Loancare Hit with Class Action Over Alleged ‘Pay-to-Pay’ Fees

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A proposed class action alleges Loancare, LLC and Lakeview Loan Servicing, LLC have unlawfully charged excessive processing fees for mortgage payments made by phone or online.

According to the 11-page lawsuit, the charges, sometimes called “pay-to-pay” fees, exceed what it actually costs Loancare and Lakeview to provide mortgage payment services by phone or online, and therefore constitute an unlawful profit center authorized by neither the terms of borrowers’ mortgages nor West Virginia law.

“None of the Pay-to-Pay Fees are permitted by the deed of trust or by statute, and, therefore, Defendants violate West Virginia law by charging those fees,” the complaint alleges, contending that the unlawful transaction fees are a breach of the defendants’ obligations to borrowers.

Loancare is a loan sub-servicer hired by mortgage servicer Lakeview to collect mortgage payments, charge fees and otherwise carry out the day-to-day administrative tasks of servicing a mortgage, the lawsuit states. Per the suit, Loancare charges an “exorbitant” $10.00 pay-to-pay fee each time a borrower makes a mortgage payment over the phone through a customer service representative and up to $10.00 when a borrower makes a payment through the automated phone system.

The case alleges Loancare likely uses a third-party vendor to process phone transactions at a cost of around $0.50 or less per transaction. Therefore, the suit says, the cost to Loancare for processing such payments is significantly less than the $10.00 fee charged to borrowers, with Loancare pocketing the difference as profit, according to the case.

Per the lawsuit, neither borrowers’ mortgages nor any state statute authorizes Loancare to collect pay-to-pay fees. In fact, West Virginia law dictates that it is illegal to represent that a consumer’s obligation may be increased by adding attorney’s fees, investigation fees, service fees or “any other fees or charges when in fact such fees or charges may not legally be added to the existing obligation,” the case relays. Because the pay-to-pay fees were not explicitly included in the terms of borrowers’ deeds of trust, the defendants have violated state law by collecting the additional charges, the suit alleges.

The lawsuit, which was recently removed from Raleigh County, West Virginia Circuit Court to the state’s Southern District Court, looks to cover anyone with a residential mortgage loan securing a property in West Virginia serviced or sub-serviced by Lakeview or Loancare and who paid a fee to Loancare for making a loan payment online, by telephone or by interactive voice recognition during the applicable statute of limitations through the date a class is certified.

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