Plaintiffs in Glover and Booze v. Ocwen Loan Servicing, a case pending in the U.S. Court of Appeals' 11th Circuit, have alleged that the company violated the Federal Debt Collection Practices Act by charging borrowers to make last-minute payments by phone or online.

The amicus curiae brief sides with borrowers in the case, alleging that pay-to-pay fees are debt-related, governed by the FDCPA and violate its ban on certain charges.

It cites FDCPA prohibitions against "collections of 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."

But Ocwen is appealing a lower-court decision supporting that stance, saying that the FDCPA doesn't govern the charges because they are not debt.

"The FDCPA only classifies activity as 'collection'— or an actor as a 'debt collector'— when the activity is performed on behalf of another," Ocwen said in a recent court filing.

"Ocwen does not charge convenience fees on another's behalf; it charges them on its own behalf, for extra and purely optional services it offers itself," the company added later in the filing.

The CFPB takes issue with the description of the fees as optional given that consumers don't choose their servicers and the payment option wasn't disclosed at origination when borrowers could still choose their mortgage company. 

"Consumers cannot choose their debt collector and cannot take their business elsewhere if they dislike a collector's practices. This provision ensures that collectors cannot take advantage of their captive audience by charging fees that a consumer did not bargain for upfront," the CFPB said.

But Ocwen pointed out that borrowers could pay earlier through another method and avoid the charges, which it disclosed prior to payment.

"Each time they decided to use these optional services, Ocwen disclosed to Glover and Booze that each would be charged the convenience fee to use the optional payment method, disclosed the amount of the fee, and obtained their consent," the company said in its filing.

The company reiterated these points in a statement issued in response to the CFPB's action.

"As set forth in detail in our brief, we have long argued that these optional payment processing fees do not violate the FDCPA. In addition, we continue to believe that our borrowers find value in, and are willing to pay for, such expedited payment methods, which can save them from incurring late fees.

"Prior to a customer voluntarily making an expedited, one-time mortgage payment, PHH discloses to the borrower all terms, conditions and fees associated with choosing to use these optional payment methods, as well as other payment methods available to the borrower that do not require a fee or require a lesser fee.

We look forward to filing our reply brief and continuing to defend ourselves on this matter."

The 11th Circuit's pending decision in the case could be significant as it may stand as the final decision unless it proceeds to the Supreme Court. The 11th Circuit could alternatively send the case back to the lower court for a second look.

The CFPB has been making a broad push to stop what it describes as "junk" fees, raising questions within the mortgage industry about what divides acceptable from illegal charges in the regulator's view.

The fees in the Ocwen case were $7.50 to $12 charges, according to the amicus brief and other court records. One plaintiff paid these fees 26 times, and the other incurred the charges 10 times.

Mr. Cooper, another large mortgage servicer facing a convenience fee lawsuit, has tentatively agreed to settle it for nearly $3.6 million. At the time of this writing, the final approval hearing for the preliminary settlement was still pending and set to take place in April.

Other companies targeted in mortgage-related pay-to-pay lawsuits include Lakeview Loan Servicing and its subservicer, Loandepot and Bank of America.