Prior to being bought by Newrez, SLS required borrowers to pay $7.50 for processing mortgage payments made by phone, representing a significantly higher amount than what other servicers charge, litigation filed Sept. 24 in Texas federal court purports. 

The suit, lodged by borrower Eugenio Alvarez, says that most servicers have all together stopped charging for this service. Companies including Freedom Mortgage, Caliber Home Loans, Rocket Mortgage and Roundpoint Mortgage Servicing have either axed the fee or did not charge it all together.

According to the suit, which is seeking class action certification, processing mortgage payments costs servicers less than 50 cents per transaction, which is why this service is usually offered for free. 

SLS's fee for this action "materially exceeded the costs incurred by SLS…generating millions of dollars in unlawful profits for SLS," the suit said.

Litigation accuses SLS of violating the Federal Debt Collection Practices Act , the Texas Fair Debt Collection Act and the laws of six other states, including Maryland, California, and West Virginia. All of the mentioned states have fee-prohibiting statutes in place.

Newrez highlighted that since its acquisition of SLS "no fees are charged to SLS homeowners who make a payment on their accounts."

"Additionally, Newrez does not charge pay-to-pay fees," the company stressed Thursday.

An attorney representing the plaintiff declined to comment.

The plaintiff's mortgage was serviced by SLS from 2017 to 2024, during this time Alvarez made payments over the phone and was charged a pay-to-pay fee.

Per the suit, the charge was illegal because fee-prohibiting statutes restrict debt collectors from assessing any charge unless it is authorized in their loan agreements. The fee charged by SLS was allegedly not outlined to borrowers, constituting unfair debt collection practices. 

"SLS knew that these pay-to-pay fees were not expressly set out in the uniform mortgages held by plaintiff and members of the fee-prohibiting state class…yet it collected them anyway," the suit said. "In doing so, SLS collected amounts not authorized by plaintiff's and class members' uniform mortgages or by law." 

Furthermore, the plaintiff claims that SLS engaged in double-charging borrowers by imposing pay-to-pay fees, while also receiving a servicing fee of 0.5% from lenders, regardless of payment method.

"Out of the $86.67 it received each month out of the loan payment being made by the borrower, it could incur as much as $4 in costs to process check payments, leaving $82.67 to cover other overhead costs and for its profit," the suit said. "SLS double charged borrowers by charging additional pay-to pay fees, up to $7.50 for each phone payment, over and above its negotiated servicing fees agreed with the  lender, government-sponsored enterprises or primary servicer."

Borrowers do not have a choice in who services their loans and had to ultimately pay these fees, the suit reads.

Pay-to-pay fees have been a hot button issue for both state and federal regulators. 

The Consumer Financial Protection Bureau, specifically, has upped its rhetoric concerning servicers charging pay-to-pay fees.

Most recently, the consumer watchdog put its support behind plaintiffs who accused mega servicer Mr. Cooper of charging illegal junk fees. The CFPB said the company violated the Federal Debt Collection Practices Act by charging customers with a fee that they were not previously aware of, in an amicus brief filed with a Washington federal court August 8. 

The FDCPA, which the CFPB has purview over, prohibits debt collectors from charging borrowers fees unless there is a law allowing them or the amount is authorized by the borrower. 

"While these contract terms may sound innocent, they allow companies to silence or buy-off anyone who complains and sidestep broader accountability or the need to fix problems company-wide," the CFPB said in a blog addressing the matter. "Allowing companies to make consumers give up fundamental protections in this manner would interfere with the law, which is supposed to let consumers hold debt collectors accountable for their actions and protect consumers from unauthorized charges."