U.S. District Judge Barbara Jacobs Rothstein last week granted summary judgment in favor of the lender and servicer in the consumer lawsuit that drew the attention of federal regulators. Plaintiffs have argued for over a year that the fee, which Mr. Cooper discloses on its website, violates state and federal consumer protection laws.

The outcome was first reported by Law360.

In an 11-page order, Rothstein wrote the fee doesn't break laws related to debt collection because the specific charge "is not a communication related to collecting a debt."

The judge at the same time denied as moot expert testimony from subjects including a Mr. Cooper executive. The sides were given three weeks to discuss the remainder of the case, although it's unclear if the three named plaintiffs will file an appeal. 

An attorney for plaintiffs declined to comment Wednesday, while neither opposing counsel nor a spokesperson for Mr. Cooper responded to requests for comment. 

Why did borrowers sue Mr. Cooper?

Consumers filed the lawsuit in Washington last April, alleging the "junk fee" ran afoul of the Fair Debt Collection Practices Act. They claimed the expedited payoff quote statements, which give borrowers a disclosure faster than TILA's seven-day requirement, are processed "in a matter of seconds" and cost Nationstar "pennies" compared to the $25 fee. 

The Consumer Financial Protection Bureau weighed in last August, filing a short amicus brief suggesting Mr. Cooper was violating the FDCPA by charging a fee customers weren't previously aware of. The new-look regulator however in May withdrew its guidance on the subject, and Rothstein allowed the bureau to withdraw its argument in the case.

Mr. Cooper throughout the pleadings asserted the expedited delivery of a payoff statement was an additional service contracted outside of the mortgage loan. It also reminded the court it provides the statements for free within the statutorily allowed time frame. 

Plaintiffs last year also attempted to add Freddie Mac to the case, for purportedly turning a blind eye to the illicit fee. Counsel for the government-sponsored enterprise said it requires servicers to comply with applicable laws, and Rothstein quickly dismissed Freddie Mac from the lawsuit.

The lawsuit is one of several so-called "pay-to-pay" disputes involving mortgage servicers in federal courts. Others, including a complaint against Newrez for charges to borrowers making payments via phone, and another against Roundpoint Mortgage Servicing for dubious late fees, remain pending.