enter otherwise lawful contracts under state law. The brief also highlighted CFPB opted not to enact its FDCPA interpretation through administrative rulemaking. Finally, the brief argued the Ninth Circuit should not construe the FDCPA prevent application of traditional state law principles. According to Amici, nothing in Section 1692f(1) compels the conclusion legally enforceable contracts are not permitted.

Bottom Line: As of March 1, 2022, the Ninth Circuit has not scheduled oral argument. 

Download the amicus brief to read the full text.